When it comes to understanding the differences between horizontal and vertical agreements, it is important to understand the basic principles behind each type of agreement.
Horizontal agreements are agreements made between companies that are in competition with each other. These agreements are typically made between companies that operate within the same industry or sector. Examples of horizontal agreements might include price fixing, market sharing, or limiting supply in order to increase prices.
Vertical agreements, on the other hand, are agreements made between companies at different levels of the supply chain. These agreements are typically made between companies that are in different industries or sectors. Examples of vertical agreements might include agreements between manufacturers and distributors, or agreements between suppliers and retailers.
The biggest difference between horizontal and vertical agreements is the relationship between the parties involved. In horizontal agreements, the parties are typically competitors, and the agreement is designed to limit competition and increase profits. In vertical agreements, the parties are typically working together to achieve a common goal, such as increasing supply chain efficiency or reducing costs.
Another key difference between horizontal and vertical agreements is the level of scrutiny they receive from regulators. Horizontal agreements are often viewed as anticompetitive and are subject to strict regulations. Vertical agreements, on the other hand, are typically viewed as pro-competitive and are subject to less scrutiny.
Overall, understanding the differences between horizontal and vertical agreements is important for businesses operating in a competitive environment. By understanding these differences, companies can make informed business decisions and avoid potential antitrust violations.