Deck 42: Antitrust

Question 1

Like the Sherman Act, Section 3 of the Clayton Act applies only to practices involving commodities, not to those that involve services, intangibles, or land.

Answer 1

False

Question 2

Regarding Section 2 of the Sherman Act, the standard test applied by the courts requires proof of a specific intent to monopolize plus a dangerous probability of success; however, this test neither defines "intent" nor gives a standard of power by which to measure "success."

Answer 2

True

Question 3

Monopoly power is tested by determining how big the corporation is in terms of total assets.

Answer 3

False

Question 4

Any violation of Section 2 of the Sherman Act constituting a conspiracy to monopolize would also constitute a violation of Section 1.

Question 5

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

Question 6

Section 1 of the Sherman Act outlaws monopolies and attempts to monopolize.

Question 7

The Federal Trade Commission may issue a cease and desist order having the effect of an injunction.

Question 8

An agreement between a manufacturer and a wholesaler is horizontal.

Question 9

Characterizing a type of restraint as per se illegal significantly affects the prosecution of an antitrust suit.

Question 10

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

Question 11

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

Question 12

Section 2 of the Sherman Act prohibits contracts, combinations, and conspiracies that restrain trade.

Question 13

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

Question 14

Failure to comply with Section 1, but not Section 2, of the Sherman Act is a criminal violation.

Question 15

All tying arrangements are per se illegal.

Question 16

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

Question 17

If Cinage Cutlery lowers its price per item to anyone who buys a minimum of 100 knives because it costs Cinage less to sell that quantity, it is not a violation of the Robinson-Patman Act.

Question 18

The courts have interpreted the Sherman Act as prohibiting contracts that unreasonably restrain trade.

Question 19

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

Question 20

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

Question 21

Group boycotts are not prohibited by the Sherman Act.

Question 22

Some group boycotts are illegal per se while others are subject to the rule of reason.

Question 23

Under the Clayton Act, private parties can bring civil actions in federal court for treble damages and attorneys' fees.

Question 24

Under the Sherman Act, price fixing is the primary and most serious example of a per se violation.

Question 25

Under the 2004 amendments, individuals who violate the Sherman Antitrust Act, Sections 1 or 2, may be imprisoned for ten years and fined up to $1 million.

Question 26

In 1992 Horizontal Merger Guidelines were jointly issued by the Justice Department and the Federal Trade Commission.

Question 27

If a wholesale manufacturer gets a retail outlet for its goods through merger, this is a horizontal merger.

Question 28

The Justice Department has expanded its enforcement policy of the Sherman Act to cover foreign companies' conduct that harms U.S. exports.

Question 29

In the case of Eastman Kodak Co. v. Image Technical Services, Inc. the U.S. Supreme Court identified the exact conduct, beyond mere possession of monopoly power, which violates Section 2 of the Sherman Act.

Question 30

The Clayton Act exempts labor, agricultural, and horticultural organizations from all antitrust laws.

Question 31

A secondary-line injury to competition occurs when the recipient of a favored price passes the benefits of the lower price on to the next level of distribution.

Question 32

The National Cooperative Research Act was passed to facilitate the use of joint ventures for joint research and development.

Question 33

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

Question 34

The validity, under antitrust law, of a joint venture depends on the competitors' purpose in forming it.

Question 35

Section 1 of the Sherman Act does not prohibit concerted action.

Question 36

The Federal Trade Commission was created by the Sherman Act and its powers are limited to preventing unfair methods of competition as set forth in the Sherman Act.

Question 37

To find a violation of Section 2 of the Sherman Act, if sufficient monopoly power has been proved, the law must then show that the firm has engaged in unfair conduct .

Question 38

When the per se approach is inappropriate in a Section 1 Sherman Act case but the challenged conduct has obvious anticompetitive effects, courts may use an intermediate test which is a "quick look" rule of reason analysis.

Question 39

Under the 2004 amendments, corporate offenders who violate Sections 1 or 2 of the Sherman Act face fines of up to $100 million per violation.

Question 40

A "Vertical Restraint Index" is a measure of relative market share.

Question 41

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 implied from this conduct.
C) there is no concerted action.
D) this is horizontal market allocation.

Question 42

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 price restraints.
D) Monopolies

Question 43

McDonald's Corporation grants to Bob a franchise in which he will be the only one who has the right to sell McDonald's products in his small hometown. Under the Sherman Act:

A) this is per se illegal.
B) there is no violation.
C) this will be tested under the rule of reason.
D) there is a tying arrangement.

Question 44

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) boycott.
C) horizontal restraint.
D) disparagement.

Question 45

The common law traditionally:

A) restricted competition.
B) held that contracts in restraint of trade are illegal and unenforceable.
C) favored concentrations of economic power in the form of trusts and combinations.
D) All of these are true.

Question 46

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 or abuse of power.
B) concerted action.
C) competitive behavior.
D) economic advantage.

Question 47

The rule of reason test, under the Sherman Antitrust Act:

A) considers the makeup of a relevant industry.
B) does not consider the defendant's position in that industry.
C) considers the defendant's need for the financial gain from the restraint of trade.
D) does not consider competitor's ability to respond to the challenged practice of restraint of trade.

Question 48

In enacting Section 2 of the Clayton Act, Congress was concerned with sellers who sought to harm or eliminate their competitors through:

A) mergers.
B) price discrimination.
C) tying arrangements.
D) advertisements.

Question 49

To determine "market share" requires knowledge of which of the following?

A) What other products are substitutable for the product.
B) Where the product is sold.
C) How much of the product is sold.
D) All of these are part of determining market share.

Question 50

The manufacturer of Rubberware 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 51

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

Question 52

If a small manufacturer of vacuum cleaners requires the buyer to agree to purchase only that manufacturer's bags as a condition of the sales of its cleaners, under the Sherman Act this is:

A) illegal per se .
B) a tying arrangement, which will be closely scrutinized by the law.
C) a vertical customer restriction.
D) no violation.

Question 53

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 54

The definition of price-fixing includes agreements that may, among other things:

A) depress prices.
B) stabilize prices.
C) raise prices.
D) All of these are true.

Question 55

Which of the following is correct regarding the Clayton Act?

A) It deals with price discrimination, tying contracts, and mergers.
B) It added criminal sanctions to the Sherman Act.
C) It repealed the Robinson-Patman Act.
D) It included labor organizations in its coverage.

Question 56

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

A) Injunctions.
B) Consequential damages.
C) Restitution.
D) None of these.

Question 57

Agreements by which the seller or lessor of a product conditions the agreement upon the buyer's or lessee's promise not to deal in a competitor's goods are:

A) tying arrangements.
B) exclusive dealing arrangements.
C) attempts to monopolize.
D) None of these.

Question 58

A merger involving noncompeting firms producing unrelated goods and services is termed a:

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

Question 59

Mitch Matthews at M&M Furniture Co. had an argument with the Selphi Sofa representative, so he decided that M&M  would boycott Selphi . Under the Sherman Act, this is:

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

Question 60

In an attempt to limit the power of large purchasers, Congress amended Section 2 of the Clayton Act in 1936 by adopting the:

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

Question 61

A form of business association organized to carry out a particular business enterprise is a:

A) sole proprietorship.
B) tenancy in common.
C) joint venture.
D) competitor.

Question 62

Masson Supply sells hinges to retail outlets for $1.20. If Rorsch Ltd. approaches Strunk Hardware, one of Masson's customers, and offers to sell a comparable hinge for $1.10:

A) Masson may, without violating the Robinson-Patman Act, lower its price to Strunk to $1.10, and Masson need not lower its price to its other customers.
B) Masson may not lower its price to Strunk to $1.10 unless it lowers its price to its other customers or it will violate the Robinson-Patman Act.
C) Masson may lower its price to Strunk to $1.05 in order to keep Strunk's business, even if Masson does not lower the price to its other customers, without violating the Robinson-Patman Act.
D) Masson may lower its price to Strunk without also lowering its price to Masson's other customers in order to allow Strunk to meet a lower price Strunk's competitor charges when selling Rorsch's hinges.

Question 63

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.
c. Betty's Bargain Department Store sells its products for 10% under the suggested retail price. One manufacturer tells the store it will not supply wholesale goods to it unless it charges at least the suggested retail price.

Question 64

W & W, 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 W & W, Inc. have liability for price discrimination? Explain.

Question 65

The Clayton Act deals with which of the following situations?

A) Supply discrimination.
B) Tying contracts and mergers.
C) Interlocking ties.
D) Monopoly conspiracies.

Question 66

Elko, Inc. and Fuldan, Inc. closely monitor each other's actions regarding the sale of consumer electronic products. Each corporation tries to match the other's product designs and specifications, prices, and advertising strategies. As a result, the two corporations have similar products, prices, and profits. Is this a violation of the antitrust laws?

Question 67

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

Question 68

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.

Question 69

The 2010 Horizontal Merger Guidelines:

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 analytic framework, which was far too subjective and uncertain.
C) rejects use of the Herfindahl-Hirschman Index.
D) clarify that merger analysis does not use a single methodology.

Question 70

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 71

The Leegin Creative Leather Products, Inc. v. PSKS, Inc. case held that:

A) vertical agreements establishing minimum resale prices should be judged by the rule of reason standard.
B) vertical agreements establishing minimum resale prices are illegal per se .
C) horizontal price fixing agreements must be evaluated by studying the reasonableness of the restraint in light of real market forces at work in the situation.
D) if a seller can show it costs less to sell to a particular buyer, the seller may lawfully pass along the cost savings.

Question 72

In enforcing the Sherman Act, the DOJ examines conduct by foreign companies  to determine whether it would violate the law if it occurred within borders of the United States.

Question 73

The concerted action requirement of the Sherman Act Section 1:

A) may be established by an express agreement.
B) is not met when a parent corporation and its wholly owned subsidiaries agree to a restraint in trade.
C) requires factors, additional to conscious parallelism, such as identical sealed bids from each competitor.
D) All of these are true.

Question 74

The National Cooperative Research Act provides that:

A) joint ventures in the research and development of new technology are to be judged under the rule of reason test.
B) treble damages apply to all joint ventures formed in violation of the antitrust laws.
C) joint venture participants must under all circumstances report their intent to the Justice Department.
D) joint ventures formed to divide markets and fix prices are not illegal.

Question 75

Failure to comply with Section 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 per violation.
C) may subject a corporation to a fine of $100 million per violation.
D) All of these are true.

Question 76

Which of the following is true in relation to market share and monopoly power?

A) A market share greater than 50% generally indicates monopoly power.
B) A market share between 50 and 75% is, in itself, inconclusive in determining monopoly power.
C) Market share is rarely used as a test of monopoly power because it is difficult to determine.
D) Market share is a common test for monopoly power because it is an easy, objective measurement for courts to determine.

Question 77

With 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 only explanation for their willingness to comply is the seller's economic power in the tying market.
D) All of these.

Question 78

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 79

Sarreno Cheese Co. supplies mozzarella cheese to pizza restaurants at $1.70 per pound. In order to snare the business of one large pizza chain, Sarreno offers to sell them cheese at $1.45 per pound. This will violate the Robinson-Patman Act unless:

A) the pizza chain can already get the cheese for $1.45 elsewhere.
B) Sarreno can show its price is justified because of a cost savings based on quantity.
C) Sarreno lowers the price to all its customers.
D) Any of these will allow Sarreno to avoid violating Robinson-Patman.

Question 80

What are the major functions of the Federal Trade Commission (FTC) and what power does the FTC have?