ASSIGNMENT
1. Von’s Grocery, a large retail grocery chain in Los Angeles, sought to acquire Shopping Bag Food Stores, a direct competitor. At the time of the proposed merger, Von’s sales ranked third in the Los Angeles area and Shopping Bag’s ranked sixth. Both chains were increasing their number of stores. The merger would have resulted in the creation of the second largest grocery chain in Los Angeles, with total sales in excess of $170 million. Prior to the proposed merger, the number of owners operating single stores declined from 5,365 to 3,590 over a thirteen-year period. During this same period, the number of chains with two or more stores rose from 96 to 150. The United States brought suit against Von’s to prevent the merger, claiming that the proposed merger violated Section 7 of the Clayton Act in that it could result in the substantial lessening of competition or could tend to create a monopoly. What result?
2. Boise Cascade Corporation is a wholesaler and retailer of office products. The Federal Trade Commission issued a complaint charging that Boise had violated the Robinson-Patman Act by receiving a wholesaler’s discount from certain suppliers on products that Boise resold at retail, in competition with other retailers that could not obtain wholesale discounts. Has the Robinson-Patman Act been violated? Explain.
3. Great Atlantic and Pacific Tea Company desired to achieve cost savings by switching to the sale of “private label” milk. A&P asked Borden Company, its longtime supplier of “brand label” milk, to submit a bid to supply certain of A&P’s private label dairy products. A&P was not satisfied with Borden’s bid, however, and it solicited other offers. Bowman Dairy, a competitor of Borden’s, submitted a lower bid. At this point, A&P contacted Borden and asked it to rebid on the private label contract. A&P included a warning that Borden would have to lower its original bid substantially to undercut Bowman’s bid. Borden offered a bid that doubled A&P’s potential annual cost savings. A&P accepted Borden’s bid. The Federal Trade Commission (FTC) then brought an action, charging that A&P had violated the Robinson-Patman Act by knowingly inducing or receiving illegal price discrimination from Borden. Discusswhether the FTC is correct in its allegations.
4. Clorox is the nation’s leading manufacturer of household liquid bleach (accounting for 49 percent—$40 million— of sales annually) and is the only brand sold nationally. Clorox and its next largest competitor, Purex, hold 65 percent of national sales, and the top four bleach manufacturers control 80 percent of sales. As all bleach ischemically identical, Clorox spends more than $5 million each year in advertising to attract and keep customers. Procter & Gamble is the dominant national manufacturer of household cleaning products, with yearly sales of $1.1 billion. As with bleach, advertising is vital in the household cleaning products industry. Procter & Gamble spends more than $127 million in advertising and promotions annually. Procter & Gamble decided to diversify into the bleach business, as its household cleaning products and bleach are both low-cost, high-turnover consumer goods; are dependent on mass advertising; and are sold to the same customers at the same stores through the same merchandising methods. Procter & Gamble decided to merge with Clorox, rather than start its own bleach division, to secure the dominant position in the bleach market immediately. Should the Federal Trade Commission take action against this merger, and if so, what decision?
5. The National Collegiate Athletic Association (NCAA) adopted a plan for televising college football games to reduce the adverse effect of television coverage on spectator attendance. The plan limited the total number of televised intercollegiate football games and limited the number of games any one school could televise. No member of the NCAA was permitted to sell any television rights except in accordance with the plan. As part of the plan, the NCAA had agreements with the American Broadcasting Company (ABC) and the Columbia Broadcasting System (CBS) to pay to each school at least a specified minimum price for televising football games. Several member universities now join to bring suit against the NCAA, claiming the new plan is a horizontal price fixing agreement and output limitation and as such is illegal per se. The NCAA counters that the existence of the product, college football, depends upon member compliance with restrictions and regulations. According to the NCAA, its restrictions, including the television plan, have a procompetitive effect. Is the television plan valid? Explain
