Reference no: EM131473414

Question: As of June 1995, Little Caesar Enterprises, Inc. (LCE) had 536 franchises nationwide operating 2,867 carryout-type restaurants. LCE also owned and operated 1,000 carryout restaurants and 500 restaurants located in Kmart stores. Blue Line Distributing, Inc., purchased the necessary supplies for the restaurants, bundled them into single units, and sold them to the franchisees. In June 1989, LCE and Blue Line entered into a licensing agreement granting Blue Line the exclusive right to distribute products containing the Little Caesar logo. Franchise agreements used to give franchisees the right to use LCE-approved alternative suppliers, but the 1990 Franchise Agreement excluded logoed products from the list of products that could be obtained from alternative suppliers.

Logoed products, such as paper products, condiments, and packaging, are necessary to the operation of a franchise. Plaintiffs bought Little Caesar franchises between 1990 and 1995 and are operating under the 1990 Franchise Agreement. They argue that Blue Line charges supracompetitive prices for the logoed products and that the exclusive license granted to Blue Line precludes them from obtaining cheaper products from alternative suppliers. They have brought this class action, alleging that LCE has unlawfully tied Blue Line's products to the purchase of a Little Caesar franchise. LCE argues that plaintiffs knew about the Blue Line distributorship, agreed to the terms when signing the 1990 Agreement, and that LCE lacks sufficient market power to force a tying arrangement on plaintiffs. How should the court resolve this antitrust claim, and why?