Vertical consolidation and horizontal consolidation are ways for businesses to reduce competition. With horizontal consolidation, competing companies merge into one big company. If five oil companies are competing against each other, and they merge into one big company, this reduces or eliminates competition. These competing businesses may agree to merge, or they may be bought out by one of the competing companies. This allows the bigger company to control supply and possibly raise prices.
Vertical consolidation is when one company controls every aspect of a specific industry. For example, a company that specialized in the meat industry would control the cattle ranches, the slaughtering houses, the packaging plants, and the vehicles that deliver the meat to the stores. In this situation, one company has total control over every aspect of the industry. This allows that company to control the supply of the products, which will affect the prices that can be charged.
Both horizontal consolidation and vertical consolidation are business techniques that reduce competition and benefit the business owners.