Deck 13: Managing Channel Policies and Legalities

Question 1

What is the most likely result of an exclusive dealing arrangement?

A) Resellers have an increased freedom of choice among suppliers, which lowers consumer prices.
B) Transactions between resellers and the supplier are greater in number and smaller in volume.
C) Interbrand competition is lessened in relevant markets according to Robinson-Patman.
D) Resellers receive more stable prices of the supplier's products.
E) Channel partners experience increased administrative costs.

Answer 1

D

Question 2

Which term refers to a channel charging higher prices to segments of buyers that express a higher willingness to pay?

A) Price segmentation
B) Slot pricing
C) Price discrimination
D) Elastic pricing
E) Price maintenance

Answer 2

A

Question 3

Kitchen Plus,a retailer,has formed an agreement with XOXO,a manufacturer of kitchen gadgets and supplies.Kitchen Plus has agreed to exert its best efforts to ensure effective distribution of XOXO goods in its assigned territory of Houston.If Kitchen Plus fails to meet performance targets,it will lose its preferred status with XOXO,although the retailer can still sell outside its territory.Which term best describes the agreement between Kitchen Plus and XOXO?

A) Primary responsibility
B) Absolute confinement
C) Single block exemption
D) Price-market segmentation
E) Profit pass-over arrangement

Answer 3

A

Question 4

According to antitrust enforcement agencies,selective and exclusive coverage policies are most similar to ________.

A) price maintenance
B) territorial restrictions
C) overt price discrimination
D) industrial slotting allowances
E) illegal interbrand competition

Question 5

What type of channel policy was the focus of disagreement in Continental TV v.GTE Sylvania?

A) Pricing
B) Ownership
C) Product line
D) Market coverage
E) Selection and termination

Question 6

Which statement about territorial restriction agreements is most likely true?

A) In most Asian markets, regulations are becoming tighter and the number of territorial restrictions is growing.
B) In the EU, restrictive business agreements involving firms with more than 30% market share are prohibited.
C) Current EU laws hold that all territorial restriction agreements are distortions of free trade.
D) Territorial restrictions are commonly used in the U.S. but highly illegal.
E) A single block exemption rule is enforced in the U.S.

Question 7

A manufacturer is LEAST likely to impose vertical restrictions when ________.

A) distributors have better market information than the manufacturer
B) distributor violations of restrictions are relatively easy to detect
C) distributors invest heavily in manufacturer-specific assets
D) competition at the manufacturer level is insignificant
E) the manufacturer is concerned about free riding

Question 8

Both Business Electronics Corp.v.Sharp Electronics and Monsanto Company v.Spray-Rite Service Corporation had the effect of ________.

A) overturning the Colgate doctrine
B) outlawing predatory pricing activities
C) validating cost-based defenses against discounting
D) weakening the per se illegality of maximum RPM
E) establishing the per se illegality of price discrimination

Question 9

Which statement is NOT a component of the Robinson-Patman Act?

A) Discriminatory prices for goods are prohibited if they reduce competition at any point in the channel.
B) Price discrimination can be legal if it results from real cost differences in serving different customers.
C) Brokerage allowances are allowable unless they are earned by an independent broker.
D) Buyers are prohibited from knowingly inducing price or promotional discrimination.
E) Discriminatory prices can be given in good faith to meet competition.

Question 10

According to the decision in Tampa Electric Co.v.Nashville Coal Co.,the legality of exclusive dealing policies relates to all of the following factors EXCEPT the ________.

A) degree of vertical integration achieved by the supplier
B) substantiality of the competition being prevented
C) height of entry barriers in the relevant market
D) geographic area of effective competition
E) type of merchandise or goods

Question 11

Which case established the per se illegality of maximum resale price maintenance?

A) Monsanto Company v. Spray-Rite Service Corporation
B) Business Electronics Corp. v. Sharp Electronics
C) Texaco Inv. v. Hasbrouck
D) State Oil Co. v. Khan
E) Albrecht v. Herald

Question 12

Under which of the following rules is a marketing policy automatically unlawful,regardless of any reasons,explanations,or implications?

A) Modified rule of reason
B) Territorial competition
C) Per se legality
D) Rule of reason
E) Per se illegality

Question 13

EQ Electronics,a retailer,has promised a supplier,Zip Computer Manufacturing,that it will not sell Zip Computers outside its assigned territory of Boston.Which term best describes the promise made by EQ?

A) Primary responsibility
B) Absolute confinement
C) Single block exemption
D) Price-market segmentation
E) Profit pass-over arrangement

Question 14

Which of the following is NOT one of the main channel policies used by channel managers to administer distribution systems?

A) Customer coverage
B) Market coverage
C) Value chain
D) Product line
E) Pricing

Question 15

Athletix Manufacturing specifies that retailers may not sell the Athletix Z200 running shoe for less than $89.99.Which term best describes this Athletix policy?

A) Slot pricing
B) Price discrimination
C) Price segmentation
D) Minimum resale price maintenance
E) Maximum resale price maintenance

Question 16

ABC Manufacturing wants to prevent the emergence of gray markets,so the firm requires that its authorized dealers contractually agree to not sell ABC products to anyone but bona fide end-users.What type of channel policy does ABC most likely have?

A) Pricing
B) Ownership
C) Product line
D) Market coverage
E) Customer coverage

Question 17

What did the Court assert in the Monsanto Company v.Spray-Rite Service Corporation case?

A) Unreasonable territorial restrictions must be proven by the plaintiff.
B) A rule-of-reason criterion is inappropriate for determining the legality of maximum RPM.
C) Manufacturers may stipulate resale prices to their distributors if the stipulations are unilateral.
D) Without recoupment, predatory pricing produces lower aggregate prices in the marketplace.
E) Functional discounts are allowable if they are not tied to product classification schemes.

Question 18

What was the significance of the Court's ruling in State Oil v.Khan?

A) Discriminatory pricing is justified by cost savings.
B) Maximum RPM should be based on per se illegality.
C) Resale price controls enable vertical monopolies to form.
D) Maximum RPM should be decided on a rule of reason basis.
E) Predatory pricing lowers aggregate prices and improves consumer welfare.

Question 19

What was the primary result of Continental TV v.GTE Sylvania?

A) The burden of proof is on the defendant in issues of territorial restriction.
B) Intrabrand and interbrand competition are both illegal forms of distribution.
C) Territorial restrictions are to be evaluated under a rule of reason doctrine.
D) Quality and safety concerns take priority over interbrand competition.
E) The manufacturer is required to provide proof of resale pricing policies.

Question 20

Control over resale prices by manufacturers is most likely legal if they ________.

A) create and reveal their supply chains
B) form a corporate vertical marketing system
C) utilize known discounters based on performance criteria
D) announce their resale policy at least six months into a contract
E) make contracts conditional on dealers adhering to the supplier's specified resale price

Question 21

A seller has been accused of price discrimination.Which of the following would be the LEAST effective defense?

A) A price is equally available to all customers but is not chosen by all customers.
B) A pricing policy was carried out to dispose of perishable or obsolete goods.
C) A price was charged to undercut a rival and significantly affected competition.
D) The price is lawful and not produced by collusion.
E) Competition takes place at the primary level.

Question 22

Which of the following is most likely a true statement about tying agreements?

A) Tying contracts are illegal because they limit competition.
B) Tying contracts are used to achieve cost savings through package sales.
C) Tying agreements are addressed by the Clayton Act but not the Sherman Act.
D) The Court's decision in Albrecht v. Herald addressed the conditions of tying contracts.
E) The use of tying arrangements is typically approved because few laws address the issue.

Question 23

Mergers most likely pose antitrust danger because they have the potential to________.

A) facilitate interorganizational channel management
B) interfere with interstate and foreign commerce
C) require tying arrangements with downstream intermediaries
D) require firms to engage in illegal block booking activities
E) limit the supply of products to downstream channel members

Question 24

Which of the following regulates external expansions?

A) Colgate doctrine
B) Clayton Antitrust Act
C) Sherman Antitrust Act
D) Federal Treasury
E) Robinson-Patman Act

Question 25

Block booking is a type of ________ policy that is frequently used by motion picture distributors to force independent theater owners to screen unwanted movies in order to obtain desirable ones from distributors.

A) tying
B) price fixing
C) full-line forcing
D) internal expansion
E) exclusive dealing

Question 26

A dual distribution strategy is most likely illegal if ________ is involved.

A) category management
B) price squeezing
C) internal expansion
D) vertical integration
E) external expansion

Question 27

Company X and Company Y are both distributors for ABC Widgets,and each firm has been given a specific territory by ABC.Company X recently sold an ABC product to a customer located in Company Y's territory.As a result,Company X must reimburse Company Y for the sale.Which term best describes this situation?

A) Profit pass-over arrangement
B) Primary responsibility
C) Block exemption
D) Absolute confinement
E) Dual distribution

Question 28

Which term refers to marketing arrangements in which manufacturers reach end-users by employing multiple channels for the same basic product?

A) Dual distribution
B) Price squeezing
C) Internal expansion
D) Vertical integration
E) External expansion

Question 29

Both market coverage and customer coverage channel policies are governed by ________.

A) internal expansion agreements
B) price maintenance doctrines
C) rule-of-reason criteria
D) functional discounts
E) per se criteria

Question 30

What marketing channel strategy was the issue in Eastman Kodak Co.v.Image Technical Service,Inc.?

A) Category management
B) Slotting allowances
C) Gray marketing
D) Price fixing
E) Tying

Question 31

Which of the following specifies the site of a channel member's place of business?

A) Profit pass-over arrangement
B) Primary responsibility
C) Block exemption
D) Location clause
E) Dual distribution

Question 32

Which of the following is most likely a true statement about slotting allowances?

A) Slotting allowances are predominant in grocery retailing.
B) Slotting allowances are considered per se illegal in all circumstances.
C) Most U.S. manufacturers file formal complaints about slotting allowances.
D) Large firms tend to pay a higher percentage of slotting allowances than small firms.
E) Slotting allowances violate the Colgate doctrine when used as price discrimination tools.

Question 33

In U.S.Federal Trade Commission v.Toys 'R Us,the toy retailer was accused of ________.

A) forming illegal distribution contracts with warehouse clubs
B) imposing block booking requirements on toy manufacturers
C) leveraging market access to lower product prices on major toys
D) limiting accesses to manufacturers' products at competing retailers
E) tying all electronic product sales to service agreements with the retailer

Question 34

CapCo,a manufacturer of baseball cap machinery,insists that Hats-R-Us,a firm that leases the machinery,purchase a service contract from CapCo to maintain the machinery.Which term best describes this arrangement?

A) Tying
B) Price fixing
C) Block booking
D) Full-line forcing
E) Category management

Question 35

What is the primary concern with category management by category captains?

A) Absolute confinement
B) Profit pass-overs
C) Gray marketing
D) Price segmentation
E) Competitive exclusion

Question 36

When a supplier uses a market coverage policy of channel management,the main focus of the channel is ________.

A) corporate mergers
B) customer coverage
C) full-line forcing
D) geographic spacing
E) price segmentation

Question 37

According to the ________,a seller has the right to choose which resellers have access to its product and to choose not to sell to certain intermediaries.

A) Sherman Antitrust Act
B) Clayton Antitrust Act
C) Parker doctrine
D) Colgate doctrine
E) Kodak doctrine

Question 38

Refusal to deal is a tool that allows a channel member to exert ________ power.

A) legitimate
B) coercive
C) reward
D) market
E) monopoly

Question 39

Which of the following involves a promise by a downstream channel member that it will not sell outside its assigned territory?

A) Profit pass-over arrangement
B) Primary responsibility
C) Block exemption
D) Absolute confinement
E) Free riding

Question 40

Which of the following regulates internal expansions?

A) Colgate doctrine
B) Clayton Antitrust Act
C) Sherman Antitrust Act
D) Federal Treasury
E) Robinson-Patman Act

Question 41

Functional discounts are legal when they reasonably reflect the supplier's savings or channel member's costs.

Question 42

What was the result and significance of Continental TV v.GTE Sylvania? In your response,differentiate between per se and rule of reason criteria.

Question 43

Vertical restraints,such as territorial restrictions,are intended to limit interbrand competition and promote intrabrand competition.

Question 44

When a supplier and a downstream channel member agree to exclusive distributorship and absolute confinement,a territory is considered airtight.

Question 45

What are the reasons that suppliers implement customer coverage policies?

Question 46

What were the issues in the Monsanto Company v.Spray-Rite Service Corporation case? What was the significance of the Court's ruling in this case on channel practices?

Question 47

What is a resale price maintenance (RPM)policy? Discuss the advantages of both a maximum RPM policy and a minimum RPM for a supplier.

Question 48

The Tampa Electric Co.v.Nashville Coal Co.case established guidelines for assessing exclusive dealing policies.

Question 49

The Clayton Antitrust Act defines unfair competition for individual industries.

Question 50

Summarize the key provisions of the Robinson-Patman Act.