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What is the law concening parallel business behavior? Assume, for example, that three firms charge identical...

What is the law concening parallel business behavior? Assume, for example, that three firms charge identical prices for a product and it is agreed by all observers that the price is unusually high compared to cost. Would this constitute a Sherman Act offense? Cite a relevant case to support your answer.

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Answer #1

Parallel Business Behaviour

Parallel Business behavior is the ecosystem of the organizations in which change in any organization which leads to direct or indirect effect to other organization.

Example- Ecosystem of Paper industry which makes raw paper pulp for other supplementary industry.

The rise in paper prices will definitely rise the notebook prices or make respective changes to neutralize the change.

Sherman Act offense

  • This law prohibits the organizations work or to form any contracts, combinations, conspiracies in order to increase the sale or boosting trade and commerce.
  • By charging higher prices compared to its cost will definitely bad practice, Government will charge heavy fine against it.

Case Study

Ecosystem- Tea manufacturers and retails seller’s outlet chain

Organization- Yewale Tea Pvt ltd

Yewale is the leading tea brand in India. Mostly having a high presence in Maharashtra, Karnataka, Goa.

Most of the tea brands are offering tea at Rs 10 per Cup.

  • Kadak Specail
  • Saiba Special
  • Joshi Tea House

All these brands came close and form a mutual agreement and suddenly increased the prices by Rs 5 . by saying quality constraint.

But It seems that there is hardly any change in quality offered tea prior to price change

Governing body of India (FDA) Food and Drug Association has checked the quality department of Yewale Tea House and found it guilty , and they charged heavy fine for malpractice .

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