Deck 16: Antitrust

Question 1

Unilateral conduct may violate Section 1 of the Sherman Act under some circumstances.

Answer 1

False

Question 2

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

Answer 2

True

Question 3

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

Answer 3

True

Question 4

Patented or copyrighted products may confer market power on the owner in tying cases when there are high switching costs.

Question 5

Courts apply the per se rule when reviewing most tying arrangements and will,therefore,consider business justifications proffered by the tying firm.

Question 6

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

Question 7

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 8

Vertical market division between a franchisor and a franchisee may be lawful when interbrand competition is enhanced by the limitation on intrabrand competition.

Question 9

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

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

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 12

Without further inquiry,boycotts are per se illegal under the Sherman Act.

Question 13

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

Question 14

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

Question 15

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

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 European Union takes a stricter view of vertical territorial restraints because of their tendency to impede continent-wide market integration.

Question 18

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

Question 19

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

Question 20

Market power is defined as the power to control prices or exclude competition in a relevant market.

Question 21

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 22

Which of the following is true regarding monopoly law in China?

A) Each offense is specifically set forth with no catch-all provisions.
B) It is not used against foreign investors.
C) It prevents behavior classified as abuse of dominant market position.
D) China lacks an anti-monopoly law although drafting has been in process for several years.

Question 23

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 24

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 25

A[n] ______ is made up of product or service offerings by different manufacturers or sellers that are economically interchangeable and may therefore be said to compete.

A) interchangeable-brand product market
B) market power interchange
C) multiple-brand product market
D) A consumer surplus brand market

Question 26

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 27

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

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

Question 28

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 29

Which of the following is true regarding private suits to enforce the Sherman Act?

A) Private plaintiffs may recover three times the damages they have sustained as a result of violations of the act.
B) Liability is joint and several among all conspirators.
C) There is no requirement of standing.
D) Private plaintiffs may recover three times the damages they have sustained as a result of violations of the act, and liability is joint and several among all conspirators.

Question 30

Which of the following refers to the principle that unless barriers to entry or other factors make a market structurally conducive to monopolization,pricing below cost is not a Sherman Act violation,regardless of whether the defendant had monopolistic intent?

A) The principle of certainty
B) The principle of uncertainty
C) The rule of improbability
D) The rule of impossibility

Question 31

What was the first U.S.antitrust law?

A) The Hart-Scott-Rodino Antitrust Improvements Act
B) The Robinson-Patman Act
C) The Clayton Act
D) The Sherman Act

Question 32

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 33

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 34

Which of the following is true regarding conscious parallelism?

A) Proof, standing alone, that firms changed prices at the same time is sufficient to prove a horizontal conspiracy to set prices regardless of whether the firms initially set prices at the same levels.
B) Proof, standing alone, that firms initially set prices at the same levels is sufficient to prove a horizontal conspiracy to set prices regardless of whether the firms later changed prices at the same time.
C) Showing that firms consistently set prices at the same levels and change prices at the same time is sufficient to prove a horizontal conspiracy to set prices.
D) Merely showing that firms consistently set prices at the same levels and change prices at the same time is insufficient to prove a horizontal conspiracy to set prices.

Question 35

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 36

Under which of the following situations will courts usually find pricing legal?

A) When the prices are above average variable cost but below average total cost and the company has excess capacity.
B) When the prices are above average variable cost but below average total cost and the company does not have excess capacity.
C) When the prices are below average variable cost and below average total cost and the company does not have excess capacity.
D) Only when prices are above both average variable cost and average total cost.

Question 37

The __________ concludes that market forces defeat most anticompetitive practices.

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

Question 38

Which of the following is true regarding enforcement under the antitrust laws?

A) The U.S. Department of Justice and the Federal Trade Commission act as enforcement agents for the federal antitrust laws.
B) Only the U.S. Department of Justice acts as an enforcement agent for the federal antitrust laws.
C) Only the Federal Trade Commission acts as an enforcement agent for the federal antitrust laws.
D) The U.S. Department of Justice and the Consumer Fairness Commission act as enforcement agents for the federal antitrust laws.

Question 39

The Robinson-Patman Act prohibits

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

Question 40

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 41

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 42

Fact Pattern 16-2
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 16-2. Which of the following is true regarding whether the imposition of maximum prices under the facts presented 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 43

Fact Pattern 16-1
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 16-1. 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

Fact Pattern 16-2
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 16-2. 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 45

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

Question 46

Fact Pattern 16-1
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 16-1. Is the fact that no express words passed between Patty and Jason a defense to charges of antitrust violation?

A) Yes, because direct evidence is required in order to establish an illegal agreement to fix prices.
B) Yes, both because direct evidence is required in order to establish an illegal agreement to fix prices and because the courts require evidence of an explicit agreement in such cases.
C) It is a defense to charges of criminal antitrust violations, but not to civil antitrust violations.
D) No, because a knowing wink can mean more than words.

Question 47

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 48

Which of the following was the result before the U.S.Supreme Court in Illinois Tool Works,Inc.v.Independent Ink,Inc.,the case in the text involving whether the fact that a product in a tying arrangement is patented creates a presumption of market power in that product?

A) The court upheld earlier law and ruled that the existence of a patent in a tying arrangement creates a presumption of market power.
B) The court ruled that a tying arrangements involving a patented product should be evaluated under the rule of reason standard rather than under the per se rule.
C) The court ruled that a tying arrangements involving a patented product should be evaluated under the per se rule rather than under the rule of reason standard.
D) Overturning prior law the court ruled that the matter was irrelevant because all tying arrangements are illegal regardless of whether or not a patented product is involved.

Question 49

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 who do not legally have to sell to any particular buyer.

Question 50

Horizontal price-fixing,such as an agreement between retailers to set a common price for a product,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 51

In the European Union,the principal rules of competition law are set forth in which of the following?

A) The Treaty of Amsterdam and the Merger Control Regulation
B) The European Union Regulation and the Treaty of Amsterdam
C) Only the European Union Regulation
D) Only the Treaty of Amsterdam

Question 52

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 53

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 surprise 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 54

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 55

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 56

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

Question 57

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

Question 58

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 59

Which of the following is the objective of the rule of reason rule?

A) To determine whether the requirements of the per se rule have been satisfied.
B) To determine whether, on balance, the activity at issue promotes or restrains competition.
C) To determine whether in a particular situation a horizontal price fixing has actually harmed consumers.
D) To determine if providers of a good acted reasonably in engaging in a boycott.

Question 60

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 61

Set forth when a monopolist has a duty to deal with its rivals and the four elements considered in determining such a duty.

Question 62

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?

Question 63

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.