The Economy of the US

Question 10 • EA Academy Civics 9

Which scenario illustrates unfair business practices?

Answer

A clothing boutique puts on an annual summer sale. To attract customers, it places a large “SALE” sign in its window and hangs a banner across the front of the store announcing the sale. During the week of the sale, fewer customers are seen at the two other clothing stores that are on the same block.

Farm Z ships a thousand boxes of produce each week during the summer. The company promised a trucking company that it will only ship goods using their trucks if the trucking company cuts its shipping rate in half. The trucking company agrees and then raises shipping prices for the other farms in the area.

A small company that manufactures custom dog collars and leashes decides to merge with a small company that makes unique dog toys and bedding. The two companies decide to use the name of the collar and leash company because it has a larger following online and a better website.

Company E manufactures environmentally safe cleaning products. It has evidence that one of its competitors is marketing its products as “Earth friendly,” even though the products contain damaging chemicals. Company E files a complaint with the appropriate government agency.

Explanation

Farm Z’s agreement requires the trucking company to work only with Farm Z in exchange for a steep rate cut. This exclusive arrangement can unfairly limit other farms’ access to shipping at reasonable prices, especially when the trucking company raises their rates afterward. The summer sale in A is ordinary competition, while the merger in C and the complaint in D do not describe unfair practices.

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