Brandon recently completed law school, passed the bar exam and began working for a prestigious law firm in Dallas, TX. The firm has a strict dress code and Brandon is required to wear business suits, dress shirts, ties, and dress shoes. He is investing in a new wardrobe and visited Men's Discount Warehouse to purchase new clothes. He shared his situation with Tim, his sales representative, and Tim told him that if he bought 2 suits, he would receive 2 dress shirts, 3 ties, and 2 pairs of socks for free. Which of the following statements is TRUE regarding this example?
A) Promotions such as this are legal when differences in price reflect cost differentials
B) The Robinson-Patman Act prohibits this activity as it would be considered price discrimination
C) Retailers are restricted from using bundled pricing
D) This practice would likely drive competitors out of business

Question

Quizplus · Accepted Answer

Promotions like the one offered to Brandon are legal and common in retail. They are designed to increase sales and are not considered price discrimination under the law as long as any price differences reflect cost differentials. The Robinson-Patman Act addresses price discrimination primarily in wholesale transactions, not retail promotions like this. Retailers frequently use bundled pricing to offer value to customers and incentivize larger purchases without violating laws. This practice is not inherently designed to drive competitors out of business, although competitive advantages can arise from effective marketing and sales strategies.

Brandon Recently Completed Law School, Passed the Bar Exam and Began