Limitation of Competition

Structurally reducing or preventing competitive pressure by shaping the environment to make competition difficult, costly, or impossible.

"Through regulatory or other means including erecting barriers to prevent or limit competitors."

• Simon Wardley

note

Limitation of Competition is the overarching goal—the desired state of reduced competitive pressure. Closely related strategies such as Defensive Regulation, Raising Barriers to Entry, IPR, Threat Acquisition, and the Standards Game are specific methods or tactics to achieve this outcome. This page provides the high-level context and rationale; see those strategies for detailed mechanisms and counterplays. Limitation of Competition should lead into, but not duplicate, those more specific plays.

🤔 Explanation

What is Limitation of Competition?

Limitation of Competition is a meta-strategy focused on structurally reducing the threat of rivals by shaping the rules, environment, or market conditions. It is not a single tactic, but a family of approaches that use regulatory, legal, or environmental levers to lock out, slow down, or burden competitors. This can include:

• Lobbying for regulations that favour incumbents or impose high compliance costs
• Creating or influencing industry standards that are hard for new entrants to meet
• Using intellectual property rights (patents, copyrights) to fence off key areas
• Acquiring or neutralising potential threats before they grow
• Engineering market expectations or requirements that only established players can fulfil

Limitation of Competition is the outcome that many defensive and decelerator strategies seek. It is most often seen in mature, regulated, or high-stakes industries (finance, telecoms, energy, healthcare, etc.), but can appear anywhere incumbents have the power to shape the environment.

Why use Limitation of Competition?

• To preserve market position and profitability by reducing the risk of disruptive entrants
• To slow the pace of change, buying time for adaptation or internal innovation
• To create a stable, predictable environment for long-term planning
• To leverage existing influence (regulatory, legal, ecosystem) as a competitive advantage

How does Limitation of Competition relate to other strategies?

Limitation of Competition is the umbrella under which strategies like Defensive Regulation, Raising Barriers to Entry, IPR, Threat Acquisition, and the Standards Game operate. Each of these is a specific play:

• Defensive Regulation: Using government or policy to create legal barriers
• Raising Barriers to Entry: Shaping market/customer expectations to make entry costly
• IPR: Using patents and legal rights to block or slow rivals
• Threat Acquisition: Buying out potential threats
• Standards Game: Making your approach the market norm, locking out alternatives

🗺️ Real-World Examples

AT&T (Bell System) and US Telecom Regulation

For decades, AT&T maintained a regulated monopoly in US telecoms, lobbying for stringent FCC rules that kept out competitors (e.g., banning non-AT&T devices). Only after antitrust action did this change, but for years, limitation of competition allowed AT&T to control the pace and direction of industry evolution.

Banking Regulation and Incumbent Protection

In many countries, banking regulations (capital requirements, licensing, compliance) are shaped by incumbents to be prohibitively expensive for new entrants. This slows fintech disruption and ensures only large, well-funded players can compete.

European Car Emissions Standards

Major automakers have influenced emissions regulations, sometimes creating loopholes or complex requirements that only established players can meet. This raises the bar for new entrants and slows the pace of change.

Airline Regulation (1930s–70s)

The US Civil Aeronautics Board tightly controlled routes and fares, securing incumbent airlines and preventing new competition. Deregulation led to a surge in competition and innovation, but also exposed incumbents who had grown complacent behind regulatory walls.

🚦 When to Use / When to Avoid

🚦 Limitation of Competition Strategy Self-Assessment Tool

Find out the strategic fit and organisational readiness by marking each statement as Yes/Maybe/No based on your context. Strategy Assessment Guide.

Landscape and Climate

How well does the strategy fit your context?

• Our map shows a critical component or market position at risk from new entrants or substitutes.
• We have, or could gain, significant influence over regulators, standards bodies, or key customers.
• There are existing or emerging rules that could be shaped to our advantage.
• Competitors are seeking to disrupt or bypass current barriers.
• We can credibly justify barriers as serving the public interest (e.g., safety, quality, stability).
• There is a window of opportunity to act before the environment shifts.

Organisational Readiness (Doctrine)

How capable is your organisation to execute the strategy?

• We have strong relationships with policymakers, regulators, or industry groups.
• We understand the regulatory and standards landscape in detail.
• We can mobilise resources for lobbying, legal, or standards-setting efforts.
• We are prepared for public scrutiny or backlash if our actions are seen as anti-competitive.
• We have contingency plans if barriers are removed or bypassed.
• We can balance defensive plays with ongoing innovation.

Assessment and Recommendation

Strategic Fit: Weak. Ability to Execute: Weak.

RECOMMENDATION
Consider alternative strategies or address significant gaps before proceeding.

Use when:

• You have, or can build, significant influence over the rules of the game
• The threat from new entrants or substitutes is high and the cost of losing position is severe
• The environment (regulatory, legal, standards) is open to being shaped

Avoid when:

• You lack the influence or resources to shape the environment
• The risk of public or regulatory backlash outweighs the benefits
• Over-reliance on barriers would stifle your own innovation or adaptability
• The market is evolving too quickly for barriers to be effective

🎯 Leadership

Core challenge

Leaders must balance the pursuit of structural advantage with the risk of stifling innovation, attracting scrutiny, or creating long-term vulnerabilities if barriers are removed.

Key leadership skills required

• Political and regulatory acumen
• Stakeholder management and coalition building
• Strategic foresight and scenario planning
• Ethical judgement and risk management
• Communication and narrative framing

Ethical considerations

Limiting competition can benefit stability and investment, but risks harming consumers, stifling innovation, and attracting regulatory or public backlash. Leaders must weigh the broader impact and be prepared for scrutiny.

📋 How to Execute

1. Map the landscape: Identify where your position is threatened and what levers exist (regulation, standards, IP, etc.)
2. Build influence: Develop relationships with key stakeholders (regulators, standards bodies, industry groups)
3. Shape the environment: Propose or support rules, standards, or requirements that favour your position
4. Mobilise resources: Coordinate lobbying, legal, and communications efforts
5. Monitor and adapt: Track changes in the environment and adjust tactics as needed

📈 Measuring Success

• Reduced number or strength of new entrants
• Regulatory, legal, or standards changes that favour your position
• Increased market share or profitability stability
• Slower pace of disruptive change in your market
• Sustained ability to invest and plan long-term

⚠️ Common Pitfalls and Warning Signs

Regulatory risk

Political or regulatory shifts can remove barriers, exposing you if you have under-invested in competitiveness.

Innovation stifling

Over-reliance on barriers can lead to complacency and loss of internal innovation capability.

Public blowback

If seen as anti-competitive, you may face reputational damage, activism, or even regulatory retaliation.

Ecosystem harm

Aggressive limitation can stifle complementors or partners, weakening the broader value chain.

🧠 Strategic Insights

Evolution and counterplay

Barriers are rarely permanent. Competitors may find ways around them, or the environment may shift. Always plan for counter-moves and the eventual erosion of barriers.

Value chain leverage

Limitation of competition is most effective when you control a critical bottleneck or dependency in the value chain.

Higher-order effects

Limiting competition can slow evolution, but may also reduce overall market dynamism and user benefit. Consider the long-term system impact.

❓ Key Questions to Ask

• Landscape: Where are we most vulnerable to new entrants or substitutes?
• Influence: What levers (regulatory, legal, standards) can we credibly shape?
• Justification: Can we frame barriers as serving a legitimate public or user interest?
• Resilience: How will we adapt if barriers are removed or bypassed?
• Balance: Are we investing enough in innovation, or relying too much on defensive plays?
• Signals: What early warning signs suggest our barriers are eroding?

🔀 Related Strategies

• Defensive Regulation – Using government or policy to create legal barriers.

• Raising Barriers to Entry – Shaping market/customer expectations to make entry costly.

• IPR – Using patents and legal rights to block or slow rivals.

• Threat Acquisition – Buying out potential threats.

• Standards Game – Making your approach the market norm, locking out alternatives.

• Lobbying – Influencing policy or standards as a precursor to limitation of competition.

• restriction-of-movement - imposing controls to constrain competitors’ strategic mobility and limit their market options.

• Licensing - structuring license terms to restrict competitor use and maintain exclusive control over key capabilities.

⛅ Relevant Climatic Patterns

• Economy has cycles – trigger: shifts in market conditions can erode imposed limits.
• Past success breeds inertia – influence: overprotected incumbents become vulnerable to change.

📚 Further Reading & References

• Case: Taxi Medallion System vs Uber – How city-enforced medallion limits kept competition out for decades, and how Uber circumvented it, leading to medallion value collapse.
• Business History: Airline Regulation (1930s–70s) – U.S. Civil Aeronautics Board tightly controlled routes and fares (incumbents secure, no new airlines). Post-deregulation, competition soared (some incumbents struggled). Illustrates the long-term effects and eventual breakdown of limitation of competition.