Vertical competition occurs when companies compete with each other at various stages of the product manufacturing process. For instance, a car parts manufacturer may compete with a car manufacturer. This competition is referred to as “vertical” because it takes place throughout the supply chain.
Vertical competition refers to the rivalry between companies operating at various stages of the supply chain. This means that companies involved in the production, distribution, and sale of a product or service compete against each other. For instance, a car manufacturer competes not only with other car manufacturers but also with car parts suppliers, car dealerships, and even companies offering financing for car purchases. Similarly, a clothing retailer competes with other retailers as well as clothing manufacturers, textile suppliers, and shipping companies responsible for transporting the clothing to the retailer’s stores. These examples demonstrate how companies operating at different levels of the supply chain can engage in competition. Vertical competition can be fierce as companies vie for the same customers and profits.
Vertical competition refers to the rivalry between businesses operating at different levels of the supply chain, such as manufacturers, wholesalers, and retailers.
Examples of vertical competition include a manufacturer competing with its own distributors or retailers, or a retailer competing with other retailers in the same industry.
Yes, vertical competition is generally legal as long as it does not involve anti-competitive practices, such as price-fixing or market allocation.
Common anti-competitive practices in vertical competition include resale price maintenance, exclusive dealing agreements, and tying arrangements.
Resale price maintenance occurs when a manufacturer or supplier sets a minimum price at which its products must be sold by retailers, limiting price competition among retailers.
Exclusive dealing agreements are contracts between a supplier and a retailer that require the retailer to exclusively sell the supplier’s products, limiting competition from other suppliers.
A tying arrangement occurs when a supplier requires a retailer to purchase one product (the tying product) in order to be able to purchase another product (the tied product), thereby limiting competition for the tied product.
Yes, there are certain exceptions to the legality of vertical competition, such as when it leads to a substantial lessening of competition or creates a monopoly in the market.
Vertical competition is regulated by competition laws and antitrust regulations, which aim to prevent anti-competitive practices and promote fair competition in the market.
Engaging in anti-competitive vertical practices can lead to legal consequences, including fines, penalties, and damage claims. Additionally, businesses involved in such practices may face reputational damage and loss of market share.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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