Horizontal Agreements Price Fixing: Understanding the Antitrust Law
Horizontal agreements are agreements that are made between two or more competitors who operate at the same level of the supply chain. One of the most common forms of horizontal agreements is price fixing. Price fixing refers to agreements between competitors to set or maintain prices at a certain level. In other words, competitors agree to quote prices at the same level or to increase or decrease their prices in unison.
Price fixing can cause significant harm to competition and consumers. It can result in higher prices, limited choices, and reduced innovation. Moreover, it is illegal under antitrust law. In the United States, price fixing is prohibited by the Sherman Act and the Clayton Act.
The Sherman Act prohibits price fixing, bid rigging, and market allocation agreements. It makes such agreements illegal per se or automatically illegal without any proof of harm to competition or consumers. The Clayton Act, on the other hand, prohibits price discrimination, tying arrangements, and exclusive dealing. It requires plaintiffs to prove that the challenged conduct has a substantial anticompetitive effect on the relevant market.
Horizontal agreements price fixing can take many forms. For example, competitors can agree to fix prices outright, agree to discounts, agree to price floors or ceilings, or agree to divide the market geographically or by customer type. The common denominator is that these agreements reduce or eliminate competition among the participants.
Horizontal agreements price fixing is not only illegal, but it is also subject to severe penalties and consequences. Companies that engage in price fixing can face civil and criminal fines, injunctions, and damages. They can also lose their reputation and customer trust. Moreover, individuals who participate in price fixing can be held personally liable and face imprisonment and fines.
To avoid the legal and business risks of horizontal agreements price fixing, companies should have antitrust compliance programs in place. They should train their employees on antitrust laws, monitor and audit their business practices, and have clear policies and procedures for detecting and reporting antitrust violations. Companies should also seek legal advice from experienced antitrust counsel when entering into agreements with their competitors.
In conclusion, horizontal agreements price fixing is a serious antitrust violation that can harm competition and consumers. Companies that engage in price fixing face severe penalties and can damage their reputation and business. To comply with antitrust laws and avoid legal and business risks, companies should have antitrust compliance programs in place and seek legal advice when entering into agreements with their competitors.