Limitations of Horizontal Combinations

Inspite of having the advantages of Horizontal Combination, the combining units suffer from the following limitations:

(i) Misuse of power: As a result of combination, the business gain enough power and subsequently the business can develop the monopolistic tendency, which ultimately starts to exploit consumers, labour and sellers. Consequently all evil efforts are emerged in case of combined business units.

(ii) Emerged of capitalism: In true sense, combination is another form of capitalism. Through combination the market, price fixation, etc. Powers are reserved by the combining unit and thereby the combining units show all the defects of capitalist economy.

(iii) Hurdle to Industrial Progress: Combination eliminates the competition, amongst the business units, thereby the speed of economic progress falls down.

(iv) Exploitation of consumers: As a result of combination, the business units gain the power of price fixation. The main aim of combination is to earn maximum profit. So, the combining business units exploit consumers by providing low quality goods and service at high price.

(v) Diseconomies of management: Management of big combination will prove to be unwidely and hence so-called economics to large scale production and sales may not be realised owning to diseconomies of management.

(vi) Overcapitalized: As a result of combination the combining business unit may suffer from the bad effect of over capitalization. Subsequently their overall efficiency may be decreased with different effect on market.

(vii) Lost of ownership: It is mention earlier that the prime purpose of combination is to earn profit. So, business combination earning abnormal profits tempt the Government to levy more taxes, interfere in their administration to protect the labourers, consumers etc. and finally they may be taken over by the Government.

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