Horizontal agreements refer to the agreements made between two or more companies that operate in the same market or industry. These agreements are also known as horizontal restraints. Such agreements can be beneficial to the parties involved, but they can also harm competition and consumer welfare.

Horizontal agreements can take different forms, such as price-fixing, market sharing, bid-rigging, and information sharing. Price-fixing involves two or more companies agreeing to set prices for their products or services. Market sharing involves dividing the market among the competitors and agreeing not to target each other`s customers. Bid-rigging involves manipulating the competitive bidding process by agreeing on who will win the bid. Information sharing involves the sharing of sensitive information among competitors, such as pricing and production capacities.

Horizontal agreements can have both positive and negative effects. On the positive side, such agreements can save costs, improve efficiency, and foster innovation. For instance, companies can collaborate on research and development, share production facilities, or jointly market their products. This can lead to economies of scale, increased output, and better quality of products or services.

On the negative side, horizontal agreements can lead to anti-competitive behavior, reducing consumer welfare, and distorting the market. For example, price-fixing can lead to higher prices, reduced output, and less innovation. Market sharing can lead to reduced competition and higher prices for customers. Bid-rigging can prevent fair competition, leading to higher costs and lower quality. Information sharing can lead to collusion, reducing competition and innovation.

To ensure that horizontal agreements do not harm competition and consumer welfare, antitrust laws and competition authorities regulate such agreements. Competition authorities monitor and investigate the behavior of companies and impose penalties if they find any violation of antitrust laws. Companies are required to prove that their horizontal agreements do not have any anti-competitive effects, such as increasing market power or reducing consumer welfare.

In conclusion, horizontal agreements refer to the agreements made between competitors in the same market or industry. They can have positive effects, such as improving efficiency and fostering innovation, but they can also have negative effects, such as reducing competition and distorting the market. Antitrust laws and competition authorities play a crucial role in ensuring that such agreements do not harm competition and consumer welfare.