Involves a merger or takeover where both firms are engaged in the same type of production. They could both be involved in a single stage in the production process or they could have very similar end products. The features of integration have pros and cons:
• Rationalisation will enable the firms to exploit potential economies of scale . The fall in costs may make it possible to cut prices and benefit the consumer. But it may also increase market power by reducing competition.
• The two firms combined may be better able to stand up to competition from foreign producers. But they may also have a large share of the domestic market and this may mean that they will be referred to the Competition Commission .
Horizontal integration has occurred in many industries. Hotels, chemicals and travel companies provide examples.