Tuesday, November 12, 2013

Make the rules or your rivals will: use anti-growth activists to erect entry barriers

A recent paper by former student Mike Saint's consulting group shows how to erect barriers to entry to protect your market share, without running afoul of the antitrust laws:

The courts have sanctioned the right to organize community opposition that urges government officials and agencies to deny land use permits to applicants, even when the underlying motive of the opposition is protecting market share and eliminating competition. What’s more, the courts are protecting third-party funding sources, in many cases anonymous funding sources, which support the opposition efforts in order to block potential competition.

 The classic example of this is a local grocery story or gas station organizing opposition to zoning changes that would permit Wal-Mart to enter a market.

See related posts: 

Are the Wal-Mart battles over?

Make the rules or your rivals will

Sales Below Cost Laws

Unions using zoning laws against Wal-Mart

1 comment:

  1. A company’s prosperity is driven by how powerful and enduring its competitive advantages are. Powerful competitive advantages create a moat around a business that can keep competitors at bay and reap extraordinary growth (Froeb, McCann, Shor, & Ward, 2014). Companies will go to great lengths to keep profits from eroding such as: lobby, using political techniques and strategic litigation. For example, in California, lawyers from unions, small business groups, and anti-sprawl groups mobilized and encouraged voters to turn down Walmart’s initiative to by-pass local planning boards while trying to enter the California grocery market. The practice is becoming increasingly more popular and utilized by a number of popular business leaders and not just the smaller localized firms. G. Richard Shell, Wharton School, explains that Sumner Redstone, Rupert Murdoch, Andy Grove, and Bill Gates, among others, have forced rivals to the bargaining table with litigation, defined the boundaries of their markets with regulations and used politics to fight competitive battles. He further goes on to say that Law is perhaps the most hidden of all competitive strategy tools. Many in business fear getting tangled up with lawyers, lobbyists, and bureaucrats, so they keep their distance from legal matters. But it is just this aversion that makes legal knowledge such a rich source of competitive advantage for those who take the time to understand how legal systems really work (How Companies Use (and Abuse) Law for Competitive Gains, 2004).


    Froeb, L. M., McCann, B. T., Shor, M., & Ward, M. R. (2014). Managerial Economics: A problem Solving Approach. United States of America: South-Western Cengage Learning.

    How Companies Use (and Abuse) Law for Competitive Gains. (2004, May 19). Retrieved from Knowledge @ Wharton: http://knowledge.wharton.upenn.edu/article/how-companies-use-and-abuse-law-for-competitive-gains/