Deck 17: Antitrust

Question 1

The Sherman Act was passed as part of a populist movement to combat the rise of trusts in such basic industries as oil and steel.

Answer 1

True

Question 2

One of the major differences between U.S.and European Union competition laws is the European Union's treatment of horizontal agreements.

Answer 2

False

Question 3

Fines,but not jail time,may be imposed for price-fixing in violation of the Sherman Act.

Answer 3

False

Question 4

Firms can incur liability under Section 2 of the Sherman Act by acquiring monopoly power through corporate mergers or acquisitions.

Question 5

The classic definition of conspiracy focuses on whether the alleged conspirators had a meeting of the minds in a scheme that violates the law.

Question 6

Local municipalities may not be held liable for antitrust damages and are not subject to equitable remedies such as injunctions.

Question 7

Sections 1 and 2 of the Sherman Act have extraterritorial reach.

Question 8

Courts look more favorably on reductions in intrabrand competition when there is vigorous interbrand competition that can prevent the reduction in intrabrand competition form harming consumers.

Question 9

Horizontal agreements among competitors not to compete on nonprice matters cannot be a violation of Section 1 of the Sherman Act.

Question 10

In order to find a violation of the Sherman Act,courts require evidence of an explicit agreement to violate the law.

Question 11

Bright lines that clearly separate lawful from unlawful in the antitrust field are rare.

Question 12

The Sherman Act,passed in 1910,was the first U.S.antitrust law.

Question 13

The Robinson-Patman Act prohibits a manufacturer from making any price discrimination among its customers.

Question 14

The Supreme Court considers market divisions between competing firms to be so inherently anti-competitive as to constitute per se violations of the Sherman Act.

Question 15

Courts define market power as the power to control prices or exclude competition in a relevant market.

Question 16

In order to avoid an unworkable construction of the Sherman Act,the courts have construed Section 1 to prohibit only those restraints of trade that unreasonably restrict competition.

Question 17

The courts are more likely to allow a restraint of interbrand competition than intrabrand competition.

Question 18

Section 5 of the Federal Trade Commission Act is broader than the other antitrust laws.

Question 19

Even when a U.S.court finds a foreign corporation in violation of the antitrust laws,any award of damages is meaningless without foreign enforcement of the award unless the foreign corporation has assets in the U.S.that can be attached to satisfy the judgment.

Question 20

The merger of an airplane manufacturer and an airplane engine manufacturer would normally be considered a conglomerate merger.

Question 21

The agreement of all the commercial airlines not to lower their fares would be an example of a

A)vertical restraint of trade.
B)horizontal restraint of trade.
C)tying arrangement.
D)monopoly.

Question 22

The essential-facility doctrine does not require a firm to share resources that _________.

A)are merely useful
B)that allow competitors to compete more effectively
C)that the competitors could duplicate on their own
D)all of the responses are correct

Question 23

What was the result in Williamson Oil Co.v.Philip Morris USA,the case in the text in which it was alleged that tobacco companies had conspired to fix prices?

A)The suit was dismissed because the plaintiffs could not establish any "plus factor" needed to proceed.
B)The suit was allowed to proceed because no "plus factor" was needed.
C)The suit was allowed to proceed because "plus factors" were established by plaintiffs.
D)The suit was dismissed because the plaintiffs lacked standing.

Question 24

As an aid to the interpretation of market data,the Justice Department uses the Herfindahl-Hirschman Index (HHI)of

A)pricing
B)productive efficiency
C)multiple brand product market
D)market concentration

Question 25

Section 7 of the Clayton Act prohibits

A)price discrimination.
B)monopolies and attempts to monopolize.
C)every contract,combination or conspiracy in restraint of trade.
D)mergers that threaten competition.

Question 26

Which of the following markets is not relevant in establishing the existence of a monopoly?

A)Consumer demand
B)Single brand
C)Multiple brand
D)Geographic

Question 27

The __________ concludes that market forces defeat most anticompetitive practices.

A)Chicago School
B)Antitrust School
C)Contra-antitrust School
D)Economic Forecasting Model

Question 28

Section 1 of the Sherman Act prohibits

A)price discrimination.
B)monopolies and attempts to monopolize.
C)every contract,combination or conspiracy in restraint of trade.
D)mergers that threaten competition.

Question 29

For a monopoly to be found illegal,which of the following is relevant after market power is established?

A)Single brand market.
B)Multiple brand market.
C)Collusion.
D)Monopolistic intent.

Question 30

If a manufacturer of television sets acquires a magazine publisher,it will be a

A)vertical merger
B)horizontal merger
C)conglomerate merger
D)product-line

Question 31

Which of the following is not an unlawful horizontal restraint of trade?

A)Price-fixing.
B)Group boycotts.
C)Market division.
D)Tying arrangement.

Question 32

_________ competition is competition between companies producing the same type of product.

A)Intrabrand
B)Interbrand
C)Vertical
D)Oriented

Question 33

Which of the following is not an illegal horizontal market division?

A)Division by a class of customers
B)Division by exclusive distributorships
C)Division by geographic territory
D)Restricting product output

Question 34

Which of the following is an approach to analyzing the reasonableness of a restraint of trade?

A)Totality rule
B)Per se rule
C)Rule of reason
D)Both the per se rule and the rule of reason

Question 35

Which of the following can be performed by unilateral action?

A)Achieving monopoly
B)Predatory pricing
C)Price discrimination
D)All of the responses are correct

Question 36

Vertical agreements may reduce _________ competition.

A)Interbrand
B)Intrabrand
C)monopolistic
D)illegal

Question 37

An equilibrium in which scarce societal resources are allocated to the production of various goods and services up to the point where the cost of the resources equals the benefit society reaps form their use is _________.

A)productive efficiency
B)allocative efficiency
C)true efficiency
D)product efficiency

Question 38

The Robinson-Patman Act prohibits

A)price discrimination.
B)monopolies and attempts to monopolize.
C)every contract,combination or conspiracy in restraint of trade.
D)mergers that threaten competition.

Question 39

An equilibrium in which only the lowest-cost producers of goods and services survive is _________.

A)productive efficiency
B)allocative efficiency
C)true efficiency
D)product efficiency

Question 40

Section 2 of the Sherman Act prohibits

A)price discrimination.
B)monopolies and attempts to monopolize.
C)every contract,combination or conspiracy in restraint of trade.
D)mergers that threaten competition.

Question 41

How would a plaintiff establish the existence of a tying arrangement,and under what laws may tying arrangements be challenged?

Question 42

Horizontal price-fixing is the classic example of a(n)________ violation of Section 1 of the Sherman Act.

A) per se
B)intentional
C) rule of reason
D) willful

Question 43

Fact pattern 17-1
Patty owns and operates a gym.Her main competitor is Jason who runs another gym three streets from her.They cater to the same clientele.Patty and Jason keep trying to undercut each other in order to attract customers.One evening Patty sees Jason in the local coffee shop and sits down to talk with him.They discuss how difficult it is to do upgrades and make money with the prices they are charging.Patty winked at Jason and said "You know,charging $80 per month would enable a good profit margin." The next day Patty started charging $80 per month as did Jason.Customers started complaining particularly after another coffee drinker and gym customer at a table sitting at a table near Patty and Jason made it known that they had seemed very cozy.Patty and Jason deny any agreement to set the same price for gym membership.They avow that the decision was made by each of them independently.
Refer to fact pattern 17-1.Frank,a first year law student and gym member,is suspicious; but he does not know what violation to claim.Which of the following is the correct term for an illegal agreement by providers of the same good or service to charge a set fee?

A)Horizontal price fixing
B)Vertical price fixing
C)Substantial price fixing
D)Predatory price fixing

Question 44

What types of price-fixing agreements are considered horizontal price-fixing?

Question 45

Which of the following is not a factor used in determining the anticompetitive effects of a horizontal merger under the Clayton Act?

A)The level of concentration in the market.
B)The market shares of the firms involved in the transaction.
C)Whether the market is structurally conducive to anticompetitive behavior.
D)The market price of the buyer's stock.

Question 46

Happy City has three distributors of milk products.Sam,who owns a grocery store,angers one of the distributors when he insists that additional milk be delivered on Christmas Eve.He annoys another distributor when he makes a delivery driver wait to deliver milk.The three distributors get together and discuss the fact that they like all the other grocers in town better than Sam.One of them has an idea that they should stop selling milk products to Sam.The milk distributors call their friends the meat distributors and talk them into not selling meat to Sam either.Sam hears about the plot and wants to stop it.Which of the following best describes the agreements between the distributors of milk and meat to not sell to Sam?

A)It would likely be a boycott
B)It would likely be a horizontal distribution agreement
C)It would likely be a vertical distribution agreement
D)There is no descriptive term in antitrust law since this is simply an agreement among sellers.

Question 47

The courts may find the pricing of a particular good or service to be predatory when prices are

A)above average variable cost.
B)below average variable cost.
C)below cost to meet competition.
D)none of the responses are correct.

Question 48

With a(n)________ distributorship,a manufacturer limits itself to a single distributor in a given territory.

A)dual
B)exclusive
C)franchise
D)market-power

Question 49

A monopolist has a duty to deal with its rivals when it controls a(n)_________.

A)essential facility
B)tied product
C)horizontal monopoly
D)vertical monopoly

Question 50

A manufacturer that sells its goods both wholesale and at retail is called a(n)

A)conglomerate merger.
B)dual distributor.
C)essential facility.
D)franchise.

Question 51

Fact pattern 17-2
Number One Oil Company sells gas to various gas stations.Number One requires that the gas stations agree that they will not sell gas above a certain maximum price set by Number One.Some of the gas stations are unhappy with the arrangement because they wish to sell gas at any price they choose.Unfortunately for them,other oil companies in the region also impose maximum price restrictions.The station owners begin investigating whether any antitrust violation could be involved.
Refer to fact pattern 17-2.Which of the following best describes the situation by which Number One Oil Company and other companies impose maximum price restrictions?

A)Horizontal price-fixing
B)Vertical price-fixing
C)Adverse price-fixing
D)There is no antitrust term for the practice.

Question 52

Molly runs the best dog grooming shop in town.All the dogs love her as do the owners.She is particularly popular because of a special type of dog biscuit she gives for treats that provides such energy that owners have been known to try them too.Slowly but surely all the other dog grooming shops start to go out of business.Molly claims surprised when one day she is charged with unlawfully monopolizing the dog grooming business.Which of the following would be her best defense?

A)That she primarily provided biscuits,not grooming.
B)That she did not intentionally obtain monopoly power or retain it through anticompetitive acts.
C)That she did not intentionally obtain monopoly power,and that it was legally acceptable for her to willfully attempt to keep it.
D)That services,not goods,were involved.

Question 53

What three factors does a court primarily look to in determining if a horizontal merger is permissible once the market is defined? Discuss fully.

Question 54

What must a plaintiff demonstrate for liability to attach under Section 1 of the Sherman Act?

Question 55

The Supreme Court has held that under the rule of ________ some allegations of predatory pricing are inherently implausible,because the marketplace cannot be successfully monopolized.

A)predatory pricing
B)impossibility
C)allocative efficiency
D)productive efficiency

Question 56

Fact pattern 17-2
Number One Oil Company sells gas to various gas stations.Number One requires that the gas stations agree that they will not sell gas above a certain maximum price set by Number One.Some of the gas stations are unhappy with the arrangement because they wish to sell gas at any price they choose.Unfortunately for them,other oil companies in the region also impose maximum price restrictions.The station owners begin investigating whether any antitrust violation could be involved.
Refer to fact pattern 17-2.Which of the following is true regarding whether the imposition of maximum prices would be an antitrust violation?

A)The U.S.Supreme Court has ruled that such restrictions do not violate federal antitrust law.
B)The imposition of maximum pricing restrictions is per se illegal under federal antitrust law.
C)A rule of reason approach is used in determining whether the imposition of maximum prices is illegal under federal antitrust law.
D)A presumption of reasonableness approach is used in determining whether the imposition of maximum prices is illegal under federal antitrust law.

Question 57

Which of the following is a component of a market?

A)A product component
B)A geographic component
C)A defined component
D)Both a product component and a geographic component

Question 58

Fact pattern 17-1
Patty owns and operates a gym.Her main competitor is Jason who runs another gym three streets from her.They cater to the same clientele.Patty and Jason keep trying to undercut each other in order to attract customers.One evening Patty sees Jason in the local coffee shop and sits down to talk with him.They discuss how difficult it is to do upgrades and make money with the prices they are charging.Patty winked at Jason and said "You know,charging $80 per month would enable a good profit margin." The next day Patty started charging $80 per month as did Jason.Customers started complaining particularly after another coffee drinker and gym customer at a table sitting at a table near Patty and Jason made it known that they had seemed very cozy.Patty and Jason deny any agreement to set the same price for gym membership.They avow that the decision was made by each of them independently.
Refer to fact pattern 17-1.Is the fact that no express words passed between Patty and Jason a defense to charges of antitrust violation?

A)Yes.so long as at least 30 days passed between their discussion and any change in prices
B)Yes,so long as neither had been previously found guilty of price fixing.
C)It is a defense to charges of criminal antitrust violations,but not to civil antitrust violations.
D)No

Question 59

In a ________ action under the Sherman Act,state attorneys general may bring civil actions for injuries sustained by residents of their respective states.

A)parens patriae
B)private attorneys general
C)Herfindahl-Hirschman
D)resale price maintenance

Question 60

Which of the following is not true regarding Section 2 of the Sherman Act?

A)Unilateral conduct may violate Section 2.
B)Section 2 allows the mere possession of monopoly power.
C)A firm violates Section 2 even if attains the monopoly power by superior performance.
D)The offense of monopolization has two elements: monopoly power and proof that the defendant willfully acquired or maintained that power through anticompetitive acts.

Question 61

Many countries do not have the equivalent of our anti-trust laws.Does vigorous enforcement of American anti-trust laws put American companies at a disadvantage in the global marketplace? Should changes in the law or in its enforcement be made to reflect the emerging global economy? Discuss fully.

Question 62

Explain the purpose and scope of the Robinson-Patman Act.What factors will courts use in determining whether or not a violation has occurred? Discuss fully.

Question 63

Discuss the basic U.S.rule for evaluating whether monopolistic action under the Sherman Act is violated by acts affecting U.S.imports where the anticompetitive conduct occurs offshore,but the adverse impact is felt in the United States.When,if ever,is conflicting law between a foreign country and the U.S.a defense?