Anderson's Business Law and the Legal Environment 20th Edition by David Twomey,Marianne Jennings

Exercise 2

The Three Tenors (Luciano Pavarotti, Placido Domingo, and Jose Carreras) make a record of their live performances together once every four years. The first two CDs and videos in the series, made by Time Warner, sold millions, with both becoming two of the highest-volume opera recordings in history. However, by the third performance and CD and video, the public demand was not as great, and Time Warner believed the first two releases would cannibalize the sales for the third. As a result, all parties involved in the sales of these CDs and tapes had to agree not to discount the first two performance tapes so that the third would have an opportunity to sell. The Federal Trade Commission (FTC) stumbled across the information on the pricing program when its staff members located a memo on the marketing plan and advertising constraints as it was reviewing documents for the proposed Time Warner/EMI Music merger proposal, a merger that fell through after European officials balked at the idea. The FTC pursued the case, and Time Warner settled the charges by agreeing not to restrain competition or set prices in the future. Is establishing a minimum price a violation of the Sherman Act? Is restricting advertising a violation of the Sherman Act?