Two car dealers,one a Honda dealer and the other a Toyota dealer,are located across the street from each other in a large city.There are several other Toyota dealers and several other Honda dealers in the same city.These two dealers have become fiercely competitive,and the competition has resulted in severe price-cutting.In fact,neither dealer can survive over the long term by selling cars at the current prices.The dealers meet and decide to stop this brutal competition.They agree on the prices to be charged for each of their models.The prices agreed to are based on many factors.As a result,there are no competing models for which the Toyota dealer and Honda dealer are charging the same price.For example,the agreed price to sell the most basic Honda Accord is different than the agreed price for the most basic Toyota Camry.Have the dealers engaged in illegal price-fixing?

Question

Quizplus · Accepted Answer

The fact that the prices agreed to are different for competing products does not excuse the fact that the dealers have engaged in price-fixing, which is illegal. The reason for engaging in price-fixing, even if it was necessary for survival, does not absolve the dealers of their illegal behavior. The presence of other dealers selling the same brand products who are not part of this agreement also does not make the price-fixing legal. Finally, the fact that the agreement includes only two manufacturers does not make the price-fixing legal. Therefore, the dealers have engaged in illegal price-fixing.

Two Car Dealers,one a Honda Dealer and the Other a Toyota