Atlantic Richfield (ARCO) is an integrated oil company that sells gasoline to consumers both directly through its own stations and indirectly through ARCO-brand dealers. USA is an independent retail marketer of gasoline that buys gasoline from major petroleum companies for resale under its own brand name. USA competes directly with ARCO dealers at the retail level. Its outlets typically are low-overhead, high-volume “discount” stations that charge less than stations selling equivalent quality gasoline under major brand names. ARCO adopted a new marketing strategy in order to compete more effectively with independents such as USA. ARCO encouraged its dealers to match the retail gasoline prices offered by independents in various ways. These included making available to its dealers and distributors short-term discounts and reducing its dealers’ costs by, for example, eliminating credit card sales. ARCO’s strategy increased its sales and market share. When USA’s sales dropped, it sued ARCO, charging that ARCO and its dealers were engaged in a per se illegal vertical price-fixing scheme. On these facts, could USA show an antitrust injury resulting from ARCO’s actions (i.e., injury that flows from the unlawful aspects of the challenged behavior and is of a type that the antitrust laws were designed to prevent)? Does per se treatment apply to vertical price-fixing when the allegedly fixed price is of a maximum nature?

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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Atlantic Richfield (ARCO) is an integrated oil company that sells gasoline to consumers both directly through its own stations and indirectly through ARCO-brand dealers. USA is an independent retail marketer of gasoline that buys gasoline from major petroleum companies for resale under its own brand name. USA competes directly with ARCO dealers at the retail level. Its outlets typically are low-overhead, high-volume “discount” stations that charge less than stations selling equivalent quality gasoline under major brand names. ARCO adopted a new marketing strategy in order to compete more effectively with independents such as USA. ARCO encouraged its dealers to match the retail gasoline prices offered by independents in various ways. These included making available to its dealers and distributors short-term discounts and reducing its dealers’ costs by, for example, eliminating credit card sales. ARCO’s strategy increased its sales and market share. When USA’s sales dropped, it sued ARCO, charging that ARCO and its dealers were engaged in a per se illegal vertical price-fixing scheme. On these facts, could USA show an antitrust injury resulting from ARCO’s actions (i.e., injury that flows from the unlawful aspects of the challenged behavior and is of a type that the antitrust laws were designed to prevent)? Does per se treatment apply to vertical price-fixing when the allegedly fixed price is of a maximum nature?

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