Quiz 5: Government Regulation of Competition and Prices


Facts: • American Crystal Sugar Co.(Defendant) and other sugar refiners companies in California adopted fixed price for beets of similar quality • Mandeville Island (plaintiff) sold beets to the defendants for sugar refinery. However, they sued contending that the price for amongst the defendants is a violation of the Sherman Act, monopoly of the market (in this case monopsony, single buyer, is a more appropriate term) • The district court ruled in favor of plaintiff appeals court reversed, plaintiff appealed The Sherman Act is applicable in the present case on the following reasons: • The pricing of the beets were influenced by the group of the contractors and reduced the actual price of the beets • The uniform fixation of the prices should meet the minimum pricing expectations of the sugar beet growers • As the overall process of the growing takes place in the same state, the law would be applicable • The growers could recover the best price for the beets with the involvement of the federal bodies Thus, the Sherman Act is applicable and the growers could recover with the involvement of the law.

The owner of a Company BE, PS sued antitrust against the Company SB through exclusive leases. On the other end just because of exclusive leases of SB Person PS stated that other coffee café owners are unable to open and run cafes due to SB's deals w.r.t lease. The lease includes that the building owners cannot provide space in the same building for another coffee café. Moreover, the SB's cafes are located very close to each other that creates a loss for other cafés in the area. Antitrust laws stand for collection of federal and state laws to regulate and conduct organization of business corporations fairly and in competitive manner to benefit the consumers. Exclusive leases: It is a common conversation when landlords and tenants are negotiating a retail lease. It is a provision that prohibits a landlord from leasing to another tenant which belongs to the same domain of the business as the existing tenant. According to antitrust law, every contract, which is a combination of trust and conspiracy to limit trade is said to be illegal. Such an exclusive lease that SB deals with the building owners that prevents them to offer building space to other cafes is illegal and simple violation of any antitrust laws. This is because as per antitrust laws, business corporations must run their businesses fairly and with competitiveness. one cannot prevent other cafes and business corporations to set up at the same building to do business. Therefore, one can agree that it does violate antitrust law about market allocation. As, SB created a monopoly and person like PS who don't have enough money to open a new coffee shop every 2 blocks can't compete with that.SB put out of business many other coffee shops not only on SBC but around the world.

The case deals with a franchise agreement between DU, franchisee and DD, franchisor. The agreement restricted DU to use the ingredients provided by DD only. DU is also required buy the napkins, cups and other materials having DD's trademark as per the agreement. Sherman Act of Antitrust stands for an act that protects trade and commerce and prohibits the business entities to undertake anti-competitive policies and procedures. According to this act, every contract or agreement which is a combination of trust and conspiracy to limit trade, is said to be illegal. Tying Arrangement is a direct violation of the Sherman Act. It is an anticompetitive practice, in which the agreement involves a practice to sell a product to a buyer, and buy another product from the same seller. This agreement would decrease the competition in a given market. By restricting the franchisee to use only DD trademarked napkins, cups and other materials, DD is trying to maintain monopoly in the market. By including this clause in the terms of the franchise agreement, DD is tying the sales of these materials to DD. Buying the trademarked napkins and cups are not necessary for the sales of the core products of DD. Franchisee DU can buy napkins, cups and other materials at a better rate from other sources, which would not affect their sales. The napkins and cups trademarked by DD are not naturally related to the products of DD. Thus, DD should not force DU to buy these napkins and cups under the franchise agreement. Thus, this is considered an illegal tying arrangement. If the trade mark was given by DD to ensure the quality of products, then this would be a legal tying agreement. This is because it helps to maintain quality control over the supplied products in the market. If providing napkins, cups and other materials such as straws which are trademarked by DD are necessary to ensure quality control across the nation-wide franchises, then this would not be considered an illegal tying arrangement.

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