Question

5. The Purple Dragon is a hobby games store that caters to people who like to play tabletop games. Purple Dragon would like to sell plastic miniatures to be used in tabletop fantasy battles and so it approaches the leader in the industry, Games Workshop (“GW.”). GW informs Purple Dragon that it would be glad to supply miniatures but Purple Dragon must agree to stock its entire line of miniatures and also sell its line of miniature paints and battle rulebooks. Additionally, GW insists that Purple Dragon not sell any competing lines of miniatures, paints or battle rulebooks in its store. The owners of Purple Dragon really want to sell GW miniatures but are concerned about the impact the added requirements. In fact, the owners think GW might be violating the law. Are they?

Identify the potential violations (be specific) and discuss the likelihood that GW will be found guilty.

Answer 1

The primary purpose of an antitrust law is to ensure that companies conduct their business in a fair and honest way. The antitrust laws help in preventing any kind of monopoly situation in the industry, thus facilitating the consumer rights. Antitrust laws try to maintain the sovereignty of the customers and avoid their exploitation at the hands of the businesses and sellers. Deceptive advertising, false claims, over-hyped prices are some of the way through which the companies try to exploit the consumers. Thus all these lead to the need of legislation, protecting the consumer rights of individuals:

There are 3 primary antitrust laws:

• Sherman Act: Any kind of monopoly-like or cartel-like situation is kept under check by the enforcement of this law. Economic competitiveness of the market is maintained through this act.
• Federal Trade Commission Act: Unfair and fraud or deceptive trade practices are kept under check under this act. The primary objective is to safeguard the consumer rights.
• Clayton Act: This act is an extension of the Sherman act which works with the objective of keeping a check on monopoly situation in mergers and acquisitions between 2 or more companies.

In the given case, GW is trying to create a monopoly like situation in which it is trying to monopolize the trade of Purple Dragon. It is forcing Purple Dragon to limit its business, only to the merchandize of GW, which is not fair. Indeed GW is violating the antitrust laws.

The potential law which GW is violating is the Sherman Act. It is monopolizing the trade of the Purple Dragon company. A cartel like situation is getting created where Purple Dragon cannot associate with any other supplier. This is a clear violation of the Sherman Act.