Answered: relationship between Apfel and Big Box

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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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 20o-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 its non-business customers a 10 percent discount off the list price. Circle Store, a rival of Big Box, asked Apfel to allow it to sell Apfel phones in California. Apfel refuses because of its contract with Big Box. 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 a contract 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 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. The relationship between Apfel and Big Box could be characterized as a: O a. horizontal business relationship. O b. diagonal business relationship. C. vertical business relationship. O d. horizontal restraint of trade. O

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