1. What were the problems with the Sherman Act? How did the Clayton Act try to fix them?
Read the simulation below and answer questions 2 and 3.
Choke Cola is a very old company and through the years its market share has grown. In 2010 Choke Cola had 40% of the sales of cola beverages in the US. Its nearest competitor was Canine Cola which had 20% of the market. Four other cola producers have evenly divided the rest of the market. The Choke Cola company also produces many other beverages including other carbonated beverages, bottled water, juice drinks, sports drinks, and coffee drinks. Choke's share of the total beverage market by 2010 was 30%
Choke has always had a very aggressive marketing strategy. There is lots of advertising and stores who wish to sell Choke must agree to display Choke promotional materials. Naturally stores agree since it is such a popular product.
In 2011 Choke introduced a new product, Grape Choke. Choke wanted to have a big introduction for Grape Choke so it required that stores wanting to sell regular Choke also had to buy a certain amount of Grape Choke. Choke also lowered the wholesale price to stores that ordered large quantities of Grape Choke.
In 2012 Choke Cola offered any fast food chain extremely low prices on Choke if they agreed to drop Canine Cola for one year.
Seeking more market share, Choke merged with Canine Cola in 2013. The combined company now has 60% of the cola market and 34% of the total beverage market. Choke's size allows it to reduce production costs and its prices have risen slowly since the merger.
2. Which of Choke's actions might be violations of anti trust laws? Explain two violations and identify which laws were violated.
3. When Choke merged with Canine Cola what kind of merger was this? What is the problem with this kind of merger?
4. Explain the "rule of reason". What did the court mean by this in the Standard Oil case? How did this change in the Alcoa case?