Ask HN: Should I kill my competitor legally?

https://news.ycombinator.com/item?id=3170323

by questionimp • 15 years ago

9 21 15 years ago

news.ycombinator.com

Hi HN,

I am in a moral dilemma and need some suggestions.

I am in a regulated industry, the entirety of it is rather complex. However my position is a great place to be in because I have been the first player in this domain within this industry (since mid 2010), and now another competitor in interested in entering the same domain (rather, has been interested since mid 2011).

This competitor just got granted a licence to operate in the domain that I have a monopoly in. I have tried reaching out to these guys in the past, regarding what they are planning or whether they'd like to collaborate, but have never gotten a response.

According to my contract I have a "Right of First Refusal" which essentially lets me get their contract cancelled (I wasn't aware, my lawyers just pointed that out to me). When I pointed that out to the guys that are incharge of granting licenses, this is the gist of the response I got:

" I have asked XXXXX to cancel their license if you are not okay with them holding it, or cannot work out a compromise. Please advise."

Now I do not know whether to just go ahead and get their contract terminated, or work with them. I have always hated the idea of monopolies, however everytime in the past I have reached out to these guys, they have not responded despite having read or gotten the message. As such their behavior seems rude, however I do not want to appear (I have always had this perception issue) bad to the licensing directors, having them given me the option, makes it that much difficult. If they had just terminated the contract, I would have been happier, but now the decision is in my hands, I feel paralyzed sort-of.

If you were in my situation, what would you do? Rather what should I do?

arkitaip2• 15 years ago

Why should they reach out to you to sustain your monopoly? Because that's what you really want to do, right?

I once worked in retail (apparel) where it is very common for manufacturers to grant individual companies exclusive wholesale rights to entire markets, i.e. a country, multiple countries, or sometimes even continents. Any other company would have to go through these wholesalers to purchase products. Anyways, whenever we came across a wholesaler that didn't have their act together - refusal to sell products, having cheaper prices for their own retail arm, unfair terms, etc - we would make a formal complain to the manufacturer and let them know why their products were doing so poorly on the market. More often than not, we ended up with getting wholesaler rights, making us completely independent. Similarly, if your competitors can show that you are damaging their sales with anti-competitive actions, they will be very quick to react, even going so far to remove your exclusive rights.

questionimp6• 15 years ago

If we are satisfying our contractual obligation, and shipping what the clients want, how could a competitor make a case using "damaged sales"? Isn't that like saying that I start a cola company and say Pizza Hut is damaging my sales by selling only coca-cola?

In your retail example it makes sense when the wholesaler did not have their act together, but we do, and we are doing a good job.

arkitaip2• 15 years ago

Whether you are satisfying the terms and conditions of your contract is secondary. A contract is there to codify the most basic rights and obligations and generally says nothing about excellence, growth and value. If a competitor really wants a piece of your cake - which I assume several actually want since it seems lucrative - they could establish the perception that you are not creating enough value/growth for the licensor.

mark-r• 15 years ago

Your relationship with your customer(s) should be your number one priority. With a 1 year head start you should be the premier option, it would be interesting to find out what caused this defection. If you strongarm them back to you, what will be the long-term consequences?

questionimp6• 15 years ago

I have a five year contract with my customer, that guarantees a level of income, so I am not worried about that. Plus, the payout is really nice if they cancel my contract, so that is not something that I am that worried about.

Also, I am not sure whether I want to be doing this in the long term. I am 38 now, so that is not what worries me.

_delirium• 15 years ago

If you have a guaranteed 5-year contract, and aren't sure if you want to be in it long-term past that, do you gain anything by killing them? It sounds like your income level for the next 5 years is basically assured regardless of whether they enter this space or not, if I'm reading correctly.

kls• 15 years ago

Personally I would go back to your client and stress that I would rather collaborate but that multiple attempts to contact them have failed, ask the client if they would be willing to act as an agent to foster collaboration. If the client agrees and gets rebuffed then you can go back to the client and have them kill the contract. This way the client sees that you acted in good faith to provide your client with the best possible scenario and that it was the other company that would not play ball. At which point the client will fully understand that you have to protect your interests and tried to uphold his interest in doing so.

01PH• 15 years ago

Depends very much on the market situation. Is there any possibility that your competitor can jump to a substitute product?

Unless you are the OPEC or under some obscure government protection law, classic monopoles are quite rare these days and with enough bad-will it should be possible to get them undermined by substitutes.

questionimp6• 15 years ago

No. Its like having official rights to screen the football game. I signed a 5 year contract that had a right of first refusal so there isn't any thing to do with goodwill. And I have a fixed income contract that gets adjusted as per market interest rates/inflation every year. If the contracting entity cancels my contract, I get a payout of 5x[Yearly Income], so I am not sure they would do that.

TheCowboy• 15 years ago

(I'm honestly not sure if this question is that useful without knowing the case in question.)

If the fact that they now have a license devalues the value of the original contract you signed for (I am assuming) exclusive rights, then that is why you have the right of first refusal in your contract.

If it is a market in which it is necessary for you to accept some risk or cost as a "first-mover", then that is why you have that clause in your contract.

md15152• 15 years ago

Well you have to look out for number one here so I think you should get a dialogue going with them. Tell them you would like to collaborate and at least speak with them about their license, but mention you can also have their contract terminated. I would say that it isn't something you want to do, but for the shareholder's interests you will be forced to do so without a dialogue between you both.

Best of luck...

dholowiski• 15 years ago

I'm not trying to criticize you, just asking an honest question - is that legal? Could that be considered a threat? (Cooperate or I'll kill you)

questionimp6• 15 years ago

OP here. In my case, that is essentially what it is. Cooperate or I'll kill you. It can even just read I can kill you, so I will.

That is why I am really unsure about cannibalizing my own baby by not killing them, but I am very unsure whether that is the route I want to tread.

md15152• 15 years ago

Yeah, I really don't know. That's a good question, but I think it can be worded along the lines of "I can legally kill your company, but I would prefer to discuss this with you first. Please do not make me do this and just contact me so we can work together or something." - Last ditch before you keep yours alive.

P.S: Be careful of stalling. They can just stall you and keep working on their project...reminds me of the Facebook?

abbasmehdi• 15 years ago

Cripple them instead of killing them, if possible.

mjs00• 15 years ago

It's not a moral dilemma to enforce your rights around a fairly negotiated business advantage, you should protect those just as you would protect technically-created advantages.

rfurlan2• 15 years ago

There is no dilemma, it is your fiduciary duty to your shareholders to protect and maximize your future revenue by any (legal) means necessary.

metachris• 15 years ago

To me this just sounds plain wrong. Is this approach contributing to the world we want to live in? I think not. Fuck the "obligation" to maximize revenue - that alone is no justification to crush people and startups by any means necessary. Of course this is a dilemma!

Lots of companies choose not to use all means available to crush competition. Google could kill hundreds of startups with their patents alone.

rfurlan2• 15 years ago

You are basically choosing your competitors over your investors if you stick to your position. I would rather protect the interests of the people who have taken a risk to help me realize my vision than nurture a future competitor.

Ask HN: Should I kill my competitor legally?

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