Question 1

A seller has been accused of price discrimination.Which of the following would be the LEAST effective defense?

Accepted Answer

Charging a price to undercut a rival and significantly affecting competition is not a valid defense for price discrimination. It may be considered predatory pricing, which is illegal under antitrust laws. The other options mentioned are valid defenses for price discrimination.

Question 2

Which of the following is most likely a true statement about tying agreements?

Accepted Answer

Tying contracts are often used to achieve cost savings through package sales, as companies offer discounts for buying related products or services together. While some tying agreements may be illegal if they are anticompetitive, not all tying contracts are inherently illegal. The Clayton Act and Sherman Act both address tying arrangements, and the Albrecht v. Herald case did not specifically address tying contracts but rather dealt with antitrust violations more broadly. The use of tying arrangements can be subject to scrutiny and approval by antitrust regulators.

Question 3

Mergers most likely pose antitrust danger because they have the potential to________.

Accepted Answer

Mergers can limit the supply of products to downstream channel members, leading to reduced competition and potentially higher prices for consumers. This can raise antitrust concerns and prompt regulatory scrutiny. Choices A, C, and D are not necessarily antitrust concerns, and choice B is too broad and vague.

Question 4

Which of the following regulates external expansions?

Accepted Answer

The Clayton Antitrust Act regulates external expansions, specifically by prohibiting mergers and acquisitions that would substantially lessen competition or create a monopoly. The Colgate doctrine refers to a company's ability to unilaterally choose its customers and is not related to external expansions. The Sherman Antitrust Act prohibits anticompetitive behavior, but does not specifically regulate external expansions. The Federal Treasury is not related to antitrust regulations. The Robinson-Patman Act addresses price discrimination among customers.

Question 5

Block booking is a type of ________ policy that is frequently used by motion picture distributors to force independent theater owners to screen unwanted movies in order to obtain desirable ones from distributors.

Accepted Answer

The answer of Block booking is a type of ________...

Question 6

A dual distribution strategy is most likely illegal if ________ is involved.

Accepted Answer

Dual distribution strategy refers to a manufacturer using two different distribution channels to sell the same product. Price squeezing occurs when a vertically integrated company sets a price for an input sold to an external company that is so high that the external company cannot compete with the integrated company's downstream operations, violating antitrust laws. Therefore, if price squeezing is involved in dual distribution, it is most likely illegal.

Question 7

Company X and Company Y are both distributors for ABC Widgets,and each firm has been given a specific territory by ABC.Company X recently sold an ABC product to a customer located in Company Y's territory.As a result,Company X must reimburse Company Y for the sale.Which term best describes this situation?

Accepted Answer

Profit pass-over arrangement describes a situation where one company compensates another for sales made in the latter's designated territory, as seen in the scenario between Company X and Company Y.

Question 8

Which term refers to marketing arrangements in which manufacturers reach end-users by employing multiple channels for the same basic product?

Accepted Answer

Dual distribution refers to the use of multiple channels (such as direct sales and intermediaries) to distribute the same product to end-users. This allows manufacturers to reach a wider audience and increase sales.

Question 9

Both market coverage and customer coverage channel policies are governed by ________.

Accepted Answer

Both market coverage and customer coverage channel policies are related to issues of competition and antitrust laws. The rule-of-reason criteria are used to determine whether a particular business practice violates antitrust laws or not. Therefore, the answer is C.

Question 10

What marketing channel strategy was the issue in Eastman Kodak Co.v.Image Technical Service,Inc.?

Accepted Answer

The issue in Eastman Kodak Co. v. Image Technical Service, Inc. was tying, which is the practice of requiring customers to purchase one product in order to be able to purchase another product. In this case, Kodak was requiring customers who wanted to purchase their replacement parts to also purchase their photocopiers. This was deemed anti-competitive behavior by the court.

Question 11

Which of the following specifies the site of a channel member's place of business?

Accepted Answer

A location clause specifies the site of a channel member's place of business.

Question 12

Which of the following is most likely a true statement about slotting allowances?

Accepted Answer

Slotting allowances are more prevalent in grocery retailing than in other retail industries.

Answer: E
 Slotting allowances can violate the Colgate doctrine, which prohibits manufacturers from dictating the retail price of their products. When used as a tool for price discrimination, slotting allowances can lead to different prices for the same product in different markets.

Question 13

In U.S.Federal Trade Commission v.Toys 'R Us,the toy retailer was accused of ________.

Accepted Answer

Toys 'R Us was accused of limiting access to manufacturers' products at competing retailers by pressuring manufacturers to not sell to other retailers. This was deemed as anti-competitive behavior by the FTC.

Question 14

CapCo,a manufacturer of baseball cap machinery,insists that Hats-R-Us,a firm that leases the machinery,purchase a service contract from CapCo to maintain the machinery.Which term best describes this arrangement?

Accepted Answer

Tying is the practice of requiring a customer to purchase one product (in this case the service contract) in order to obtain another product (the machinery lease). CapCo is insisting that Hats-R-Us purchase the service contract in order to lease the machinery, which is an example of tying.

Question 15

What is the primary concern with category management by category captains?

Accepted Answer

The primary concern with category management by category captains is competitive exclusion. This occurs when the category captain, often a leading supplier, uses its position to favor its own products over competitors', potentially limiting the variety of products available to consumers and reducing competition within the category.

Question 16

When a supplier uses a market coverage policy of channel management,the main focus of the channel is ________.

Accepted Answer

The answer of When a supplier uses a market coverage...

Question 17

According to the ________,a seller has the right to choose which resellers have access to its product and to choose not to sell to certain intermediaries.

Accepted Answer

The Colgate doctrine affirms the right of the seller to select its customers, and it holds that a unilateral decision of a manufacturer or supplier to deal, or not to deal, with any reseller does not violate antitrust laws. The Sherman Antitrust Act and Clayton Antitrust Act are not relevant to this concept, while the Parker doctrine and Kodak doctrine pertain to other antitrust principles related to mergers and monopolies.

Question 18

Refusal to deal is a tool that allows a channel member to exert ________ power.

Accepted Answer

Refusal to deal involves the threatened or actual cessation of business dealings with another firm. This tactic is a form of coercive power because it relies on the threat of punishment (in this case, withholding business) to force the other party to comply with the channel member's wishes.

Question 19

Which of the following involves a promise by a downstream channel member that it will not sell outside its assigned territory?

Accepted Answer

Absolute confinement involves a downstream channel member being restricted from selling outside its assigned territory.

Question 20

Which of the following regulates internal expansions?

Accepted Answer

The answer of Which of the following regulates internal expansions?
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Quiz 13: Managing Channel Policies and Legalities