Horizontal integration, a significant business strategy employed during the late 19th and early 20th centuries in the United States, involves a company acquiring or merging with competitors in the same industry performing the same stage of production. This process aims to consolidate power, reduce competition, and expand market share within a specific sector. An example would be a large oil refinery acquiring smaller, independent refineries to control a greater percentage of oil processing capacity.
The importance of this consolidation strategy lies in its potential to create near-monopolies, thereby granting significant influence over pricing and production levels. Benefits to the integrating company can include economies of scale, reduced operating costs, and increased profitability. However, the practice also raised concerns about antitrust issues and potential exploitation of consumers through artificially inflated prices, influencing the development of regulatory policies designed to curb monopolistic practices. The growth of industries like oil, steel, and railroads saw widespread use of this tactic.