Question: THE CASE OF TOO MANY TELEVISIONS
Global Television was one of the country's largest manufacturers of television sets. It sold its sets to wholesalers who in turn sold them to retailers. One time, due to a production error, it found that it had an inventory surplus of 10,000 sets. It needed to sell them in a hurry so that it could raise some much-needed cash. Global placed an ad in newspapers throughout the country offering to sell the sets directly to the public at 10 percent below cost. The Federal Trade Commission brought an action against Global, claiming that Global's action was a violation of the Sherman Act and other acts.
The Trial: At trial, officers of Global described its outstanding performance as a producer of quality television sets and its state-of-the-art system of inventory control. They discussed how the error occurred and stressed what a serious effect having 10,000 surplus sets would have on the economic condition of the company. They emphasized that they had considered many other ways of dealing with the problem, but that the solution they chose was the only realistic one. Competitors of Global testified that they had lost so much business because of Global's discount sale that they might have to go out of business. They stressed that as there was so little profit in the sale of television sets, having to compete against sales below cost was impossible.
The Arguments at Trial: Attorneys for the FTC and Global's competitors argued that Global's action was a violation of the Sherman Act and other trade regulations because it was unfair competition that would harm small businesses. Global's attorneys argued that Global's action was not intended to hurt competition but to solve a serious financial problem and that its action would not have the effect of raising prices to consumers.
1. Who do you think has the stronger argument, Global or the FTC?
2. If you were the judge hearing this case, for whom would you decide? Why?
3. If the FTC is right, how would sales by discount stores be affected?
4. What do you believe should be the rule regarding promotional sales?