Apfel manufactures smartphones in the United States and sells them nationwide. Apfel contracts with Big Box to make it the exclusive distributor of Apfel smartphones in California. In the contract, Apfel specifies that it would not sell its smartphones to any other retailer within a 20-mile radius of a Big Box store. In its California stores, Big Box has a unique pricing policy. It charges a higher price to its business customers, while giving non-business customers a 10 percent discount off the list price. Apfels's distribution policy in New York differs from that in California. In New York, Apfel does not reject any distributor's request to sell Apfel smartphones. However, Apfel requires that New York distributors sign contracts agreeing not to sell Apfel products below the prices specified by Apfel in a monthly "price list." In contracts with its distributors in all other states, Apfel insists that sales of its smartphones be tied to a data plan. No consumer can purchase an Apfel smartphone without buying an Apfel data plan. The court in Leegin Creative Leather Products v PSKS held: "Minimum resale price maintenance can stimulate interbrand competition-the competition among manufacturers selling different brands of the same type of product-by reducing intrabrand competition-the competition among retailers selling the same brand." This means that agreements that promote competition will pe held as legal, whereas agreements that stifle competition will be held illegal. If this case is applied to the agreement between pfel and its New York retailers, the agreement would be: a. a legal means of product distribution to enhance interbrand competition. O b. a legal horizontal restraint of trade. O C. an illegal vertical restraint of trade. D d. an illegal horizontal restraint of trade.

Principles Of Marketing

17th Edition

ISBN:9780134492513

Author:Kotler, Philip, Armstrong, Gary (gary M.)

Publisher:Kotler, Philip, Armstrong, Gary (gary M.)

Chapter1: Marketing: Creating Customer Value And Engagement

Section: Chapter Questions

Problem 1.1DQ

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Transcribed Image Text:Apfel manufactures smartphones in the United States and sells them nationwide. Apfel contracts with Big Box to make it the exclusive distributor of Apfel smartphones in California. In the contract, Apfel specifies that it would not sell its smartphones to any other retailer within a 20-mile radius of a Big Box store. In its California stores, Big Box has a unique pricing policy. It charges a higher price to its business customers, while giving non-business customers a 10 percent discount off the list price. Apfels's distribution policy in New York differs from that in California. In New York, Apfel does not reject any distributor's request to sell Apfel smartphones. However, Apfel requires that New York distributors sign contracts agreeing not to sell Apfel products below the prices specified by Apfel in a monthly "price list." In contracts with its distributors in all other states, Apfel insists that sales of its smartphones be tied to a data plan. No consumer can purchase an Apfel smartphone without buying an Apfel data plan. The court in Leegin Creative Leather Products v PSKS held: "Minimum resale price maintenance can stimulate interbrand competition-the competition among manufacturers selling different brands of the same type of product-by reducing intrabrand competition-the competition among retailers selling the same brand." This means that agreements that promote competition will be held as legal, whereas agreements that stifle competition will be held illegal. If this case is applied to the agreement between Apfel and its New York retailers, the agreement would be: a. a legal means of product distribution to enhance interbrand competition. O b. a legal horizontal restraint of trade. C. an illegal vertical restraint of trade. O d. an illegal horizontal restraint of trade.

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