A country has 2 established car manufactures, both of which have an exclusive ne

Question

A country has 2 established car manufactures, both of which have an exclusive network. Dealers have to sign a contract that explicitly forbjds selling cars of any other make. An upstart new maufactures sues them for damages with the claim that these dealer contracts are illegal. what arguments in court would the plaintiff make to support their claimand what counts arguments might the established manufactures make in their defense? A country has 2 established car manufactures, both of which have an exclusive network. Dealers have to sign a contract that explicitly forbjds selling cars of any other make. An upstart new maufactures sues them for damages with the claim that these dealer contracts are illegal. what arguments in court would the plaintiff make to support their claimand what counts arguments might the established manufactures make in their defense?

Explanation / Answer

A country has two established car manufacturers, both of which have an exclusive dealer network. Dealers have to sign a contract that explicitly forbids selling cars of any other make. An upstart third manufacturer sues for damages, claiming that these dealer contracts are anti-competitive. What counter arguments might the established manufacturers present in court?

Answer:

On a first look, it appears that the dealer contracts are anti-competitive. But the established manufactures can put counter arguments to defend this decision in court; they can tell to the court that the two dealers sell same type of cars, cater same type of customers and have same cost structures, therefore if they are merged, they are likely to realize economies of scope which will benefit the customers in terms of lower price of car and large available choices.

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