Reference no: EM131390695

As part of a corporate plan to stimulate sagging color television sales, GTE Sylvania began to phase out its wholesale distributors and began to sell its television sets directly to a smaller and more select group of franchised retailers.

To this end, Sylvania limited the number of franchises granted for any given area and required each franchisee to sell Sylvania products only from the location or locations at which he was franchised. A franchise did not constitute an exclusive territory, and Sylvania retained sole discretion to increase the number of retailers in an area in light of the success or failure of existing retailers. The strategy apparently was successful, as Sylvania's national market share increased from less than 2 percent to 5 percent.

In the course of carrying out its plan, Sylvania franchised Young Brothers as a television retailer at a San Francisco location one mile from that of Continental T.V., Inc., one of Sylvania's most successful franchisees. A course of feuding began between Sylvania and Continental that reached a head when Continental requested permission to open a store in Sacramento, and Sylvania refused. Continental opened the Sacramento store anyway and began shipping merchandise there from its San Jose warehouse.

Shortly thereafter, Sylvania terminated Continental's franchise. Is the franchise location restriction a per se violation of the Sherman Act? Explain.