Business partnerships have a hand in resetting industries and redefining markets. Yet, not all such alliances work out just as planned: some have contained public controversy leading to public outcry, legal fights, and at times, regulatory or policy changes. Here is a look at some of the most controversial business partnerships of all time and the lessons they offer.
- Daimler-Benz and Chrysler (1998)
Daimler-Benz, the German car company, and American car manufacturing company Chrysler came together in a 1998 merger that was called a “merger of equals.” Not long after that, the honeymoon was over as cultural embroilment and strategic differences rose to the surface. Daimler sold Chrysler in 2007, hugely discounting it, to only be recorded in the automotive company’s history as one of the most notorious failed mergers.
- Google and Yahoo (2008)
In 2008, Google and Yahoo entered into an advertising agreement, under which Google ads would have appeared on Yahoo search results. The deal had barely been struck when regulators began to sniff around it, and the other competitors screamed that—as the saying goes in the Valley—it would give Google a fistful of pistons. Thus, anticipating the possibility of a lawsuit for monopoly practices and a violation of antitrust laws, the partnership was dissolved, further testifying to how the high-tech pressure cooker is hard to navigate in high-stakes collaborations.
- BP and Rosneft (2011)
British oil giant BP and Russian state-controlled oil company Rosneft were making plans for a strategic partnership to explore and develop the vast, untapped reserves in the Arctic. That is, until a deal was blocked by BP’s current Russian partners within TNK-BP, arguing in court that the BP-Rosneft deal breached their shareholder agreement. The resultant legal wrangling and public relations fiasco laid bare how difficult such international partnerships can be.
- Facebook and Cambridge Analytica (2018)
If it was not a marriage of convenience for business purposes, then the joining of Facebook and Cambridge Analytica is one of the most controversial alliances in the history of technology. The political consulting firm Cambridge Analytica accessed millions of Facebook user data without their consent or approval in order to fuel political advertising. The data breach flared up huge concerns over privacy and security, forced Facebook’s market value to plummet, and also put huge pressure on regulators to tighten their policies on data handling in the tech industry.
- Foxconn and Wisconsin (2017)
In 2017, Foxconn declared that it would soon be investing in Wisconsin and building a manufacturing facility there, while creating thousands of employment opportunities within the state. This move was applauded by politicians at the local and national levels. Serious controversy has erupted since then regarding the billions of dollars of tax incentives given to Foxconn and to whether it would ever materialize into the delivery of the promised jobs and investments. The project has since been scaled down and even resulted in accusations of mismanagement of public funds and lack of corporate accountability from such economic development deals.
- Enron and Arthur Andersen (2001)
The failure of Enron is directly succeeded by the breakup of Arthur Andersen, a company of the top five largest audit and accountancy partnerships in the world, to be a clear sign of what results in business practice that is not ethical. The collapse of the company’s bankruptcy in 2001, due to the relentless fraudulent practices and accounting scandals, also led to the dissolution of Arthur Andersen, which was found guilty of obstructing justice for shredding documents related to its audit of Enron. This scandal resulted in a loss of trust in accounting firms and major changes in regulations governing corporate governance and accounting.
Conclusion
These controversial alliances indicate that while an alliance can offer a whole host of benefits, it is bound to be laced with risks. The deals are fraught with legal, ethical, and cultural challenges. While each teaches its own lessons, they are grounded in the importance of due diligence, the conduct of ethics, and the need for a strong, clear regulatory framework to guide corporate behavior. Good businesses will have to navigate these partnerships from a clear strategy and be aware of the broader implications they will make in their reputation and operational landscape.
