Under normal circumstances, the formation of horizontal competition is directly related to the lack of "integrity rectification". When the company was restructured, the promoters failed to invest all the relevant assets and businesses that constituted horizontal competition in the joint-stock company, which eventually led to the competitive relationship between the existing business of the joint-stock company and the controlling shareholder. In the case of large state-owned enterprises, multinational groups and private enterprises as the main sponsors, the problem of horizontal competition is more likely to occur.
Influence of horizontal competition
In the actual operation of enterprises, the existence of horizontal competition will inevitably make related enterprises unable to compete equally in a completely competitive market environment. Controlling shareholders can use their voting rights to decide the major operations of the enterprise. If their voting rights are tilted towards unlisted companies, it is unfair to minority shareholders.
Legislation in various countries requires listed companies to prohibit horizontal competition in principle, so as to prevent controlling shareholders from taking advantage of their controlling position and harming the interests of listed companies in horizontal competition. For the China Securities Regulatory Commission, the requirement is (in principle) to prohibit horizontal competition. In this way, it will be difficult to get approval from the CSRC if there is the fact that the company to be listed competes with the sponsor institution. Therefore, sponsors and companies to be listed must deal with horizontal competition well.