Is there an antitrust claim against cortland bake shop

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Reference no: EM133294126

Assignment:

Ithaca Bakery is the predominant bakery in the Ithaca market for baked goods. Ithaca Bakery is so successful in Ithaca that not only is it the most popular bakery for consumers, but, due to its expanded operations and capacity to produce intricate pastries on a mass scale, it services 90% of retail demand for baked goods from other Ithaca food locations. For example, it serves many of the local coffee shops and delis in Ithaca, providing them with breads and pastries that they can sell alongside whatever the shop's primary product is (supplying retailers like CTB and Gimme! Coffee pastries to be sold with their coffees).

Ithaca Bakery's contracts with retailers are conducted on a monthly basis to designate costs and operations. The contract anticipates the retailer paying on a monthly basis the cost of the baked goods supplied to the retailer at the retailer's request + a service fee (25% of the cost of the baked goods supplied that month). There is a minimum order requirement per month.

Cortland Bake Shop, a bakery that has been very successful in its local area, decided to expand into its neighboring town, Ithaca. Cortland Bake Shop is very similar to Ithaca Bakery, both in its operational capacity and the types of baked goods it offers. When it entered the Ithaca market, it quickly captured the hearts of Ithacan consumers, with large lines out Cortland Bake Shop's Ithaca location.

Seeing that the real money in Ithaca was to be made supplying retail food locations, however, Cortland Bake Shop set about engaging retailers in contracts very similar to Ithaca Bakery's retailer contracts. To attract attention, Cortland Bake Shop sent an email to all retail food locations in Ithaca offering a 50% discount on the monthly bill for the first six months they sign on with Cortland Bake Shop.

This was a fairly successful strategy for Cortland Bake Shop - after a year, Cortland Bake Shop supplied 25% of Ithaca food retailers, with Ithaca Bakery dropping its Ithaca market share to 71%. Now, Cortland Bake Shop has announced that it will apply its discount promotion for any retailer again, whether or not they took advantage of the six-month discount in the prior year.

Q1 - Ithaca Bakery is very upset at how Cortland Bake Shop managed to cut so much of the Ithacan retail market and has come to you. Is there an antitrust claim against Cortland Bake Shop? Describe in detail what claims are possible against Cortland Bake Shop, the arguments for that claim, defenses Cortland Bake Shop could argue, and how you think a judge would rule.

Assume that Ithaca Bakery and Cortland Bake Shop face the similar costs and use similar prices for their baked goods individually. Also assume that the minimum order requirements established by Ithaca Bakery and Cortland Bake Shop are such that no individual retailer would be able to economically justify signing a contract with both bakeries in the same month.

Reference no: EM133294126

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