Exam 49: Antitrust: the Sherman Act

_____ agreements reduce a manufacturer's sales costs and provide dealers with a secure source of supply.

Firms that acquire monopoly power in a given market comply with the antitrust laws' objective of promoting competitive market structures.

Sherman Act violations may give rise to civil prosecutions only.

Acme Corp. has captured 90 percent of the national market for commodity "X." Acme is most likely to be liable for monopolization under Section 2 of the Sherman Act, if "X" is:

Which of the following has been recognized by the courts as a possible justification for tying agreements?

Bony Corp. requires retailers and wholesalers that purchase Bony's $200 video cassette recorders to purchase $20-worth of blank Bony videotapes with each VCR. Under these circumstances, which of the following statements is accurate?

The relevant product market is composed of those products meeting the functional interchangeability test.

Rockchalk Paving Co., a Kansas firm, paves public streets and highways in Kansas and the surrounding states of Nebraska, Colorado, Oklahoma, and Missouri. Wildcat Pavers, Inc., a paving contractor that competes with Rockchalk in Kansas, Oklahoma, and Missouri, filed suit against Rockchalk and Jayhawk Corp., another paving contractor. Wildcat alleges that Rockchalk owns 65 percent of the outstanding stock of Jayhawk and that the defendants violated Sections 1 and 2 of the Sherman Act by engaging in collusive bid-rigging practices. The defendants have moved to dismiss for failure to state a cause of action. Should their motion be granted? Explain your reasoning.

A nolo plea or a consent decree is often attractive to antitrust defendants because:

When two or more business entities conspire to monopolize a relevant market, Section 2 of the Sherman Act may be violated.

As per the Colgate doctrine, a manufacturer cannot unilaterally refuse to deal with those who fail to follow the manufacturer's suggested resale prices.

Which of the following situations is most likely to trigger liability for a vertical boycott under Section 1 of the Sherman Act?

In 1978, Frieda Stayel opened a donut shop in the town of Fort Garth, Indiana. Her shop, called "Stayel Donuts," was the first of its kind in the community. Over the years, Stayel Donuts acquired a wide following, not only in Fort Garth but also throughout Indiana and even in surrounding states. Persons traveling through Indiana on their way to another state often would go out of their way to stop at Stayel Donuts because of what they had heard about the high quality of the baked goods sold there. Various competing donut shops opened in Fort Garth and in nearby communities during the years following 1978, but all had failed to acquire enough of a following to enable them to stay in business for very long. As of mid-2003, approximately 95 percent of the donuts sold in Fort Garth were Stayel donuts. The latest of Stayel's competitors whose business failed was Duane Duncan, the former operator of "Duncan Donuts." Duncan's attorney has advised him that Stayel has a monopoly on the donut business and that Duncan therefore has a good antitrust claim against Stayel under Section 2 of the Sherman Act? Is the attorney's advice legally sound? Why or why not?

The Sherman Act provides that individuals criminally convicted of violating it may be:

Supreme Court decisions in recent years indicate that some group boycotts receive per se treatment, whereas other group boycotts receive rule of reason treatment.

Ojay Corp., A-C, Inc., and Kato Co. are competitors in the production and sale of knives. A year ago, the three firms agreed to share pricing information with each other on a periodic basis. As a result of this agreed sharing of information, the three companies regularly charge the same prices, including a minimum price that none of the three goes below and a maximum price that none of the three goes above. A fourth producer of knives, Bronco Co., the plaintiff in a Sherman Act Section 1 files a lawsuit against Ojay, A-C, and Kato. Bronco claims in the lawsuit that the foregoing facts constituted price-fixing and Bronco suffered direct antitrust injury as a result. Assuming that Bronco is a proper plaintiff, which of the following is an accurate analysis under current antitrust law?

Dee Frost, president of the American Refrigerator and Freezer Producers Association (ARFPA) and CEO of Frozenaire Corp. (one of the nation's largest manufacturers of refrigerators and freezers), delivered the keynote address at the ARFPA's annual convention in Siberia, Montana. In her speech, Frost addressed the assembled members on the "credit sales" problem currently confronting the industry. According to Frost, this problem was a result of refrigerator and freezer manufacturers' increasing tendency to sell appliances on credit instead of requiring payment in full upon delivery--a tendency that, in Frost's view, had led to negative price trends in the industry. Frost asserted that if refrigerator and freezer producers would refuse to permit credit sales and would insist upon payment in full upon delivery, prices would return to "a reasonable level that serves the interests of the industry and consumers." She concluded her remarks by assuring those in attendance that Frozenaire would do its part by "unilaterally saying 'sorry, pardner' to requests for purchases on credit." A few months after the ARFPA meeting, the U.S. Justice Department filed a Sherman Act Section 1 lawsuit against Frozenaire and the other ARFPA members, citing evidence that all ARFPA members eliminated credit sales within one month after the meeting. Is the Justice Department's action proper? Explain your reasoning.

The following statements pertain to alleged violations of Section 1 of the Sherman Act. Which statement is accurate?

Chicago School advocates view __________ as the primary, if not sole, goal of antitrust enforcement.

Section 2 of the Sherman Act outlaws monopolies because monopolists have the power to fix prices unilaterally.