What does a horizontal merger refer to?

A horizontal merger refers to the combination of two companies that operate in the same industry and are direct competitors. This type of merger typically aims to enhance market share, reduce competition, achieve economies of scale, and increase efficiency. For example, if two companies that produce similar products merge, they may be able to reduce operating costs and increase their bargaining power over suppliers and customers.

This distinction is important because horizontal mergers can significantly impact competition in a market, often leading to concerns about monopolistic practices. Regulatory bodies frequently scrutinize these mergers to ensure they do not create unfair market dominance.

The other options describe different types of mergers that occur in business contexts. For instance, a merger involving suppliers and retailers is known as a vertical merger, which focuses on different stages of production or distribution. In contrast, mergers between different markets suggest a diversification strategy rather than direct competition, while mergers between unrelated firms do not fit into the traditional competitive framework. Thus, the focus of a horizontal merger on direct competitors makes it unique among merger types.