In the business world, competition is the driving force behind innovation, growth and economic success. However, some companies engage in anti-competitive practices that stifle competition and harm consumers. Anti-competitive agreements are arrangements between businesses that aim to decrease competition and increase profits. These agreements are usually deemed illegal due to their negative impact on competition. In this article, we`ll explore some types of agreements that are considered anti-competitive.
Price-Fixing Agreements
Price-fixing agreements are among the most common types of anti-competitive agreements. This agreement is when businesses collude to set prices for their goods or services at an artificially high level. In this way, they can inflate their profits, eliminate competition, and harm customers who are forced to pay more than market value.
Market Sharing Agreements
Market sharing agreements are when businesses agree to divide a market among themselves. This agreement is illegal because it limits competition by preventing other companies from entering the market and offering better products or services to consumers. For example, two companies in the same industry may agree to divide a geographical area between them, with one company taking the north and the other taking the south.
Exclusive Dealing Agreements
Exclusive dealing agreements are when a business agrees to only purchase from or sell to a single supplier or customer, thereby shutting out its competitors. For example, a car dealer may agree to sell only one brand of cars, thus excluding other brands from the dealership.
Tying Agreements
Tying agreements happen when a business ties the sale of one product to the sale of another product. For example, a computer manufacturer may refuse to sell its computers unless the customer agrees to purchase its software as well. This agreement is illegal because it restricts the consumer`s freedom of choice and creates a monopoly.
Mergers or Acquisitions
Mergers or acquisitions are the joining of two or more companies to form a single entity. While not inherently anti-competitive, mergers or acquisitions can become anti-competitive if they lead to a significant decrease in competition. For example, if two rival companies merge, they may control a large portion of the market, leading to higher prices and less choice for consumers.
In conclusion, anti-competitive agreements harm competition, resulting in negative impacts on consumers, innovation, and economic growth. Companies that engage in these agreements can face significant fines, legal action, and damage to their reputation. It`s critical for businesses to ensure their activities comply with antitrust laws and regulations and to seek legal advice before entering into any agreements that could cause harm.