Horizontal restriction of competition refers to an agreement or procedure for limiting competition between businesses that operate on the same production or distribution level, i.e. actual or potential competitors.
All agreements between business undertakings, decisions by associations of business undertakings and concerted practices by business undertakings which have as their object the significant prevention, restriction or distortion of competition or which result in the prevention, restriction or distortion of competition shall be prohibited under Section 5 of the Competition Act.
If the competition restriction may affect the trade between the Member States, the provisions of Article 101 on the Treaty on the Functioning of the European Union apply to it.
Under Section 5, in particular, agreements, decisions or practices which:
- directly or indirectly fix purchase or selling prices or any other trading conditions;
- limit or control production, markets, technical development, or investment;
- share markets or sources of supply:
- apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; or
- make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connections with the subject of such contracts
shall be prohibited.
Forbidden horizontal cooperation may manifest itself as express agreements between companies or as corresponding mutual agreement. Forbidden are also decisions or arrangements whereby the conduct of companies is effectively limited or controlled on a horizontal level. Such forbidden arrangements may e.g. be born on the initiative of or within trade organizations. Price or fee recommendations given by trade organizations may thus also qualify as cartels.
The most common cartels that appear in practice are:
- price fixing and price recommendations
- market or supply sharing or limiting production
- bid rigging (collusive tendering)
- information sharing
Other aspects to take into account in horizontal agreements between competitors include:
- The efficiency benefits to be achieved from horizontal cooperation, and the exemption given in Section 6 of the Finnish Competition Act