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Chapter 46
Antitrust Law and Unfair Trade Practices
VI. Answers to Critical Legal Thinking Cases
46.1 Division of Markets
Yes, BRG of Georgia, Inc. (BRG) and Harcourt Brace Jovanovich (HBJ) are liable for violating Section 1
of the Sherman Act. The BRG–HBJ agreement constitutes a division of markets and is therefore a per se
violation of Section 1 of the Sherman Act. The revenue-sharing formula in the agreement between BRG
and HBJ, coupled with the price increase that took place immediately after the parties agreed to cease
competing with each other, indicates that this agreement was formed for the purpose and with the effect
46.2 Price Fixing
The State of Arizona wins. The U.S. Supreme Court held that the defendants, the Medical Society,
Foundation, and its members, engaged in price fixing in violation of Section 1 of the Sherman Act. The
Supreme Court held that price fixing is a per se violation of Section 1 of the Sherman Act, i.e., once price
fixing is found, no defenses may be raised to try to justify the price fixing. The defendants argued that
Section 1 only prohibited the fixing of minimum prices and did not prohibit the fixing of maximum
46.3 Tying Arrangement
Metrix Warehouse, Inc. wins. The court held that Mercedes-Benz of North America (MBNA) engaged in
an illegal tying arrangement when it required its franchised dealers to purchase their replacement parts for
Mercedes-Benz automobiles from MBNA. A tying arrangement occurs when a seller refuses to sell one
concluded that the anticompetitive aspects outweighed the procompetitive aspects. The court rejected
MBNA’s claims that the tie was necessary as a device to regulate quality control. The court found that
there were less anticompetitive methods for assuring quality control, such as setting published quality
control standards that must be met by all manufacturers of Mercedes-Benz replacement parts. Applying
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46.4 Merger
The proposed merger between Lipton Tea Co. (Lipton) and Celestial Seasonings would be a horizontal
merger. A horizontal merger occurs when two or more firms in the same line of commerce (product
market) serving the same section of the country (geographical market) merge. The relevant “line of
second largest competitor with 32 percent market, and Celestial Seasonings, the largest competitor with
52 percent market share, would create a merged firm that would have “monopoly power” over the
marketplace. The size of the resulting firm and increase in concentration that it would cause would violate
the “presumptive illegality” test announced by the U.S. Supreme Court in Philadelphia National Bank.
1989 U.S. App. Lexis 574 (United States Court of Appeals for the Second Circuit)
VII. Answer to Ethics Case
46.5 Ethics Case
difference in price was important enough to cause several manufacturers of low-priced candy to move
their plants to the Chicago area to avoid having to pay the phantom freight charge. The Supreme Court
held that Corn Products had engaged in “indirect” price discrimination in violation of Section 2(a) of the
Robinson-Patman Act, and upheld the trial court’s judgment against Corn Products. Corn Products acted