Reference book if possible: 978-1-7326694-6-8 (print)978-1-7326694-7-5 (eBook)

Tigers and Hydro OneBeverages are each national sports drink distributors and are direct competitors. There are many competitors in the market, but Tigers, the market leader, has about a 50% market share and Hydro OneBeverages, its closest competitor, has about a 25% market share. Shug Jordan, the Tigers C.E.O., and Patrick Dye, the Hydro OneC.E.O., were classmates in the USC University Executive MBA Program, and are close friends who live in the same neighborhood and belong to the USC University Golf Club. During a Saturday morning round of golf, Mr. Jordan and Mr. Dye start discussing their respective businesses.

1 First, Mr. Jordan and Mr. Dye discuss TideAde, an upstart sports drink company that is aggressively marketing and starting to dilute the market share of both Tigers and Hydro OneBeverages. Mr. Jordan and Mr. Dye believe that they can each produce sports drinks at a lower cost than TideAde, so Mr. Jordan suggests to Mr. Dye that perhaps Tigers and Hydro Oneshould reduce their prices to their direct costs for the next three months to try to squeeze TideAde out of the market.

1.1 Explain how antitrust laws apply to these discussions and whether they expose the parties to any sanctions.

2 Second, Mr. Jordan and Mr. Dye discuss a possible merger between Tigers and Hydro OneBeverages. Mr. Jordan suggest that, if Tigers and Hydro OneBeverages combine, they can achieve economies of scale, reduce production costs, decrease prices, and increase their combined market share to 90%.

2.1 Explain how the antitrust laws apply to the merger discussions and specifically describe whether the merger would expose the parties to enforcement risk.