Scenario 1: Business Competition BRG of Georgia and BARMAX, located in Illinois

Question

Scenario 1: Business Competition
BRG of Georgia and BARMAX, located in Illinois are the nation’s two largest providers of bar review materials and lectures that are designed to help students study and pass the bar exam for their state.
BARMAX began offering Georgia bar review course on a limited basis in 2006 and was in direct, and often intense, competition with BRG from 2007 to 2009 when the companies were the two main providers of bar review courses in Georgia. In early 2010, they entered into an agreement that gave BRG an exclusive license to market BARMAX materials in and to use its trade name Bar/Bri. The parties agreed that BARMAX would not compete with BRG in Georgia and that BRG would not compete with BARMAX outside of Georgia. Under the agreement, BARMAX received $100 per student enrolled by BRG and 40 percent of all revenues over $350. Immediately after the 2010 agreement, the price of BRG’s course was increased from $150 to more than $400.
Is their conduct illegal under federal antitrust laws? Scenario 1: Business Competition
BRG of Georgia and BARMAX, located in Illinois are the nation’s two largest providers of bar review materials and lectures that are designed to help students study and pass the bar exam for their state.
BARMAX began offering Georgia bar review course on a limited basis in 2006 and was in direct, and often intense, competition with BRG from 2007 to 2009 when the companies were the two main providers of bar review courses in Georgia. In early 2010, they entered into an agreement that gave BRG an exclusive license to market BARMAX materials in and to use its trade name Bar/Bri. The parties agreed that BARMAX would not compete with BRG in Georgia and that BRG would not compete with BARMAX outside of Georgia. Under the agreement, BARMAX received $100 per student enrolled by BRG and 40 percent of all revenues over $350. Immediately after the 2010 agreement, the price of BRG’s course was increased from $150 to more than $400.
Is their conduct illegal under federal antitrust laws? Scenario 1: Business Competition
BRG of Georgia and BARMAX, located in Illinois are the nation’s two largest providers of bar review materials and lectures that are designed to help students study and pass the bar exam for their state.
BARMAX began offering Georgia bar review course on a limited basis in 2006 and was in direct, and often intense, competition with BRG from 2007 to 2009 when the companies were the two main providers of bar review courses in Georgia. In early 2010, they entered into an agreement that gave BRG an exclusive license to market BARMAX materials in and to use its trade name Bar/Bri. The parties agreed that BARMAX would not compete with BRG in Georgia and that BRG would not compete with BARMAX outside of Georgia. Under the agreement, BARMAX received $100 per student enrolled by BRG and 40 percent of all revenues over $350. Immediately after the 2010 agreement, the price of BRG’s course was increased from $150 to more than $400.
Is their conduct illegal under federal antitrust laws?

Explanation / Answer

Facts

Two companies(BRG of Georgia and BARMAX) are in direct competition with each other. They collude to form s contract through which one player –BRG gets a license to sell other player’s (Barmax) products in Georgia. In exchange, Barmax will get $100 per student enrolled by BRG and 40% revenues over $350.

Also, Barmax will not compete with BRG in Georgia and BRG will not compete with Barmax outside Georgia

Immediately after this BRG rises the price of courses from $100 to $450

Issue

Whether this setting between competitors violates federal antitrust laws

Rule

Analysis

Horizontal market allocation happens when firms competing on the same level divide their geographies, customers among themselves thus reducing competitions. Parties usually split a market within which they both operate or they allocate market and tend to avoid moving into each other’s territory. There is an absence of both price and non-price competition.

Barmax and BRG both competed in Georgia. They signed an allocation contract- BRG would get Georgia and Barmax would get the remainder of the country. Both agreed not to compete in other’s territories/.

Immediately after that the price has been increased tremendously, showing that the agreement was created to raise the price of the course and increase monopoly/oligopoly

Court answer

This is a clear case of violation of federal anti-trust laws

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