[Scuba Gear] Katie is a popular manufacturer of scuba gear. Before she allows a store to carry her line of scuba gear, she requires that the store owner agree that her line is the only line of scuba gear the store will carry. She also requires that if a store carries her line of scuba gear, it must also carry her line of wet suits. Sales of other manufacturer's gear and wet suits have begun a steady decline. Katie is accused of violating antitrust laws. However, Katie replies that she is simply conducting good business practices. Lara, the president of Deep Blue Scuba, calls Katie and tells her that she is prepared to bring suit against Katie for antitrust violations. Katie tells Lara that although she is not in violation, only the government could take action against her, and the government is way too busy to get involved in a dispute over scuba gear.
-Katie says that her agreements with sellers that ask the sellers to carry only her scuba gear are good and legal business practices. Which of the following is true regarding her statement?
A) She is correct.
B) She is wrong because an agreement that a seller will only carry a seller's merchandise is per se illegal under Section 1 of the Sherman Act.
C) She is wrong because an agreement that a seller will only carry a seller's merchandise is per se illegal under the Clayton Act.
D) Additional information is needed in order to determine whether she violated either the Clayton Act or the Sherman Act because her actions will be reviewed under a rule-of-reason test with the primary inquiry being whether her actions were reasonable in view of competitive practices in the industry.
E) If the agreement lessens competition or tends to create a monopoly, the agreement is in violation of Section 3 of the Clayton Act.
Correct Answer:
Verified
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