Agreements Competition Law: Understanding the Dos and Don`ts
Competition is an essential aspect of the business world. It pushes companies to innovate, improve their services, and offer better deals to customers. However, competition can also breed unethical behavior, such as price-fixing, bid rigging, and market sharing. That`s where competition law comes in. It aims to promote fair competition and protect consumers from anti-competitive practices. One area of competition law that companies need to be aware of is agreements.
What are Agreements?
An agreement is a binding arrangement entered into by two or more parties. In the context of competition law, an agreement is a mutual understanding among companies to behave in a specific way that restricts competition. Examples of agreements include price-fixing, bid rigging, market sharing, and cartel behavior.
Why are Agreements Prohibited?
Agreements that restrict competition are prohibited because they harm consumers and stifle innovation. Price-fixing, for instance, eliminates competition on price, which means that consumers end up paying more for goods and services. Bid rigging, on the other hand, deprives customers of the benefits of fair and open competition, resulting in inflated prices and reduced quality.
What are the Dos and Don`ts of Agreements?
To avoid violating competition law, companies need to adhere to the following dos and don`ts when entering into agreements.
Dos:
1. Conduct a competition law risk assessment before entering into an agreement with other companies.
2. Consult with a competition law expert to ensure that the agreement complies with competition law.
3. Ensure that the agreement benefits consumers and promotes fair competition.
Don`ts:
1. Agree with other companies to fix prices or coordinate prices.
2. Allocate customers or territories with other companies.
3. Agree with other companies to restrict output or production.
4. Agree with competitors on bids or tender proposals.
5. Agree with competitors to exchange commercially sensitive information that could impact pricing or production.
What are the Consequences of Violating Competition Law?
Violating competition law can have severe consequences for companies, including fines, damages claims, reputational damage, and even criminal sanctions. Companies that engage in anti-competitive behavior may face penalties of up to 10% of their global turnover.
Conclusion
Agreements are an essential aspect of doing business, but companies need to be aware of competition law and the consequences of anti-competitive behavior. By adhering to the dos and don`ts of agreements, companies can promote fair competition and protect consumers from harmful practices. It`s essential to consult with a competition law expert to ensure that any agreement complies with competition law.