The written assignments will present you with a scenario that has legal implications and ask you to identify the legal issues involved and make recommendations as to how to best handle the situation. The written assignments may be turned in at any time between the time the unit begins and the deadline for that unit. Read the scenario below and answer the questions that follow. Submit your answers in the form of a Word or PDF file.
George Bluth really, really wants to control the market for new homes in Orange County, California. The Bluth Company (“TBC””) currently controls about 60% of the market in Orange County, while TBC’s chief competitor, Stan Sitwell, controls about 25%, and various other companies control the remaining 15%. George approaches Sitwell to see if they can make a deal under the table to stop competing and join forces to corner the market, but Sitwell refuses. After being rebuffed by Sitwell, George decides to try and buy out Sitwell’s company. He is unable to raise enough cash to do so, however. Finally, he tries to corner the market all by himself by cutting his prices so low that his competitors could not possibly hope to compete. In fact, he cuts the prices for his new houses so low that he’s losing money on each one. Hopefully his competitors will go out of business soon and he can raise his prices back up once they do.
Please answer the following questions:
- If Stan Sitwell had been open to George’s suggestion that they join forces, discuss two possible ways they could have acted that would be blatant violations of Section 1 of the Sherman Act.
- If TBC had been able to raise the money to purchase Sitwell, what type of merger would it have been? Would the government have allowed the merger to proceed? (hint: discuss Section 7 of the Clayton Act).
- Do George’s actions create an illegal monopoly under Section 2 of the Sherman Act? (hint: analyze ALL of the elements necessary to have an illegal monopoly).