Businesses in competition with each other collaborating in times of crisis is not a novelty discovered during the COVID-19 pandemic. Companies have been doing so for decades, and for various reasons – to reduce costs, to ride on each other’s strengths, to increase efficiency and profitability.
But in the wake of COVID-19, the relevance of joining forces with your competitors has been given a new dimension: survival. Indeed, for certain businesses whose demand or supply was affected by the disruptions caused by the pandemic, collaborating with a company that’s in competition with your own may be a way to mitigate such negative effects and ride out the waves.
Crucial to note is the observation of competition laws ahead of such a move. Last March, the Maltese Office for Competition issued a statement together with the European Commission on the application of European competition rules throughout the crisis.
On the subject of competitor cooperation, it was recognised that under the circumstances, authorities will not intervene against temporary measures of collaboration aimed at avoiding a shortage of supply. However, it has warned that it will take action against companies taking advantage of the situation to establish a dominant position.
Assuming no unlawful activity is at play, strategic collaboration with a competitor could prove to be both beneficial and profitable – such as capitalising on economies of scale, combining shared expertise in a specific field, or pooling in resources for R&D. Under the current circumstances, it could also be a way to protect your staff, customers and shareholders, and to maintain a level of business activity in view of a looming global economic recession.
However, being aware of the risks associated with this is also important, such as those posed by sharing lots of information with your rivals, depending entirely on these newly forged partnerships to survive – bearing in mind that the current circumstances will eventually change and so too may this partnership – as well as other negative consequences, such as tension between business owners and a weaker competitive advantage.
The crux comes down to working with competitors you can trust. In the midst of an unprecedented global event, joining forces in business could be rewarding and lead to long-term gains, but both businesses need to be on the same page from the outset, ensuring that the balance of power remains stable between both sides, with the ultimate purpose of achieving mutually-beneficial goals to ride out the storm and, hopefully, beyond.
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