Georgia DECA Advertising Practice Test

Tying agreements are considered illegal when they do which of the following?

1. Encourage poor service

2. Reduce competition

3. Decrease consumer choices

4. Increase prices

The correct answer is: Reduce competition

Tying agreements are considered illegal primarily because they reduce competition in the marketplace. These agreements occur when a seller requires a buyer to purchase a secondary product or service as a condition for obtaining a desired product or service. This practice effectively limits the choices available to consumers, forcing them to buy products they may not want or need in order to acquire the primary item they desire. By reducing competition, tying agreements can harm both other businesses and consumers. They can create an unfair advantage for the seller who controls both the primary product and the tied product, potentially leading to monopolistic practices. This ultimately undermines the competitive market structure, which is essential for maintaining innovation, price competitiveness, and consumer choice. Such anti-competitive behaviors are why regulators closely scrutinize tying arrangements and consider them illegal in many cases. While other options like encouraging poor service, decreasing consumer choices, and increasing prices may be consequences of tying agreements, the fundamental legal issue revolves around the reduction of market competition.