Deck 40: Antitrust

Question 1

The "rule of reason" requires the courts to balance the anticompetitive effects of behavior in restraint of trade with its positive effects on competition.

Answer 1

True

Question 2

It is per se illegal under the Sherman Act to set a maximum price, but not a minimum price.

Answer 2

False

Question 3

The Clayton Act weakened the Sherman Act by eliminating illegal acts that had previously been prohibited.

Answer 3

False

Question 4

The main goal of antitrust regulation is to prevent competitive behavior among firms.

Question 5

All price discrimination is illegal under the Robinson-Patman Act.

Question 6

Tying arrangements have been labeled by the Supreme Court as serving "hardly any purpose beyond the suppression of competition."

Question 7

The language of Section 1 of the Sherman Act prohibits every contract that restrains trade, and the courts have interpreted this prohibition literally so as to invalidate all such contracts.

Question 8

If one major U.S. car manufacturer acquired another, the Clayton Act would require close scrutiny of the transaction.

Question 9

The Federal Trade Commission can act like a judicial body in conducting hearings and issuing orders to cease and desist.

Question 10

The court interpretation of the Sherman Act results in the prohibition of monopolies only if a firm possesses market power that it attained unfairly or it abused the monopoly power once attained.

Question 11

Section 1 of the Sherman Act prohibits unilateral conduct.

Question 12

The principal objective of antitrust law governing mergers is to maintain competition.

Question 13

The distinction between horizontal and vertical restraints often determines whether a restraint is illegal per se or should be judged by the rule of reason test.

Question 14

If United Widgets lowers its price to all buyers of 10 or more widgets, it is not a violation of the Robinson-Patman
Act.

Question 15

A corporation may be guilty of a criminal felony violation of the Sherman Act.

Question 16

All tying arrangements are per se illegal.

Question 17

Group boycotts are illegal per se.

Question 18

Determining how big the corporation is in terms of total assets is the prevalent test of monopoly power.

Question 19

Antitrust law, as currently applied, focuses on the resulting entity's absolute size.

Question 20

The Robinson-Patman Act adds to the Clayton Act merger provisions.

Question 21

The more narrowly that a product market is defined as being, the more likely that the firm will be found to possess monopoly power.

Question 22

In expanding its policy of enforcement regarding the Sherman Act to cover conduct by foreign companies that harms exports, the Justice Department has indicated that it will focus primarily on boycotts and cartels that injure the export of U.S. products and services.

Question 23

The Federal Trade Commission has only three commissioners.

Question 24

Price fixing is the primary example of a per se violation of the Sherman Act.

Question 25

Resulting from a Supreme Court decision, vertical territorial and customer restrictions are now illegal per se rather than being judged by the rule of reason.

Question 26

The Justice Department has issued a "market structure screen," under which the department will not challenge
restraints by a firm having less than 25 percent of the relevant market.

Question 27

A monopolistic market will produce more goods than a competitive market; however, the problem the Sherman Act tries to address is the fact that a monopolistic market will sell those goods at a higher price than a competitive market.

Question 28

The Sherman Act contains both civil and criminal penalties.

Question 29

Under the Antitrust Criminal Penalty Enhancement and Reform Act of 2004, corporate offenders who violate
Sections 1 or 2 of the Sherman Act face fines of up to $100 million per violation.

Question 30

The common law traditionally favored competition.

Question 31

A wholesale manufacturer gets a retail outlet for its goods through a merger. This is a horizontal merger.

Question 32

Meeting competition is a defense to a charge of price discrimination under the Robinson-Patman Act.

Question 33

A restraint of trade may be classified as either horizontal or vertical.

Question 34

The Clayton Act deals with interlocking directorates.

Question 35

In 2007, the Supreme Court held that vertical price restraints are per se violations of Section 1 of the Sherman Act.

Question 36

The National Cooperative Research Act is designed to inhibit formation of joint ventures.

Question 37

Prices can be controlled through direct price fixing or by market allocation.

Question 38

Under the Antitrust Criminal Penalty Enhancement and Reform Act of 2004, individuals who violate the Sherman
Antitrust Act may be imprisoned for ten years and fined up to $1,000,000.

Question 39

Because the language of Section 1 of the Sherman Act is so narrow, there is little room for judicial interpretation in establishing what constitutes a violation.

Question 40

Conscious parallelism is sufficient in itself to suggest a conspiracy in violation of Section 1 of the Sherman Act.

Question 41

A merger involving firms that are not competitors, customers, or suppliers is termed a:

A) tying arrangement.
B) vertical merger.
C) conglomerate merger.
D) horizontal merger.

Question 42

To determine "market share," one would require knowledge of which of the following?

A) What other products compete with the product
B) Where the product is sold
C) How much of the product is sold
D) All of these

Question 43

Margaret tells the members of the Raleigh Association of Restaurant Owners that they will be able to get a better price on linen supplies (tablecloths, napkins) if they will deal with one supplier rather than split their business between two. They all know Margaret deals with Niagara Linen rather than Cayuga. Under the Sherman Act, if they all sign contracts with Niagara:

A) there is no violation since there is no express agreement to boycott Cayuga.
B) illegality may be inferred from this conduct.
C) there is no concerted action.
D) this is horizontal market allocation.

Question 44

Boycotts that are in violation of the Sherman Act include:

A) a seller's refusal to deal with any particular buyer.
B) a manufacturer who refuses to sell to a retailer who persists in selling below the manufacturer's suggested retail price.
C) when two or more firms that have market power agree not to deal with a third party, thereby eliminating competition.
D) cooperative agreements designed to increase economic efficiency and render markets more competitive.

Question 45

Under Section 1 of the Sherman Act, which of the following is illegal per se?

A) Vertical market allocations
B) Horizontal market allocations
C) Vertical territorial and customer restrictions
D) All of these.

Question 46

A manufacturer agrees to sell the distributor 1,000 boxes of 2-quart bowls only if he agrees to resell to the retailer at cost plus $1.10 per bowl and the retailer must agree to sell at no less than his cost plus .50 per bowl. This is:

A) horizontal price fixing.
B) vertical price fixing.
C) vertical market allocation.
D) a group boycott.

Question 47

If all milk producers in the area agree to set a minimum price for raw milk, this would be an example of:

A) horizontal allocation.
B) vertical market restraint.
C) horizontal price fixing.
D) a tying arrangement.

Question 48

The Clayton Act:

A) was intended to stop certain trade practices before they become restraints of trade.
B) added criminal sanctions to the Sherman Act.
C) repealed the Robinson-Patman Act.
D) included labor organizations in its coverage.

Question 49

The definition of price-fixing includes agreements that:

A) may, among other things, depress prices.
B) stabilize prices.
C) raise prices.
D) All of these.

Question 50

Enforcement proceedings under the Sherman Act may not be brought by the:

A) U.S. Commerce Department.
B) U.S. Justice Department.
C) Federal Trade Commission.
D) state Attorneys General.

Question 51

Harry Jones at Jones Brothers Furniture Co. does not like the Bryte Lamp Co. representative, so he decided that Jones Brothers would boycott Bryte. Under the Sherman Act, this is:

A) per se illegal.
B) no violation.
C) a tying arrangement.
D) vertical market allocation.

Question 52

The 1936 Act prohibiting price discrimination in interstate commerce involving commodities of like grade and quality is the:

A) Sherman Act.
B) Clayton Act.
C) Robinson-Patman Act.
D) Federal Trade Commission Act.

Question 53

If X Co. agrees with S Co. that X will not sell beer in Wisconsin if S will not sell beer in Colorado, under the Sherman Act, this is:

A) no violation.
B) a per se illegal horizontal price fixing agreement.
C) a per se illegal horizontal market allocation.
D) a per se illegal horizontal tying agreement.

Question 54

If a seller of a product conditions its sale upon the buyer's purchasing a second product from the seller, this is known as a:

A) tying arrangement.
B) vertical boycott.
C) horizontal restraint.
D) disparagement.

Question 55

Barb sets her prices to undercut her competitors by 20%. This is:

A) vertical price fixing.
B) market allocation in restraint of competition.
C) no violation of the Sherman Act.
D) per se illegal.

Question 56

The Justice Department's policy toward conduct by foreign companies is to:

A) focus on boycotts and cartels that harm U.S. exports.
B) examine conduct to determine whether it would violate the law if it occurred within the borders of the U.S.
C) expand the enforcement of the Sherman Act to include conduct by foreign companies that harms U.S. ^exports.
D) All of these.

Question 57

If a type of restraint is characterized as per se illegal:

A) the plaintiff need only show that the type of restraint occurred.
B) the defendants may defend on the basis that the restraint was reasonable.
C) the court is required to conduct extensive economic analysis into the type of harm caused or the business excuse for use of the restraint.
D) the plaintiff must prove that the restraint limited competition.

Question 58

Which of the following remedies are available under the Sherman Act?

A) Injunctive
B) Damages of four times the amount of actual loss sustained
C) Consequential damages
D) All of these

Question 59

In order for there to be a violation of Section 2 of the Sherman Act, in addition to monopoly power, the courts must find:

A) unfair conduct.
B) concerted action.
C) competitive behavior.
D) economic advantage.

Question 60

Three of the airline companies agree that they will not go any lower than $100 each way for coast-to-coast tickets. This is:

A) vertical price maintenance.
B) horizontal group boycott.
C) vertical market allocation.
D) horizontal price fixing.

Question 61

The 2010 guidelines regarding horizontal mergers:

A) use a single methodology for merger analysis.
B) are intended to identify harmful mergers while avoiding unnecessary interference with mergers that will not be likely to affect competition.
C) explain that market definition is a necessary starting point of merger analysis.
D) reject use of the Herfindahl-Hirschman Index in quantifying market concentration.

Question 62

The National Cooperative Research Act:

A) prohibits using the rule of reason test in judging joint ventures in research and development of new technology.
B) is designed to clear up uncertainty about the legality of joint ventures.
C) now requires treble damages if joint ventures are formed in violation of Section 1 of the Sherman Act.
D) All of these.

Question 63

For purposes of the concerted action requirement under Section 1 of the Sherman Act:

A) a corporation is viewed separately from its wholly owned subsidiaries.
B) a firm and its employees are viewed as one entity.
C) concerted action must be established by an express agreement.
D) All of these are correct.

Question 64

Conglomerate mergers have been challenged only where:

A) one of the merging firms would be highly likely to enter the market of the other firm.
B) the merged company would be disproportionately large compared with the largest competitors in its industry.
C) Both of these.
D) None of these.

Question 65

Failure to comply with Sections 1 or 2 of the Sherman Act:

A) is a felony and can result in imprisonment.
B) may subject an individual to a fine of up to $1 million under the 2004 amendments.
C) may subject a corporation to a fine of $100 million per violation.
D) All of these.

Question 66

The Sherman Act:

A) prohibits contracts and combinations in restraint of trade.
B) prohibits conspiracies in restraint of trade.
C) proscribes monopolization and any attempts to monopolize.
D) All of these.

Question 67

Discuss the validity and effect of each of the following:
_a. Two manufacturers of the same product decide to allocate territories, with one taking the southern States.
_b. A labor union encourages its members and all consumers to boycott a product manufactured by a company that refuses to honor a union contract.
_{Carrin's Department Store sells its products for 10% under the suggested retail price. One}
c. manufacturer tells the store it will not supply wholesale goods to it unless it charges at least the suggested retail price.

Question 68

Sareno Cheese Co. supplies mozzarella cheese to pizza restaurants at $1.50 per pound. In order to snare the business from a pizzeria, Sareno offers to sell them cheese at $1.25 per pound. This will violate the Robinson- Patman Act unless:

A) the pizzeria can already get the cheese for $1.15 elsewhere.
B) Sareno can show it is cost justified because of quantity.
C) Sareno lowers the price to all its customers.
D) Any of these.

Question 69

Market share greater than what percentage generally indicates monopoly power?

A) 25%.
B) 30%.
C) 50%.
D) 75%.

Question 70

What are the major functions of the Federal Trade Commission (FTC)?

Question 71

A restraint involving collaboration among competitors at the same level in the chain of distribution is:

A) a vertical restraint.
B) a horizontal restraint.
C) price fixing.
D) a trust.

Question 72

The Clayton Act regulates all but which of the following?

A) Price discrimination
B) Tying contracts and mergers
C) Exclusive dealing by labor organizations
D) Interlocking directorates

Question 73

Explain how price differentials may be justified so that the Robinson-Patman Act is not violated.

Question 74

Elko Inc. and Fulda Inc. closely monitor each other's actions regarding the sale of consumer electronic products.

Question 75

Major, Inc. has 68% of the market share in a particular geographic region for one of its products. Does Major have a monopoly? Explain.

Question 76

Widget Maker, Inc. manufactures and sells widgets. It sells widgets to Marklin of Marklin's Department Store and gives him a preference in pricing that discriminates against other retailers. Does Marklin have liability for price discrimination? Does Widget Maker, Inc. have liability for price discrimination? Explain.

Question 77

If Hyvac Vacuum Cleaners requires that Hyvac bags be used for the warranty to be valid, under the Sherman Act, this is:

A) illegal per se.
B) a tying arrangement, which is always judged by rule of reason.
C) either illegal per se or judged by the rule of reason depending on the economic power of the seller and the amount of interstate commerce in cleaner bags affected.
D) no violation.

Question 78

In tying arrangements, the courts may establish a seller's economic power by showing that:

A) the seller occupied a dominant position in the tying market.
B) the seller's product enjoys an advantage not shared by its competitors in the tying market.
C) a substantial number of customers have accepted the tying arrangement and the sole explanation for their willingness to comply is the seller's economic power in the tying market.
D) All of these.

Question 79

The 1992 Horizontal Merger Guidelines, as revised in 1997 and 2010:

A) were issued by the Justice Department to be additional to the FTC's separate guidelines.
B) require a mechanical application; in order to reduce the previously used analytical framework, which was far too subjective and uncertain.
C) rejects use of the Herfindahl-Hirschman Index.
D) deals with mergers of powerful buyers and mergers between competing buyers.

Question 80

The National Tax Accountants Professional Association (TAPA) has recommended that its members charge a minimum of $25 per hour for completing tax forms. This recommendation is probably:

A) a per se price-fixing violation of the Sherman Act.
B) not a violation of the Sherman Act, because it has been made by a professional association.
C) not a violation of the Sherman Act, because a fee is different from a price.
D) subject to the rule of reason.