Affiliated companies are related to each other in some way, from formal agreements to working in the same industry. They may work together on projects and provide special services. Formally affiliated companies are closely scrutinized by financial regulators, while informally affiliated companies are not subject to the same level of regulatory scrutiny.
Affiliated companies are companies that are related to each other in some way. There are many ways in which companies can relate, from formal agreements such as interlinking directories to simply working in the same industry. Affiliated companies may work together on projects, provide special services to their affiliates’ customers, and engage in other business activities in association with the companies with which they are related.
Formally, companies can be affiliated when both are subsidiaries of the same company. Likewise, if a company owns a minority stake in another company, the companies are considered to be affiliated companies. In an interconnected board, the same person is responsible for two different companies and the two companies are affiliated because of their shared directors. It is not uncommon for top management to be the same or for business ethics to be used in affiliated companies.
Formally affiliated companies are closely scrutinized by financial regulators. There is concern that these companies could potentially corner the market or control financial conditions due to their size and connections. Related companies must show that they can act independently and are not trying to block other companies from the market. If affiliates become too powerful, they may be forced to sell stock or develop spinoffs to satisfy regulators.
Another form of affiliated company is a company associated with another company by virtue of belonging to the same industry. Known in Japan as keiretsu, these companies are not formally linked to each other, but can work together on projects. The technology sector has many of these affiliations in the form of companies that are independent but cooperate to produce projects and promote innovation. For example, a phone manufacturer might work with a software developer to create a new product.
Informally affiliated companies are not subject to the same level of regulatory scrutiny. It is understood that these affiliated companies operate independently and may even be competitors at times, even though they also work together on projects. If it becomes clear that companies are engaging in price fixing, suppression of competition and similar activities, they can be investigated and potentially penalized in countries that promote a free market economic view. According to the law in these regions, limiting competition, controlling prices and obstructing consumer choices is not legal.
Asset Smart.
Protect your devices with Threat Protection by NordVPN
