Assume that Ahahid, Inc., Hovanosh, Inc., and Khosrofuhi, Inc. collectively cont

Question

Assume that Ahahid, Inc., Hovanosh, Inc., and Khosrofuhi, Inc. collectively control 75% of the Midwest market for tahini (sesame paste). In order to control costs and reduce needless conflict, the presidents of the three companies agree that Anahid will sell tahini exclusively in Michigan, Hovanoush will sell tahini exclusively in Ohio, and Khosrofuhi will sell tahini exclusively in Indiana, and that none of the firms will attempt to sell their products in one of the states "given" to the other firms. This agreement is

A horizontal market division, and illegal.

A price fixing agreement, and illegal.

A vertical market division, and illegal.

A legal and efficient method of doing business.

A legal and efficient method of doing business as long as each stays in his own state so that interstate commerce is not involved.

A horizontal market division, and illegal.

A price fixing agreement, and illegal.

A vertical market division, and illegal.

A legal and efficient method of doing business.

A legal and efficient method of doing business as long as each stays in his own state so that interstate commerce is not involved.

Explanation / Answer

A. horizontal market division, and illegal.

Because, this is the type of situation which comes under market allocation. Wherein competitors themselves decided to not to sell in each others territory. This results in Price Fixing and is illegal. This is also known as violation of Sherman Act

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