Page 20 - Azerbaijan State University of Economics

Adalat J. Muradov, Nazim Ö. Hajiyev: Analytical frameworks and procedures for application of
demonopolization

those mentioned below. One example is based only contractual relations without consolidation;

other is related to relations within a single property. A compressor is an assembled component of

an air conditioner for domestic use. Compressors have to conform to certain technical

characteristics and be delivered to producer of air conditioner according to planned time

schedule. Coordination between a factory producing compressors and an air conditioner plant is

ensured through a contract concluded and enforced. Breach of contractual obligations is settled

via court. As models of air conditioners would not display frequent changes, it is possible to

exactly identify technical parameters and shipping date of compressors. Therefore, parties to the

contract will be satisfied, and court may define whether or not requirements of contract on

supply are met. In this case, no integration is required. As a result, integrated producers of

compressors and conditioners may be vertically fragmented by an agency of demonopolization

with no loss of effectiveness.

Another example for vertical mutual relationships highlights advantages of common

property. This example refers to an enterprise of blast-furnace and initial steel processing. In

steel production, metal should be poured out of blast-furnace in molten form, in time, at a certain

temperature with chemical composition. It is impossible to develop comprehensive contract

specifying the technological process in a vertical direction, because as requirements of the

successive process change very frequently and in an uncertain form, it is difficult to consider

these requirements beforehand. Also, it is difficult to identify standards which could ensure

effective quality of furnace product and later be tested by the independent judge.

During implementation of demonopolization such stages of production cycle should not be

separated from each other.

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