As a professional, I have prepared an article on “Meaning and Types of Anti-Competitive Agreements”.
Anti-competitive agreements refer to agreements made between two or more competitors with the purpose of restricting competition in a particular market. Such agreements violate the competition laws of most countries and are therefore illegal. These agreements can take many forms, and it is essential to understand the different types to adequately enforce antitrust laws.
Horizontal Agreements
Horizontal agreements are those made between direct competitors operating in the same market. These agreements aim to restrict competition and can take various forms, such as price-fixing, market allocation, and bid-rigging. In price-fixing, competitors agree to set a common price for their products or services, which restricts price competition in the market. Market allocation agreements involve competitors agreeing to divide up the market amongst themselves, thereby reducing competition. Bid-rigging occurs when competitors agree to submit artificially high bids for specific contracts, which ensures that one of them wins the contract.
Vertical Agreements
Vertical agreements are those made between parties operating at different levels of the supply chain. For example, manufacturers and distributors or retailers and wholesalers. These agreements may also violate competition laws if they excessively restrict competition or cause harm to consumers. Examples of vertical agreements include exclusive dealing, resale price maintenance, and tying arrangements.
Exclusive dealing refers to an agreement where a manufacturer or supplier requires its distributors or retailers to only purchase or sell its products. Resale price maintenance occurs when a manufacturer or supplier sets a minimum resale price for its products, which can lead to higher prices for consumers. Tying arrangements happen when a manufacturer or supplier requires a distributor or retailer to buy one product to secure the right to sell another product.
Collusive Tendering
Collusive tendering occurs when two or more bidders agree to submit artificially high bids for a particular contract. This type of agreement is detrimental to the competitive process and can lead to higher prices for the buyer. Therefore, collusive tendering is illegal in most countries.
Conclusion
Understanding the different types of anti-competitive agreements is crucial for businesses and individuals involved in the competitive market. These agreements harm competition and restrict consumer choice, leading to higher prices and reduced innovation. Thus, it is vital for governments to enforce antitrust laws and penalize those engaging in anti-competitive behavior. By promoting competition in the market, businesses can grow and innovate while providing consumers with more choices at lower prices.