Vertical vs. Horizontal Agreements

Vertical and horizontal agreements are types of business arrangements that can impact competition. Horizontal agreements occur between competitors at the same level of the supply chain, like two manufacturers or two retailers, and can reduce competition by fixing prices or dividing markets. Vertical agreements happen between different levels of the same supply chain, such as a manufacturer and its distributor. These agreements typically involve pricing, distribution, or sales restrictions and are generally more acceptable if they promote efficiency or innovation. Both types are scrutinized by competition authorities to prevent practices that may unfairly hinder market competition.