Reference no: EM133340068

CASE STUDY

Tova Tires is a multinational corporation that produces tires for consumer vehicles. The company headquarters is located in Israel, but the company sells its tires throughout the world. Twenty-five percent of all tires in the United States come from Tova Tires.

General Vehicles, Corp. is also a multinational corporation which produces consumer vehicles in the United States. General Vehicles makes almost one-third of the vehicles on the road in the U.S., and historically, have purchased a large portion of their tire supply from Tova Tires.

After the current CEO of General Vehicles retires, a new CEO, Amira Kahn, takes his place. Kahn makes sweeping changes to the supply lines of the company, including cutting Tova Tires as a vendor, and replacing Tova with a Chinese-based tire company. The new tire supplier does not save General Vehicles any money annually, but it also does not cost them any additional money. Kahn never provides a reason for these supply-line changes other than that the changes were intended to, "maximize efficiency."

Tova Tires is financially harmed by this change and believes that Kahn's change in suppliers is connected to her support of The Boycott, Divestment, and Sanctions (BDS) Movement which encourages individuals and businesses to boycott any goods and services from Israel. Kahn never publicly announces her support of the movement, and Tova Tires is the only Israel-based company that was currently a supplier of General Vehicles. However, privately, Kahn has expressed political opinions against the government of Israel. Kahn's brother, Sujat, the owner of a car dealership which sells General Vehicle cars, also stops buying tires from Tova Tires for the mechanic shop attached to his dealership, and begins purchasing his tire supply from a U.S.-based company after Amira becomes the CEO of General Vehicles.

1. If Amira and Sujat, during a family vacation, discuss the change of tire suppliers and make an agreement that neither would purchase tires from Tova Tires, has a conspiracy to restrain trade occurred between the two?

A. Yes, under the theory of conscious parallelism.

B. No, because there is not sufficient evidence of a concerted action.

C. Yes, a vertical restraint of trade has probably occurred.

D. Yes, a horizontal restraint of trade has probably occurred.

2. Could Tova, as a non-U.S. based company, sue under the Sherman Act?

A. No, because their headquarters are outside of the United States.

B. No, because the United States does not comprise a majority of their market.

C. Yes, because there would be a direct, substantial and foreseeable effect on the U.S. market.

D. Yes, because they have made at least one sale in the United States.

3. If Sujat continues to purchase tires from Tova, but Amira unilaterally boycotts Tova as part of a personal alliance to the BDS Movement, can Amira's actions still be considered a "concerted action" because she has cooperated with other companies and industries boycotting Israeli products in violation of antitrust laws?

A. Yes, because Amira's actions alone are considered a "concerted action."

B. Yes, because more than one company participates in the BDS movement, Amira's actions at General Vehicles could be "concerted."

C. No, because it is part of Amira's personal belief system and that cannot be imputed onto the business.

D. No, because there was not a "concerted action" because Amira has not agreed with any other business to boycott Tova, and Sujat still purchases tires from Tova.

4. If Tova sues under the Sherman Act, what standard would the court most likely apply?

A. Quick look Rule of Reason.

B. The Rule of Reason.

C. Preponderance of the Evidence.

D. Illegal per se.

5. If General Vehicles, alone, has significant market share and purchases more tires than any other company in the United States, could their refusal to purchase tires from Tova, even without a concerted action, be a violation of the Sherman Act under Section 2?

A. No, a refusal to deal by a company with market share, but is not a monopoly, is not a violation.

B. No, because General Vehicles stopped doing business with Tova as opposed to never having purchased from them.

C. No, unless it has an exclusive dealing arrangement with another competitor of Tova.

D. Yes, because General Vehicles has market share, it must deal with Tova; otherwise, the company has engaged in "unfair conduct" under Section 2.