Roger Jameson is the head of the consumer loan department at First National Bank. He is a regular participant in a lending committee of a local finance trade association. The committee meets once a month at a local hotel. After the committee meetings, Roger and several other committee members who are officers at other banks in town go to a hotel restaurant and talk for a couple of hours before leaving. During these informal conversations Roger learned that the other members require the car dealerships in town that sell consumer installment contracts to the banks to refrain from selling them to local savings and loan associations. Roger believes that this is a good idea and would like to implement it at First National. Is there a problem with doing so?
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A. B. C. D.D
The correct answer to this question is D. Yes. Restricting the dealerships is a restraint of trade.
The situation presented in the question involves an informal agreement among the lending committee members to restrict the sale of consumer installment contracts by car dealerships to local savings and loan associations. This kind of agreement is known as a "restraint of trade," which refers to any action that limits competition or restricts the free flow of goods and services in a particular market.
The purpose of such agreements is usually to protect the interests of the participants by creating an environment in which they can control the market and dictate the terms of competition. However, such agreements are illegal under antitrust laws, which are designed to promote competition and prevent monopolies.
The specific antitrust law that applies to this situation is the Sherman Antitrust Act, which prohibits agreements that unreasonably restrain trade. The law applies to all types of businesses, including banks and other financial institutions. In this case, the agreement among the lending committee members to restrict the sale of consumer installment contracts would be considered an unreasonable restraint of trade because it limits the options available to car dealerships and savings and loan associations in the local market.
It's worth noting that the fact that interest rates are not involved or that the decision would have no effect on the cost to the consumer does not make the agreement legal. Antitrust laws are designed to protect competition, not just consumers or interest rates.
In summary, while Roger Jameson may believe that restricting the sale of consumer installment contracts by car dealerships to local savings and loan associations is a good idea, implementing such a restriction would be illegal under antitrust laws and could lead to significant legal consequences for First National Bank.