Hines Cosmetic Co. sold beauty preparations nationally to beauty shops at a stan

Question

Hines Cosmetic Co. sold beauty preparations nationally to beauty shops at a standard or fixed priceschedule. Some of the shops were also supplied with a free demonstrator and free advertising materials. The shops that were not supplied with them claimed that giving the free services and materials constitute unlawful price discrimination. Hines replied that there was no price discrimination because it charged everyone the same. What it was giving free was merely a promotional campaign that was not intended to discriminate against those who were not given anything free. Was Hines guilty of unlawful price discrimination? Explain.

Explanation / Answer

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The discriminatory allowances or services furnished or paid to customers in general requires that a seller treat all competing customers in a propotionatly equal manner. Services or facilities covered include payment for or furnishing advertising or promptional allowance, handbills, catalogues,signs,demonstrations, display and storage cabinates, special packaging warehousing facilities, credit returns, and prices or free merchandise for promotional contests. The seller must inform all of its competing customer if any services or allowances are available. The seller must allow all types of competing customers to receive the services and allowances involved in a particular plan or provide some other reasonable means of participation for those who cannot use the basic plan.

Promptional allowances or services that are not practically available to all customers on propotionately equal terms may be illegal.

Hines was guilty of unlawful price discrimination since the promotional allowances were not available in equal terms to all the customers.

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