Should Vertical-Integration Be More Regulated?
While monopolies may seem a thing of the past, they are still our whole reality. Ever since the 1890 Sherman Anti-Trust Act, we have scarcely seen the horizontal monopoly, but vertical monopolies are still a huge chuck of the giant companies out there.
For further analysis on horizontal monopolies,
Article from Investopedia- Horizontal vs. Vertical Integration: What's the Difference?
“When a company wishes to grow through horizontal integration, its aim is to acquire a similar company in the same industry.”
In other words, if AT&T were to acquire T-Mobile, Sprint, and Verizon, they would be a horizontal monopoly. This is because they are going to be the only significant cell phone provider in the United States. This is illegal due to the fact that with this much power, they can raise the prices to whatever they desire. This also eliminates any real competition. In our history, many monopolies had risen, and due to their abuse and puppeteering of the American people they were banned.
But what about Vertical monopolies?
Article from Investopedia - Horizontal vs. Vertical Integration: What's the Difference?
“A company that undergoes vertical integration acquires a company that operates in the production process of the same industry. Some of the reasons why companies choose to integrate vertically include strengthening their supply chain, reducing production costs, capturing upstream or downstream profits, or accessing new distribution channels. To do this, one company acquires another that is either before or after it in the supply chain process.”
An example of this is a car company buying tire companies, glass companies, etc. so that they can use their own other businesses to help create the most cost-efficient car. Seems fair enough? But these are not necessarily innocent either.
Pepsi and Coke are two enormous monopolies. Ever wonder why not many new sodas have popped up recently? Pepsi and Coke own the main bottling industries, and if they don’t own them, they control them. If a new soda comes out Pepsi or Coke can say, “if you bottle this product, I will pull all my business from your company”. Keep in mind that when I say Pepsi that includes everything Pepsi owns (Mountain Dew, Gatorade, 7 Up, SoBe, Tropicana, Naked Juice, etc.). That is a HUGE threat. The bottling companies would rather keep the giant corporations on their side than take a chance on the new guy. So, if you ever disagreed with set prices, you can thank these companies for that. Since they own everything, they set the standard.
Just take a look and who owns your pantry!
This graphic is solely to depict the effect large corporations have on new businesses that would like to transpire. Also think of all the packaging and plastic that they own too. It makes them seem untouchable.
Vertical-Integration? More like Soytical-Integration
It really is insanity though how much power that these corporations have.
Are you crowdsourcing answers for a school project?
Vertical integration and horizontal integration could be ethical or could be unethical. The purpose of business is to provide returns to shareholders, if its not illegal (or unethical enough to damage rep) and will create value then they should do it.
Also, I don't think that graphic you have is vertical integration.
The image I showed ties in to my last comment about the difficulty of new brands to come up when these massive corporations have ties to all these brands. If I were a company that does packaging would I do business with someone new if I knew that all of these products could be pulled?
Pepsi and coke and the other corporations also own many of the bottling companies etc if they don't control them. That was the point of a graphic. This was solely to get opinions on what people's take is on monopolies.
I changed the question to if they should be more regulated.... I do see where it can be construed differently on whether or not it is ethical.
I know it is regulated in the phone industry..... as for other areas I think there is a seriously lack there of
There is. I don't necessarily view it like a "victim" like some people do, but it's pretty crazy how powerful these corporations are, and how much money they make from the general population on a daily basis.
AT&T was basically a horizontal monopoly for a moment with the US and Canada until the gov stepped in. Vertical too with their ownerhip of Direct TV not that that has longevity from the trends I see on cable.
Excellent question.
May I add an Indian perspective since I am of Indian origin ?
In India the oil industry majors collude with the Ministry and politicians to capture vertically integrated monopolies.
Let me explain. 1. The chairman of the board or his team will wire $2 million to the Cyprus bank account of the Petroleum Minister or his party's foundation. 2. The government will grant the tycoon's company an oil block concession and along with that maybe even a fuel retailing license at airports.
There are vertically integrated mafias world wide, a lot of billionaires in developing nations are totally guilty of anti-monopolistic practices and crony capitalism.
In India we have vertically integrated mafias in the energy industry, where coal mines were given at dirt cheap prices to owners of power plants for next to nothing.
There's a lot of dirty stuff that happens before a product finally comes to the market place.
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