Freezo Refrigerators are sold by various retailers. Most of the same retailers also sell Icy Refrigerators. The Freezo brand outsells Icy in some stores, but not in others. Freezo has decided to offer secret bonuses and discounts to retailers where the
sale of Freezo Refrigerators lags behind the sale of Icy Refrigerators. Freezo sees this action as an advertising ploy to increase market share. Retail stores where Freezo is number one are not eligible for any of these bonuses and discounts. Discuss the implications of Freezo's advertising plan.
Both the Clayton Act and the Robinson-Patman Act prohibit price discrimination. The Robinson-Patman Act makes it illegal to charge different prices to buyers when the marginal cost of the seller for the goods is the same. Incentives and bonuses are considered part of the price. The Clayton Act makes both the giving and receiving of any illegal price discrimination a crime so both Freezo and any retail outlets that accept the secret bonuses and discounts are guilty.
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