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Since the dawning of antitrust regulation in America

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Since the dawning of antitrust regulation in America [#permalink] New post 16 Aug 2011, 23:10
Since the dawning of antitrust regulation in America at the beginning of the twentieth century, agreements establishing resale price maintenance have been considered expressly illegal. Unlike horizontal price fixing between competitors, however, where there are no exceptions to a blanket ban on such activity, certain types of vertically integrated price maintenance schemes have been held not to violate the law.

The current rule, the so-called Colgate doctrine named after one of the first major corporate litigants, provides that a manufacturer may state a pricing policy and refuse to deal with those who do not abide by it so long as no actual agreement is made. For example, a manufacturer is allowed to unilaterally establish a specific price at which it would like the retailers to resell its product. It may also state that it will terminate any retailer who fails to abide by its pricing policy. The manufacturer is even allowed to follow through by terminating any noncomplying retailers. The manufacturer is not, however, allowed to do anything beyond the flat statement of its pricing policy and a possible, but undiscussed, termination of the retailer. Any attempt by the manufacturer to obtain the retailer's agreement or its promise of acquiescence to the pricing policy goes beyond the approved unilateral action and will therefore be considered illegal.

This emphasis on unilateral action stems from the fact that the antitrust laws prohibit only contracts, combinations and conspiracies in restraint of trade. The law does not extend to unilateral action. So long as the manufacturer's policies and behaviors do not go beyond these accepted unilateral actions, there is no illegal activity. However, this result has left the field in virtually total disarray. The focus on unilateral action versus combined action puts otherwise sane sales people in the peculiar position of trying to state a policy to an existing or potential retailer but being required to avoid receiving so much as an ok in response. Without substantial reform of these rules, the continuing uncertainty and counterintuitive results will inevitably lead to completely unintended illegal behavior on the part of confused corporate entities.
With which of the following choices would the author be most likely to agree?
A)Price maintenance policies are a rational approach by manufacturers seeking to maximize their profitability and control over their products in the retail market.
B) The Colgate doctrine is an ill advised attempt to meddle in internal corporate matters that should be left to the competence of the corporate managers.
C) The law should be revised to allow vertical and horizontal price maintenance.
D) Extending the law to cover unilateral action would be a positive step in improving the current state of regulation.
E) Eliminating the ban on combinations and conspiracies would be a positive step in improving the current state of regulation.
[Reveal] Spoiler:
E





Please Explain why the answer is what it is.
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Re: Definitely a tough one [#permalink] New post 18 Aug 2011, 03:40
C seems to be the answer.

A not because nothing has been said about price maintainence policy
B is not because nothing has been discussed about the internal corporate matters
D is not as it has not clearly said whether the extension would lead to appropraite rule
E is not as elimination of rule is not discussed
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Re: Definitely a tough one [#permalink] New post 21 Aug 2011, 19:37
To me D seems to be the answer as - C talks both about Horizontal and vertical price management. But the author focuses on vertical prize management and has been describing that with unilateral action not being covered the manaufcator can not expect any response from retailor for price management and this leaves the manafactur/sales person with stating a policy for which they can not expect a "OK" - response. Thus authro would agree to cover unilateral action
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Re: Definitely a tough one [#permalink] New post 28 Aug 2011, 05:55
Quote:
The law
does not extend to unilateral action. So long
as the manufacturer’s policies and behaviors
40 do not go beyond these accepted unilateral
actions, there is no illegal activity.
However, this result has left the field in
virtually total disarray.
The focus on
unilateral action versus combined action
45 puts otherwise sane sales people in the
peculiar position of trying to state a policy to
Quote:


Explanation- the law is not extended to unilateral action, which has caused disarray....
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Test Description_______Date____Total___Quant_____ Verbal
GMAT PREP1_____________________610
GMAX online test 1____29.07.2011__540_____43________19
MGMAT CAT 1_________03.09.2011__580____42________28
MGMAT CAT 2_________02.10.2011__690____48________36
GMAX online test 2_____16.10.2011__640____48________32
MGMAT CAT 3_________23.11.2011__670____47________34
Veritas free CAT______ 31.10.2011___630___ 46________33
MGMAT CAT 4_________06.11.2011__690____48________36
MGMAT CAT 5_________13.11.2011__660____46________34
MGMAT CAT 6_________19.11.2011__680____51________33
GMAT PREP2__________23.11.2011__680
GMAT Exam___________24.11.2011__690____50________34

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Re: Definitely a tough one [#permalink] New post 12 Sep 2011, 03:23
Can anyone tell where can I get such tough passages so that I get used to language.
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Re: Since the dawning of antitrust regulation in America [#permalink] New post 06 Jan 2012, 22:33
It has to be D.
Quote:
This emphasis on unilateral action stems
35 from the fact that the antitrust laws prohibit
only contracts, combinations and
conspiracies in restraint of trade. The law
does not extend to unilateral action.
So long
as the manufacturer’s policies and behaviors
40 do not go beyond these accepted unilateral
actions, there is no illegal activity.
However, this result has left the field in
virtually total disarray
.
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Re: Since the dawning of antitrust regulation in America [#permalink] New post 07 Jan 2012, 07:31
I got 'D'. but as per OA its 'E'.
Any explanation ?
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Re: Since the dawning of antitrust regulation in America [#permalink] New post 22 Apr 2012, 01:54
This emphasis on unilateral action stems
35 from the fact that the antitrust laws prohibit
only contracts, combinations and
conspiracies
in restraint of trade. The law
does not extend to unilateral action. So long
as the manufacturer’s policies and behaviors
40 do not go beyond these accepted unilateral
actions, there is no illegal activity.
However, this result has left the field in
virtually total disarray. The focus on
unilateral action versus combined action
.....

The author is trying to mean that law applies to contracts and conspiracies but not to unilateral action. Only unilateral action is permitted while conspiracies and contracts are deemed illegal. This situation demands revision, preferably removal of ban on contracts and conspiracies so that manufacturers can get "OK" ( written consent) from retailers. This will prevent unitended illegalitie sin the trade.

E is the winner.

Its not C because author does not talk about horizontal parts.
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Re: Since the dawning of antitrust regulation in America [#permalink] New post 10 Mar 2014, 09:59
Expert's post
Re: Since the dawning of antitrust regulation in America   [#permalink] 10 Mar 2014, 09:59
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