Competition Restrictive Agreements
Competition restrictive agreements are a set of contracts between two or more parties that restrict competition. Such agreements are illegal under anti-trust laws in many jurisdictions around the world. These agreements are usually entered into for the purpose of protecting one party’s interests or preventing the other party from gaining an unfair advantage in the market.
Competition restrictive agreements can be either vertical or horizontal. Vertical agreements involve an agreement between two companies with different interests in the same product or service, while horizontal agreements involve an agreement between two or more companies with the same interests in the same product or service. For example, a grocer and its supplier might enter into a vertical agreement for the supply of the grocer’s products, while a group of auto dealers might enter into a horizontal agreement to not compete with one another.
There are several types of competition restrictive agreements. These include price-fixing agreements, market allocation agreements, and bid-rigging agreements. Price-fixing agreements are agreements between companies to keep their prices at a certain level and prevent other companies from entering the market. Market allocation agreements involve the division of markets between two or more companies, making it more difficult for any other company to enter the market. Finally, bid-rigging agreements involve companies agreeing not to bid on a contract for supplies or services, thereby driving up prices for the end consumer.
In general, competition restrictive agreements are considered illegal in many jurisdictions. These agreements create an unfair advantage for one party, limit the choices available to consumers, and can lead to higher prices. Additionally, such agreements prevent new companies from entering the market, limiting innovation and competition. Moreover, such agreements can negatively affect entire industries by creating a monopoly situation.
Despite the potential harms of competition restrictive agreements, there are some instances where they may be permissible under the law. For example, in some jurisdictions, vertical agreements may be permissible if they are found to be necessary for the stability of certain industries or to enable the companies involved to serve their customers better. Additionally, some jurisdictions allow employers to enter into non-compete agreements with their employees in order to protect trade secrets and other confidential information.
In conclusion, competition restrictive agreements can have detrimental effects on competition, prices, and innovation. Such agreements should only be entered into in certain circumstances and be carefully monitored by relevant legal and economic authorities. In this way, the potential for harm resulting from such agreements can be minimized, allowing for a more open and competitive market to exist.
