Coldpoint, Inc., a manufacturer of refrigerators, and several of its wholesale d
ID: 460102 • Letter: C
Question
Coldpoint, Inc., a manufacturer of refrigerators, and several of its wholesale dealers have entered into an agreement in which Coldpoint has assigned each dealer to an exclusive sales territory. A proper plaintiff has sued Coldpoint on the theory that the agreement (whose existence the plaintiff is able to prove) violated Section 1 of the Sherman Act. Which of the following is a legally accurate analysis of the case?
A. This agreement means only that the dealers have unilaterally refused to deal outside their own territories; therefore, no violation of Section 1 is present.Explanation / Answer
The correct choice is b
Explanation : - The underlying assumption of section 1 of the Sherman act is that society's welfare is harmed if rival firms are permitted to join in an agreement that consolidates their market power or otherwise restrains competition . The type of trade restraints that section 1 of the Sherman Act prohibits generally fall into two broad categories : horizontal restraints and vertical vertical restraints.
A Vertical merger occurs when a company at one stage of production acquires a company at a higher or lower stage of production . An example of a vertical merger is a company merging with one of its suppliers or retailers. Thus Coldpoint agreement with the dealer restricts competition and is a per se violation of Section 1.