Horizontal Agreements in the EU: What You Need to Know
The European Union (EU) is committed to promoting fair competition within its member states. To achieve this, the EU has established strict policies that prohibit businesses from engaging in practices that could restrict competition among themselves. One of these policies is the prohibition of horizontal agreements that restrict competition. In this article, we will define what horizontal agreements are, examine how the EU defines them, and explore their impact on businesses operating within the EU.
What Are Horizontal Agreements?
Horizontal agreements are agreements between two or more competitors operating at the same level of production or distribution. These agreements are designed to restrict competition, either by coordinating production or pricing policies, or by sharing markets. The result of such agreements is that businesses are artificially able to maintain prices or divide up markets. This reduces consumer choice, stifles innovation and could lead to higher prices for consumers.
The EU Definition of Horizontal Agreements
The EU has a number of laws in place that specifically prohibit horizontal agreements that restrict competition. These laws include the Treaty on the Functioning of the European Union (TFEU) and the EU`s antitrust regulations. Specifically, the TFEU prohibits cartels and other forms of collusion between competitors.
The EU`s antitrust regulations impose penalties for businesses who engage in horizontal agreements that violate competition laws. These penalties can include fines of up to 10% of a business`s annual turnover, injunctions, and damages claims from other businesses who have suffered as a result of the anti-competitive behaviour.
Impact on Businesses Operating in the EU
Horizontal agreements can have significant consequences for businesses operating within the EU. Not only can they result in costly fines and legal action, but they can also damage a company`s reputation. Furthermore, the impact on smaller businesses could be even more severe, as they may struggle to compete with larger companies who have entered into anti-competitive agreements.
It is therefore crucial that businesses operating within the EU understand the legal framework surrounding horizontal agreements and ensure that they comply with competition laws. This can include seeking legal advice, implementing robust internal policies, and monitoring the behaviour of competitors.
Conclusion:
Horizontal agreements are a significant issue for businesses operating within the EU. These agreements can result in higher prices for consumers, reduce innovation, and limit consumer choice. The EU has strict policies in place to prevent horizontal agreements and punish those who engage in anti-competitive behaviour. To avoid the consequences of being found in breach of competition law, businesses must ensure that they comply with the EU`s legal framework governing horizontal agreements.