Horizontal Cooperation Agreement

Horizontal cooperation implies equitable competition.

In the competitive marketplace, cooperation may bring advantageous results. In recognizing this, the European Commission (EC) regulates horizontal cooperation agreements for companies active in European Union (EU) member countries.

Identification

EC legislation defines a horizontal cooperation agreement as cooperative practice between companies operating at the same production or distribution level in a given market. Ideally, companies with such agreements cooperate in research and development, pricing, production and improving environmental conditions.

History

The agreement was first adopted in 2000, with major amendments occurring in May 2010. These amendments make a special effort in prohibiting "anti-competitive" companies from forming horizontal cooperation agreements. Such companies barred from agreement would demonstrate traits such as price-fixing and limiting production.

Considerations

While horizontal agreements aim for pro-competitive results, including faster innovation and cost savings, negative consequences may also result. Such results could essentially stem from too much cooperation, affecting variety and quality of products as well as limited innovation due to lost competitive incentive.

References

• Europa: European Union--Guidelines on Horizontal Cooperation Agreements
• Association of Corporate Counsel: European Commission Begins Consultation on draft Horizontal Co-operation Agreement Guidelines