Horizontal Agreement Law and Legal Definition

Horizontal Agreement is an agreement for co-operation between two or more competing businesses operating at the same level in the market. This is generally to develop a healthy relationship between competitors. The substantial clauses of the agreement may include policies regarding pricing, production and distribution. The Agreement may also discuss sharing of information regarding the products and the market. Horizontal agreements can prompt violations of antitrust laws because these agreements may include clauses which restrict competition.

Horizontal agreements may cause negative market effects with respect to prices and quality of products. On the other hand, horizontal cooperation can lead to substantial economic benefits such as sharing risk, cost savings, sharing know-how and making innovations faster.

Price fixing is a term associated with horizontal agreements. It is an arrangement in which several competing businesses make a secret agreement to set prices for their products to prevent real competition. Price fixing is a criminal violation of federal antitrust statutes. Price fixing also includes secret setting of favorable prices between suppliers and favored manufacturers or distributors to beat the competition.