The owners of all the Chrysler auto dealerships in a large metropolitan area have an informal meeting during a golf outing. During the meeting, they agree to limit their orders of a new model of automobile that has received excellent reviews from the trade press for its styling and handling characteristics. Restricting orders will permit the dealers to sell these models at a price that will be at or above the manufacturer's suggested retail price for the vehicle. As a result, the dealers will make more profit on each vehicle sold due to the high demand for the new model. This type of agreement would be viewed by the courts as:
A) Horizontal collusion that is illegal.
B) Horizontal collusion that is legal.
C) Vertical collusion that is legal.
D) Vertical collusion that is illegal.
E) An exclusive distribution arrangement that is legal.

Question

Quizplus · Accepted Answer

The agreement among the Chrysler auto dealerships to limit their orders of the new model of automobile constitutes horizontal collusion, which is illegal under antitrust laws. By agreeing to restrict orders, the dealers are engaging in price-fixing, which harms competition and ultimately harms consumers by depriving them of the benefit of free competition in the marketplace.

The Owners of All the Chrysler Auto Dealerships in a Large