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I’m working on a Business Law exercise and need support.
You are the president of a company that supplies several state governments with office products. Each year, your company and four others submit bids to the respective states for the business. Some years you win and some years you lose. The president of a competitor company called you to ask if you would be willing to meet with her and the presidents of the three other competitors, who routinely submit bids. You asked about the purpose of the meeting and she told you that she was tired of losing money due to having to submit low bids and losing some states’ business. She wanted to see if everyone would agree to fixing the prices of the bids by state, so each competitor could get a share of the annual business.
You are retiring at the end of the month and your vice president is taking over for you. However, you don’t want to leave this issue open. You must prepare an internal, confidential memorandum addressed to the vice president advising her of the situation and giving her your opinion and recommendations related to:
Cheeseman, H. (2019). Business law. (10th ed.) Upper Saddle River, NJ: Pearson. ISBN: 978-0134728780
Attending a meeting with competitors to discuss potentially fixing prices would likely be considered a violation of antitrust laws. In the United States, federal antitrust laws are designed to protect competition by prohibiting certain types of anticompetitive conduct, such as price fixing, bid rigging, and market allocation. Agreeing to the request of your competitor to fix prices would also be a violation of these laws.
The main federal antitrust law is the Sherman Act, which prohibits contracts, combinations, and conspiracies in restraint of trade. The Sherman Act applies to both horizontal agreements, which are agreements between firms at the same level of the supply chain, and vertical agreements, which are agreements between firms at different levels of the supply chain. Price fixing is a type of horizontal agreement that is specifically prohibited by the Sherman Act.
In addition to the Sherman Act, there are also several other federal antitrust laws that may be relevant to this situation, including the Clayton Act, which prohibits price discrimination and certain types of mergers and acquisitions, and the Federal Trade Commission Act, which prohibits deceptive and unfair trade practices.
There are also state antitrust laws that may apply to this situation. Many states have their own antitrust laws that are modeled after the federal antitrust laws and that provide additional protection against anticompetitive conduct.
Given the potential legal risks, it would not be advisable for the vice president to attend the meeting or to agree to participate in the price fixing of the bids. In addition to the legal risks, participating in price fixing could also potentially harm the company’s reputation and its relationships with its customers.
In the future, it will be important for the company to be mindful of antitrust laws and to avoid engaging in conduct that could be seen as anticompetitive. This may include avoiding discussions with competitors about prices or other terms of competition, and being careful about mergers and acquisitions to ensure that they do not violate antitrust laws. It may also be advisable for the company to seek legal guidance in situations where there may be potential antitrust concerns.