What Is Considered Horizontal Agreement
Although some other provisions are not classified as hardcore restrictions, they are also not covered by the vertical block exemption. However, unlike hardcore restrictions, these limited provisions may be separated from the agreement as far as possible. Accordingly, the block exemption also applies to the rest of the agreement. Careful drafting is therefore necessary to prevent it from falling under any of the restricted provisions and to ensure that severance pay is possible as an alternative. It is essential that the Parties focus on the potential anti-competitive effects of a horizontal agreement and ensure that legal and genuine cooperation agreements between two or more undertakings do not migrate to the territory referred to in Chapter I or Article 101. The prohibition of horizontal agreements between competitors (actual and potential) is found in section 41 of the Competition Act 2007. It is one of three forms of collusive agreement; the others are tender agreements and vertical agreements involving the maintenance of the resale price. More recently, the U.S. government and U.S. companies have investigated non-poaching agreements, as it is suspected that these horizontal no-poaching agreements are anti-competitive in nature. In the United States, competition laws are called antitrust laws, and there has been criticism that non-poaching agreements violate antitrust laws. Therefore, U.S. Senator Cory Booker introduced a bill in early 2018 to determine that non-poaching agreements are illegal if they are in the context of franchising under antitrust law.
To be covered by the vertical block exemption, the agreement must be a vertical agreement or concerted practice between at least two undertakings concerning the conditions for the purchase, sale or resale of services or goods. The parties must operate at different levels of the production, supply and distribution chain for the purposes of the specific agreement. The block exemption shall not apply where the agreement exists between competing undertakings, unless the competition results only from activities not covered by the agreement. The current block exemption for vertical agreements expires at the end of May 2022 and is currently under review. Horizontal agreements are agreements between two or more parties operating at the same level of the production, supply and distribution chain, for example between two suppliers or two retailers. Examples include joint sale agreements, joint purchase agreements, specialisation agreements and R&D agreements between competing companies. Pricing is a term associated with horizontal agreements. It is an agreement whereby several competing companies enter into a secret agreement to set the prices of their products in order to prevent real competition. Price fixing is a punishable violation of federal antitrust laws. Pricing also includes the secret setting of favorable prices between suppliers and preferred manufacturers or distributors in order to beat the competition. Overall, hardcore restrictions result in the loss of the block exemption for vertical agreements, although some hardcore restrictions may sometimes be acceptable.
For example, if the restriction is necessary to comply with a ban on the sale of dangerous goods, to create a new market or to test a new product. The EU vertical block exemption exempts certain vertical agreements from the prohibitions in Chapter I or Article 101. Where the vertical block exemption applies to the agreement concerned, there is no need to examine the agreement further from a competition perspective. However, where the block exemption does not apply, further examination of the agreement under Chapter I or Article 101 is necessary to determine whether the agreement may give rise to anti-competitive concerns. It should be recalled that the block exemption for vertical agreements does not apply to the prohibitions laid down in Chapter II or Article 102. Therefore, any undertaking holding a dominant position on the market should take into account the possibility of infringing those provisions. However, where a practice falls within the scope of the vertical agreement block exemption, the parties must have reached the market share threshold and are therefore less likely to be considered `dominant` within the meaning of Chapter II or Article 102. In a market-sharing agreement, members agree on how to eliminate the process of competition among themselves by sharing the market. These are agreements between competitors that do not source from each other on the (allocated) market. The customer is thus forced to buy from the company selected by the agreement.
Several EU block exemptions may apply to horizontal agreements (see How do the prohibitions in Chapter I or Article 101 affect horizontal agreements?). Agreements limiting technological development would normally be considered collusive, as would agreements limiting capacity or otherwise restricting investment. Vertical agreements are agreements between two or more parties operating for the purposes of this Agreement at different levels of the production, supply and distribution chain. For example, between a manufacturer and a supplier or between a supplier and a retailer. Sometimes horizontal agreements can be created that benefit consumers by coordinating logistics to save on business costs and use the company`s capacity more efficiently. In other cases where horizon agreements are concluded between competitors on the market and where the implication of price fixing and price coordination is obvious, the agreement may be considered prohibited. Pricing could also take the form of an agreement restricting price competition. This may include, for example, an agreement to adhere to published price lists or not to disclose a price without consulting potential competitors, or to charge at least any other price on the market. The horizontal agreement is an agreement between undertakings operating in the same market and competitors in the market.
The term agreement is defined broadly under the Competition Act 2007. It can take any form, whether written, oral or by direct or indirect communication, whether legally enforceable or not. However, the agreement must be implemented in Mauritius or in a part of Mauritius. By their very nature, horizontal agreements are more likely to fall within the prohibitions set out in Chapter I or Article 101 than vertical agreements. .