Which is a disadvantage of horizontal integration?

• A. Could breach EU competition laws
• B. Always improves customer satisfaction
• C. Always increases supplier power
• D. Always reduces prices

Answer: (A)

Horizontal integration carries regulatory risk because authorities aim to preserve competition. When a company merges with a competitor at the same stage of the market, it can create a dominant player or reduce competitive pressure, which regulators in the EU scrutinize closely. If the European Commission determines the deal would substantially lessen competition, it can block the merger or impose remedies such as divestitures. This potential for intervention is a real disadvantage, as it can derail growth plans, delay integration, or force costly concessions. The other statements aren’t reliable guarantees: customer satisfaction isn’t assured and can suffer during integration; supplier power doesn’t inherently rise with a horizontal merge and can even fall if the combined firm negotiates better terms; prices aren’t guaranteed to fall, as consolidation can lead to higher prices if competition wanes.