Introduction

Even in a "free enterprise" economy like the one in the United States, a marketing strategy planner faces many legal constraints. These laws are often confusingand may even appear contradictory. Further, the laws are frequently written vaguely by legislatorsto allow the courts to interpret and apply them. But the interpretation may vary depending on the current political environment. In spite of these problems, it is critical that marketing managers make every effort to understand the political-legal environmentsbecause business must operate and develop its marketing strategies within these environments.

Assignment

The following cases describe marketing activities that might be judged illegal. Study each case carefully and determine the law (or laws) which appear to be most relevant to each situation. Then state why you answered as you did. You should refer to the following list of laws in completing this exercise:

Sherman Antitrust Act (1890)Wheeler-Lea Act (1938)

Clayton Act (1914)

Federal Trade Commission Act (1914)

Robinson-Patman Act (1936)Magnuson-Moss Act (1975)

1.Edyie lanni purchased a "boom box"--a portable cassette and CD playerfrom a mail-order retailer after seeing the retailer's ad in the Sunday New York Times. Edyie was attracted by the low price-- and was assured by the "full one-year warranty" highlighted in the ad. Three months after the unit arrived, the cassette unit stopped working. Edyie called the retailer's toll-free number to find out how to get warranty service. The salesperson who answered Edyie's call said that he would send her a copy of the written warranty issued by the manufacturer-and all Edyie needed to do was follow the instructions. To Edyie's surprise, the manufacturer's "full one-year warranty" read as follows:

"The manufacturer warranties this high quality stereo unit against all possible defects for a period of one full year, except for the motors on the cassette and CD players, which are covered for 30 days, and except for all plastic parts, which are not covered at all. Should this set fail to operate during this period, it should be shipped at the purchaser's expense in the original carton to: Repair Depot, 1716 Rushmore Road, Ithaca, NY. A certified check for $49.95 should be enclosed to cover handling charges. This is the only warranty provided by the manufacturer, and all other express or implied warranties are hereby excluded. This warranty does not cover damage caused by improper handling or abuse. The manufacturer shall be the sole judge of whether any parts are defective or whether they were damaged through improper handling or abuse."

a)Federal legislation:____________________________________________________________

b)Reason: ____________________________________________________________________

2.At Home Exercise Corporation, a firm located in Santa Monica, CA, advertised its Body Shaper, "an amazing new isometric exercise device" in the Arizona Republic. According to the ad, "individual results vary, but through only 5 minutes a day of effortless exercise you can expect to add up to 2 inches to your biceps and up to 3 inches to your chest while losing up to 4 inches from your waistline and up to 10 pounds from your present weight during an average 14-day period." The ad stated that the body shaper could be purchased by mail for only $14.95 and added "Try the Body-Shaper risk free. If you are not completely satisfied, return the Body Shaper within 30 days and the purchase price will be promptly refunded."

The ad caught Michael Colombo's eye and he ordered the exerciserenclosing a money order for the specified amount. About a month later, he received a package containing a hard rubber cable about 2 feet long, and a small pamphlet describing various diet plans. Believing he had been cheated, he demanded that his money be refunded as advertised. Shortly afterwards, he received a form letter from the firm stating that his request for a refund had been denied on the grounds that "more than thirty days has passed since you placed your order."

a)Federal legislation: _______________________________________________________

b)Reason:___________________________________________________________________________

3.Garrett Paint Co. has been selling its products only through paint and hardware retailers, but recently the company decided to try to sell its spray paints through supermarket chains. To encourage the food chains to purchase in large quantities, Garreu offered them a special 12 percent quantity discount. Garrett does not plan to offer quantity discounts to its paint and hardware retailers. Several food chains have already agreed to carry the spray paints, but one large national chainwhose business Garrett really wantshas refused to stock the paints unless Garrett agrees to give the chain an additional 3 percent "advertising allowance."

a)Federal legislation:________________________________________________________________

b)Reason:________________________________________________________________________

4.Fuel-oil producers were caught by surprise when December temperatures dropped unexpectedly. Because of inadequate fuel-oil reserves, most producers had trouble quickly filling orders from their distributors across the country. In a number of areas across the country, fuel-oil prices shot up by as much as 60 percent more than normal. During the shortage, the three fuel-oil distributors in Summit, a mountain area on the North Carolina and Tennessee border, kept their delivery trucks running 24 hours a day to ensure that customers did not find themselves without heat. By mid-January, the shortages had begun to let up. About that time, the owners of the three distributorships saw each other at a monthly civic club luncheon. As they were discussing the added costs of all of the "overtime" deliveries, one of the men suggested that they all keep their prices at the current level "until the February peak demand period is over. " The other two agreed that this would help improve profits.

a)Federal legislation: _______________________________________________________________

b)Reason: ________________________________________________________________________

5.All the cases described below involve a potential application of the Robinson Patman Act (1936) to determine a violation, if any under this act. You should determine whether each case situation violates the act, and provide a justification for the conclusion.

a)"Procter and Gamble sells its product under a national brand name X to all retailers, and a similar product of like grade and quality under a private label brand name that is sold through select retailers at substantially lower prices. Is this legal?" (private label brands are brands sold exclusively under store brand names such as Kirkland line from Costco and Great Value line from Walmart).

b)"Apple is selling Iphones and Ipads at its company-owned store at retail prices that are below the wholesale price that it charges to a small electronics dealer"

c)"My family business runs two small mom-and-pop stores that sell book. Our business is being ruined by giant store chains that sell these books for less than our wholesale cost."