Home > West's Encyclopedia of American Law > Vertical Merger

A merger between two business firms that have a buyer-seller relationship.

Business mergers can take two forms: horizontal and vertical. In a horizontal merger, one firm acquires another firm that produces and sells an identical or similar product in the same geographic area. This type of merger eliminates competition between the two firms. In a vertical merger, one firm acquires either a customer or a supplier. Because horizontal mergers pose a direct threat to competition, they have been regulated more aggressively by the federal government than vertical mergers. Nevertheless, vertical mergers may, in some circumstances, be anticompetitive and violate federal ANTITRUST LAWS. Firms vertically integrate for many reasons. Some of the most common are to reduce uncertainty over the availability or quality of supplies or the demand for output, to take advantage of available economies of