The manufacturers of several designer purses have met and agreed not to sell the
ID: 331951 • Letter: T
Question
The manufacturers of several designer purses have met and agreed not to sell their purses to Bramble's Department Store because of Bramble's practice of discounting all items 20 percent below the retail costs at other stores. The manufacturers are concerned about maintaining their images of exclusivity and quality. The agreement among the manufacturers:
a. is valid because of their need to protect their product.
b. violates the Sherman Act because it is a boycott.
c. is valid because the rule of reason applies and they have a valid reason.
d. none of the above
Explanation / Answer
The Sherman Antitrust Act is a landmark federal statute in the history of United States antitrust law (or "competition law") passed by Congress in 1890 under the presidency of Benjamin Harrison. It allowed certain business activities that federal government regulators deem to be competitive, and recommended the federal government to investigate and pursue trusts. As per the subsequent legislation expanding the scope of the Sherman Act, The Clayton Antitrust Act, passed in 1914, prescribes certain additional activities that had been discovered to fall outside the scope of the Sherman Antitrust Act. For example, the Clayton Act added certain practices to the list of impermissible activities:
Which proves that the store's policy is in violation of the Act.
Also, conduct characterized as per se unlawful is that which has been found to have a "'pernicious effect on competition' or 'lack[s] . . . any redeeming virtue'"[19] Such conduct "would always or almost always tend to restrict competition and decrease output." The department store's practice to discount the items would result in low sales at all the other stores and also kill competition in the market.
So, the agreement among the manufacturers:
a. is valid because of their need to protect their product.
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