

Ask HN: Should I kill my competitor legally? - questionimp

Hi HN,<p>I am in a moral dilemma and need some suggestions.<p>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).<p>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.<p>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:<p>" 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."<p>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.<p>If you were in my situation, what would you do? Rather what should I do?
======
01PH
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.

~~~
questionimp
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
(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.

~~~
questionimp
_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._

Thanks for putting it that way, it makes more sense when I look at it from
this perspective.

------
arkitaip
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.

~~~
questionimp
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.

~~~
arkitaip
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.

------
rfurlan
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
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.

~~~
rfurlan
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.

------
mjs00
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.

------
md1515
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
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)

~~~
md1515
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?

------
mark-r
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?

~~~
questionimp
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
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.

~~~
questionimp
Yes, however there is something like a commission/bonus that is associated
with the work too, so depending on how much my company is working, we get more
revenues above the guaranteed level of income.

------
abbasmehdi
Cripple them instead of killing them, if possible.

