Deck 27: Antitrust Law

Question 1

To reduce marketing costs and raise prices, competitors can divide up marketing territories or customers without violating antirust law.

Answer 1

False

Question 2

Any agreement that results in enhanced market power violates the antitrust laws.

Answer 2

False

Question 3

Because commerce operates more efficiently when competitors cooperate, Section 1 of the Sherman Act permits rivals to consolidate market power.

Answer 3

False

Question 4

Requiring users of a social media site to agree to certain terms and conditions to use the site is most likely an antitrust violation.

Question 5

Any agreement among competitors to artificially fix prices or restrict output is a per se violation of Section 1 of the Sherman Act.

Question 6

Because market power arises from access to consumer data, collecting such information is an antitrust violation.

Question 7

Antitrust legislation is based on a belief that competition leads to lower prices, better products, a wider selection of goods, and more product information.

Question 8

Any contract, combination in the form of a trust, or conspiracy to restrain trade and commerce can be declared illegal under the antitrust laws.

Question 9

If the legitimate benefits outweigh the anticompetitive effects of a resale price maintenance agreement, the agreement may be held lawful.

Question 10

A business, but not an individual person, can be deemed liable for monopolizing or attempting to monopolize trade or commerce in violation of the antitrust laws.

Question 11

Restraints of trade are laws that regulate economic competition.

Question 12

A market in which there is a single seller or a very limited number of sellers is a monopoly.

Question 13

Predatory pricing is not an antitrust violation because the tactic can eliminate a firm's competitors, enabling it to increase prices and earn higher profits to benefit its owners and employees.

Question 14

Proving an antitrust violation requires showing a misuse of market power.

Question 15

The power to control the market price of a product is market power.

Question 16

To deem an agreement a per se violation of antitrust law, a court must determine whether the agreement actually constitutes a restraint on trade.

Question 17

The rule of reason represents a more flexible economic analysis of agreements among competitors than the rigid application of a per se standard.

Question 18

Price-fixing agreements are considered violations of the Sherman Act because of their real and potential adverse effects on open and free competition.

Question 19

Section 2 of the Sherman Act essentially condemns the act of monopolizing, not the possession of monopoly power.

Question 20

Fixing prices, controlling production, and establishing exclusive geographic markets can reduce or eliminate economic competition.

Question 21

Because a single seller is free to deal with whomever it wishes, the seller's unilateral refusal to deal cannot violate Section 2 of the Sherman Act.

Question 22

Any conspiracy that has a substantial effect on U.S. commerce is within the scope of the Sherman Act, unless it occurs outside the United States.

Question 23

Under the Clayton Act, a seller can condition the sale of a product on the buyer's promise not to deal in the goods of the seller's competitors.

Question 24

Establishing the relevant product market is a key issue in monopolization cases because the way a market is defined can determine whether a firm has monopoly power.

Question 25

Every threat of monopolization is condemned as a violation of antitrust law even fi the alleged offender does not possess some degree of market power.

Question 26

The chief executive officers of the major U.S. steel makers would most likely be prosecuted under the antitrust laws if they

A) met to review developments in the domestic market for steel.
B) agreed to work together to control the price of domestic steel.
C) conferred on resource, supply, and distribution issues.
D) promised to reveal to each other their positions on trade and tariffs.

Question 27

Under the Clayton Act, a business firm cannot merge with another unless the effect is to substantially lessen competition.

Question 28

Power Inc. and QualGas Corporation refine and sell natural gas. To limit the supply on the market and thereby raise prices, Power and QualGas agree to buy "excess" supplies from dealers and "dispose" of it. This is

A) a deal that neither restrains trade or harms competition.
B) not within the scope of the Sherman Act.
C) a per se violation of the Sherman Act.
D) subject to analysis under the rule of reason.

Question 29

A firm may be deemed a monopolist, even though it is not the only seller in a market, because what matters is size in relation to the market.

Question 30

Antirust legislation is based on society's desire to

A) increase prices.
B) foster competition.
C) consolidate market power.
D) encourage restraints of trade.

Question 31

Blu-ray producers cannot jointly lobby Congress to change the copyright laws without being held liable for attempting to restrain trade.

Question 32

A price-fixing agreement or other anticompetitive agreement to control a portion of U.S. markets cannot be held to be a per se violation of the antitrust laws if the agreement involves a foreign firm.

Question 33

Only the Federal Trade Commission can enforce the Clayton Act.

Question 34

It is in society's interest to condemn every acquisition of monopoly power as an antitrust violation even though a dominant market share may be the result of business acumen.

Question 35

The legality of a tying arrangement depends in part on the agreement's likely effect on competition in the relevant markets.

Question 36

Competition is not necessarily diminished solely as a result of market concentration.

Question 37

Only the U.S. Department of Justice can prosecute violations of the Sherman Act.

Question 38

Even if a firm possesses monopoly power and engaged in anticompetitive conduct, it cannot be inferred that the firm acted with the intent to monopolize.

Question 39

Online Media Inc. bundles its products so that consumers are forced to pay for access to some sites that they do not want in order to obtain access to sites that they do want. A court will likely rule that the bundling does not violate the rule of reason if it

A) is the most restrictive means for the firm to achieve its purpose.
B) is fully within the firm's ability to achieve.
C) does not injure competition.
D) suppresses or destroys competition.

Question 40

Every agreement concerned with trade, and every regulation of trade, restrains. The test of legality under the antitrust laws, according to the rule of reason, is whether the restraint

A) is blatantly, inherently anticompetitive.
B) has a substantial effect on interstate commerce.
C) merely regulates and thereby promotes competition.
D) suppresses or destroys competition.

Question 41

Fish Purveyors Corporation and Gill Netters Inc. are the principal suppliers of crustaceans in their market. They agree that Fish Purveyors will sell exclusively to retailers and Gill Netters will sell exclusively to wholesalers. This is most likely

A) a situation that neither restrains trade nor harms competition.
B) not within the scope of the Sherman Act.
C) a per se violation of antitrust law.
D) subject to analysis under the rule of reason.

Question 42

Snowboards Inc. refuses to sell its products to Timber Winter Sports Stores, Inc., a retail snowboard dealership. This violates Section 2 of the Sherman Act if Snowboards has monopoly power and

A) none of the choices.
B) Timber has or is likely to acquire monopoly power.
C) the refusal is unilateral.
D) the refusal has an anticompetitive effect on the market.

Question 43

Bio Med Corporation makes and sells Curative, the most prescribed name-brand pain-relief medication. Drugs Inc. has the potential to make a generic version of the same drug. Bio Med agrees to pay Drugs not to make or sell the generic. This agreement is most likely

A) a deal that neither restrains trade or harms competition.
B) not within the scope of the Sherman Act.
C) a per se violation of the Sherman Act.
D) subject to analysis under the rule of reason.

Question 44

Road Tires Inc. conditions the sale of its products to Service Stores on the buyer's agreement to buy Road's tire-repair kits. Under the Clayton Act, this deal is

A) a per se violation.
B) a violation, unless the seller's competitors make similar deals.
C) a violation, depending on its purpose and the effect on competition.
D) not a violation.

Question 45

Dig Inc. is the major wholesale distributor of heavy equipment in six states. Dig's closest competitor is Excavator Company. The two firms agree that Dig will operate in four of the states and Excavator in the other two. This is

A) a group boycott.
B) a market division.
C) a price-fixing agreement.
D) a trade association.

Question 46

An antitrust action is brought against Carrier Freight Company, alleging that a certain act constitutes the offense of attempted monopolization. To qualify, the act must

A) be likely to succeed.
B) be unlikely to succeed.
C) succeed.
D) fail.

Question 47

Dairy Cream Inc. makes and sells ice cream. Dairy Cream wants to merge with EZ Freeze Inc., its main competitor and a maker of ice cream and other frozen desserts. In a challenge to the deal on a charge of monopolization, the relevant product market includes ice cream and

A) no other products.
B) products that are related, such as cake.
C) products that have identical attributes, such as frozen yogurt.
D) products that must be kept cold, such as frozen fruit.

Question 48

Four grocery stores account for 80 percent of the retail food sales in Metro City. Two of the stores want to merge. In determining whether the merger violates the Clayton Act, the most crucial factor is

A) the market shares of the firms in their market.
B) the market value of the firms' shares in the stock market.
C) the comparative value of each store in a market for their sale.
D) the total value of the market in relation to the stock for sale in the stores.

Question 49

Mountain Crest Inc. makes and distributes its branded products to authorized dealers. To prevent price-cutting by dealers in direct competition, the firm imposes limits on where each dealer can sell the products. This is

A) a territorial restriction.
B) a trade association.
C) smart marketing.
D) a price-fixing agreement.

Question 50

Fertile Acres Inc., Growers Farm Co-op, and Harvest Orchards agree to exchange information, conduct an advertising campaign, and set certain regulatory standards to govern their operations. This association is

A) a deal that neither restrains trade nor harms competition.
B) not within the scope of the Sherman Act.
C) a per se violation of antitrust law.
D) subject to analysis under the rule of reason.

Question 51

Edibles Inc. and Food Stuff Corporation are competitors. Each firm has capital, surplus, and undivided profits in excess of $40 million and competitive sales of more than $5 million. Gina and Hal serve as directors on both firms' boards. Under the Clayton Act's restriction concerning interlocking directorates, Gina and Hal are

A) liable for failing to comply.
B) not liable because the firms are likely to continue to compete.
C) not liable because the firms' officers conduct the competitive activities.
D) not liable because the firms' shareholders can affect company policies.

Question 52

Under a contract, Oil Shale Corporation forbids Petro Inc., a wholesale buyer of Oil Shale's products, to purchase products from the seller's competitors. This is prohibited

A) under any circumstances.
B) if its effect is to stabilize the relevant market.
C) if its effect is to substantially lessen competition.
D) if tis purpose is to create a monopoly.

Question 53

Cosmétique Inc. makes and sells cosmetics and related products. By selling its goods at prices substantially below the normal cost of production, the firm hopes to drive its competitors from the market. This is

A) market power pricing.
B) predatory pricing.
C) price discrimination.
D) price-fixing.

Question 54

Components Inc., a maker of vehicle parts, refuses to sell to DIY Repair Inc., a national vehicle service firm. The maker convinces Engine Parts Company, a competitor, to do the same. This is

A) a group boycott.
B) a tying arrangement.
C) a trade association.
D) a market division.

Question 55

Battery Corporation's production, distribution, and marketing methods are unique. Its capital value and size are greater than its competitors. A suit is filed against the firm, alleging the offense of monopolization. To determine whether Battery has monopoly power requires looking at

A) the price of a share of the firm's stock.
B) the corporation's size alone.
C) the business's production methods and marketing techniques.
D) the relevant market.

Question 56

When applying the rule of reason to an activity that allegedly violates the antitrust laws, a court will not consider

A) the purpose of the agreement.
B) the parties' market ability to implement the agreement.
C) whether the agreement is a per se violation.
D) the potential effect of the agreement on competition.

Question 57

To drive its competitors out of a certain geographic segment of its market, Drones Inc. sets the prices of its products below cost for the buyers in that area. This is

A) price-fixing.
B) smart marketing.
C) predatory pricing.
D) price discrimination.

Question 58

Best View Corporation offers to sell LED screens to Computer & Video, Inc., only if the buyer also agrees to buy the seller's servicing of its products. This is

A) an exclusive-dealing contract.
B) a tying arrangement.
C) price discrimination.
D) business acumen.

Question 59

The Medical Device Makers Association does not include all manufacturers of medical and surgical instruments. The association refuses to deal with any parties who do not carry the products of its members. This is

A) a situation that neither restrains trade nor harms competition.
B) not within the scope of the Sherman Act.
C) a per se violation of antitrust law.
D) subject to analysis under the rule of reason.

Question 60

Pump Makers Inc. makes pumps for fire trucks and conditions shipments of its products to Quality Motors Corporation-a maker of fire trucks-on Quality's agreement to buy additional pumps only from Pump Makers. This is

A) an exclusive-dealing contract.
B) a tying arrangement.
C) price discrimination.
D) a unilateral refusal to deal.

Question 61

Linking Cogs Corporation and Meshed Gears Inc. are competitors selling certain machine parts that are otherwise generally unattainable in their geographic market. This market includes the states of Minnesota, North Dakota, and South Dakota. Linking Cogs and Meshed Gears agree that Linking Cogs will no longer sell in Minnesota and that Meshed Gears will no longer sell in North and South Dakota. Have Linking Cogs and Meshed Gears violated any antitrust law? If so, which one? Explain. If they had divided their market by type of customer rather than geographic are, would the result be the same? Why or why not?

Question 62

Expressly exempt from antitrust laws because it is not interstate commerce, according to the United Supreme Court, is

A) digital streaming.
B) video production.
C) professional football.
D) professional baseball.

Question 63

Under what circumstances would Quality Market, a small store in Rustic, an isolated town, be considered a monopoly? If Quality Market is a monopoly, is it in violation of antitrust law?

Question 64

Ranch Supplies Company believes that its chief competitor Stock & Equipment Inc. engages in anticompetitive behavior in an attempt to drive Ranch Supplies out of the market. Under the Clayton Act, Ranch Supplies can sue Stock & Equipment for a violation of

A) none of the choices.
B) the Clayton Act only.
C) any of the federal antirust laws.
D) the Sherman Act only.

Question 65

With respect to anticompetitive behavior, the Federal Trade Commission Act prohibits

A) civil violations of the Sherman Act.
B) criminal violations of the Clayton Act.
C) all forms not covered under other federal antitrust laws.
D) only forms covered under other federal antitrust laws.

Question 66

Baby Goods Inc. buys Child Shops Inc. in an attempt to gain monopoly power. Remedies that a court might impose in a suit against Baby Goods for a violation of the antitrust laws include

A) divesting itself of the control or ownership of Child Shops.
B) funding new entries to the relevant market.
C) all of the choices.
D) using its market power to encourage increased competition.

Question 67

American Oil Company joins a cartel that includes foreign participants to set the price of oil. The cartel has a substantial effect on U.S. commerce. With respect to the foreign participants, under U.S. antitrust laws, this is most likely

A) a per se violation.
B) a violation, depending on the price.
C) a violation, depending on the effect in foreign markets.
D) not a violation.

Question 68

With respect to antitrust violations, the Federal Trade Commission does not enforce

A) the Federal Trade Commission Act.
B) the Clayton Act.
C) the Sherman Act.
D) any of the federal antitrust laws.

Question 69

The federal agencies that enforce the antitrust laws include

A) the U.S. Department of Justice.
B) the Securities and Exchange Commission.
C) the Consumer Financial Protection Bureau.
D) all of the choices.

Question 70

Two Chinese firms, Wong Ltd. and Xiang Ltd., engage in a conspiracy to control the distribution of certain goods in global markets. This may violate U.S. antitrust laws

A) under no circumstances.
B) if the conspiracy has a substantial effect on U.S. or foreign commerce.
C) if the conspiracy has a substantial effect on U.S. and foreign commerce.
D) if the conspiracy has a substantial effect on U.S. commerce only.

Question 71

Oil Industries Inc. and Petro Corporation are competing refineries situated on the Gulf coast. The two firms cooperate to obtain federal funds to build a levee that could protect their facilities from rising sea levels. With respect to antitrust law, this effort is

A) a violation because it is "objectively baseless."
B) a violation because funds will be spent for an anticompetitive purpose.
C) a violation because it involves a conspiracy to affect market power.
D) exempt from antitrust enforcement.

Question 72

Say It Inc. and Text Talk Inc. are social media companies. They compete for employees, users, and advertisers. The two firms work together on security threats, however. With respect to antitrust law, this cooperation is most likely

A) a violation because it is not possible to completely thwart such fraud.
B) a violation because it concerns sharing confidential information.
C) a violation because it involves setting aside competitive differences.
D) not a violation because it is not anticompetitive.