Vysion produces TVs it sells nationwide. Vysion contracted with Karol's Appliances to make it the exclusive distributor of Vysion TVs in the San Diego area. Karol's received a promise that Vysion would not sell its TVs to any other retailer within 20 miles of Karol's. In its San Diego stores, Karol's has a unique pricing policy. A higher price is charged to customers wearing suits than to

Question

customers not wearing suits. Karol's salespeople give non-suit-wearing customers 10% discounts off of the list price, and refuse any discounts to suit-wearing customers. Don's, a rival of Karol's, asked Vysion to allow it to sell its products in San Diego. Vysion refused, pointing to its contract with Karol's. Vysion's distribution policy differs in New York from what it is in California. In New York, Vysion allows every distributor who asks to sell Vysion TVs. However, Vysion requires that New York retailers sign contracts stating that they agree not to sell Vysion products below prices in a monthly "price list" sent by Vysion. In contracts with its distributors nationwide, Vysion insists that sales of its TVs be tied to sales of its VCRs. No consumer is allowed to purchase a Vysion TV without also buying a Vysion VCR. If, instead of requiring its New York retailers to follow its price list, Vysion required its retailers to not charge a price higher than those on a price list, this would be:
a. legal because consumers would be protected from high prices charged by retailers
b. legal because consumers could always shop at different retailers if they were unhappy with Vysion's retailers
c. illegal because it is a horizontal restraint of trade d. illegal because it is a territorial restraint of trade e. legal under State Oil Co. v. Khan

Answer 1

e