Prepare a response to their request and include suggestions as to how they might deal with their problem.

Best Appliance Co. produces a complete line of small and large domestic kitchen appliances, about 30 different products in all, ranging from small electric toasters to automatic dishwashers and laundry appliances. Most of the small appliances are sold through wholesalers, while the larger appliances are sold directly to “authorized dealers.” The authorized dealers normally carry only the larger appliance line consisting of about 12 different products, but the occasional dealer would carry the full line of both large and small appliances. In recent years, the company experienced problems with retailers selling its smaller appliances as “loss leaders.” It considered either selling only through authorized dealers who would agree to carry the full line of products, or to dealers on a consignment basis (whereby the company would control the retail price). A third alternative would be to notify all wholesalers who carried the small-appliance lines that they must refrain from selling to retailers who used the company’s products as loss leaders. Then, if the wholesaler failed to monitor retail sales and keep retailers from loss leader selling, the company would no longer supply them with stock. The company officers, who wish to have the legal implications of these proposals examined, ask for advice. Prepare a response to their request and include suggestions as to how they might deal with their problem.

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