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It's even worse than a monopoly, it's the elimination of a market. When you perform a vertical merger you no longer have to negotiate with people at that level

It's even worse than a monopoly, it's the elimination of a market. When you perform a vertical merger you no longer have to negotiate with people at that level of the market. The acquired business now only has to respond to the demands of the parent company and it is only through those demands that market forces act on the child business. Furthermore, since the parent company has removed its demand from the market, there is less money moving around. The less competitive businesses who contributed to the market forces keeping prices low end up folding or being vertically integrated into competitors. The market dies and the oligarchy strengthens immensely. Especially so because now startup competitors must have all segments of the market in order to compete.

stale2002 9y ago
I mean, your argument is effectively that vertically integrated companies are so efficient, and lower costs so much, that they force competitors out of business. If I was a lawyer, fighting FOR the company, I would literally use your exact same argument as for why vertical integration is a good thing. Reducing costs, and making the market more efficient is a good thing, not a bad thing. Reducing prices is good, not bad.
- vorotato 9y ago
  There's another explanation, that they have the capacity to drive price of entry up. That they have enough money saved that they can undercut their competitors and snuff them out before they can gain any market share. So this is true whether they are efficient or not. However I'd argue the damning blow is that centralization makes efficient but fragile structures. Its why everyone hates a monolithic codebase.
- rifung 9y ago
  > vertically integrated companies are so efficient, and lower costs so much, that they force competitors out of business. I don't think you would want to argue that driving competitors out of business since antitrust legislation is partly designed to prevent that. My understanding is that using the lowering of costs as an argument works when the government is concerned with consumers but not when it is concerned with competition. I think the US is the former while the EU is the latter?

stale2002 9y ago

I mean, your argument is effectively that vertically integrated companies are so efficient, and lower costs so much, that they force competitors out of business. If I was a lawyer, fighting FOR the company, I would literally use your exact same argument as for why vertical integration is a good thing. Reducing costs, and making the market more efficient is a good thing, not a bad thing. Reducing prices is good, not bad.

vorotato 9y ago
There's another explanation, that they have the capacity to drive price of entry up. That they have enough money saved that they can undercut their competitors and snuff them out before they can gain any market share. So this is true whether they are efficient or not. However I'd argue the damning blow is that centralization makes efficient but fragile structures. Its why everyone hates a monolithic codebase.
rifung 9y ago
> vertically integrated companies are so efficient, and lower costs so much, that they force competitors out of business. I don't think you would want to argue that driving competitors out of business since antitrust legislation is partly designed to prevent that. My understanding is that using the lowering of costs as an argument works when the government is concerned with consumers but not when it is concerned with competition. I think the US is the former while the EU is the latter?