If Penn Hills Mfg. Corp. gives the Johnstown Distributing Co. the exclusive right to distribute Penn Hills' products in Ohio-with the understanding that Johnstown can't sell Penn Hills' products outside Ohio or to other wholesalers in Ohio, this arrangement:
A) WOULD DEFINITELY BE ILLEGAL because the courts have ruled that all vertical arrangements between producers and intermediaries are illegal.
B) MAY OR MAY NOT BE LEGAL-the courts would weigh the possible good effects of this vertical arrangement against possible restrictions on competition.
C) WOULD DEFINITELY BE LEGAL because the courts have ruled that all vertical arrangements between producers and intermediaries are legal.
D) WOULD DEFINITELY BE ILLEGAL because the courts have ruled that all horizontal arrangements between competitors are illegal.
E) WOULD DEFINITELY BE LEGAL because the courts have ruled that all horizontal arrangements between competitors are legal.

Question

Quizplus · Accepted Answer

The arrangement described is a vertical agreement between a producer and an intermediary, which is not inherently illegal. The legality of such an arrangement would depend on the specific details and potential effects of the agreement. The courts would weigh the potential benefits of the exclusive distribution agreement against any potential harm to competition. Therefore, option B is the most appropriate answer.