(Legal) Limits to Vertical Integration

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(Legal) Limits to Vertical Integration
Bernhard Keim, Business Consultant, Germany

- I would like to mention that backwards vertical integration (take control of supplier) is not legal if you gain control over competitors who source from the same supplier.
- The same holds for forward integration if you dominate or dictate market access for competitors that way. Buying direct competitors is legal as long as you do not gain control of the market you are in and its competition.
Therefore, to buy a monopoly can not be regarded as a sound legal nor economic move, as not the quality of services or goods you deliver gives you competitive advantage, but curtailing your customers choice. It weakens your company's ability to innovate and makes you less efficient.
Besides that antitrust agencies will start to meddle in your company's affairs, by telling you, what you are not allowed to do. It does not matter whether the antitrust agency in your home country agrees on your moves. Agencies in import countries have something to say as well (see EU Antitrust commission on US companies' practices).



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