Doreen and Al are sales reps for competing product lines of school desks in the same state. They run into each other at the Expo Hall for a state convention of high school principals and other education administrators. During a slow period in the Expo Hall, Doreen and Al talk about their upcoming sales pitches a various schools. They discover that they are both pitching to the same schools. Al proposes the following to Doreen, "Why don't you take Winterbury Elementary and I will take Red Stone Middle School? Just submit a higher bid on Red Stone and I will submit a high bid on Winterbury. That way we both get one contract each." Which of the following statements is correct?
A) As long as they both bid, there is no problem with their agreement.
B) As long as they do not mention their prices to each other, there is no problem with their agreement.
C) This arrangement is a violation of antitrust laws.
D) Throwing a bid is not an antitrust violation; it is their decision.

Question

Doreen and Al are sales reps for competing product lines of school desks in the same state. They run into each other at the Expo Hall for a state convention of high school principals and other education administrators. During a slow period in the Expo Hall, Doreen and Al talk about their upcoming sales pitches a various schools. They discover that they are both pitching to the same schools. Al proposes the following to Doreen, "Why don't you take Winterbury Elementary and I will take Red Stone Middle School?   Just submit a higher bid on Red Stone and I will submit a high bid on Winterbury. That way we both get one contract each." Which of the following statements is correct?
A) As long as they both bid, there is no problem with their agreement.
B) As long as they do not mention their prices to each other, there is no problem with their agreement.
C) This arrangement is a violation of antitrust laws.
D) Throwing a bid is not an antitrust violation; it is their decision.

Quizplus · Accepted Answer

This arrangement is a violation of antitrust laws. It is illegal for competitors to agree to divide up customers, territories or markets. This is known as market allocation and is considered an antitrust violation. Additionally, submitting a higher bid on a contract just to win, instead of offering a fair and competitive price, could also be considered bid rigging, which is also illegal under antitrust laws. As sales reps for competing product lines, Doreen and Al cannot make an agreement to divide up customers or markets.

Doreen and Al Are Sales Reps for Competing Product Lines