Deck 42: Antitrust

Question 1

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.

Answer 1

True

Question 2

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

Answer 2

False

Question 3

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

Answer 3

False

Question 4

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

Question 5

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

Question 6

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."

Question 7

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

Question 8

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

Question 9

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 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

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

Question 15

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

Question 16

An agreement between a manufacturer and a wholesaler is horizontal.

Question 17

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

Question 18

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.

Question 19

All tying arrangements are per se illegal.

Question 20

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

Question 21

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

Question 22

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 23

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

Question 24

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

Question 25

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 26

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 27

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

Question 28

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

Question 29

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 30

Group boycotts are not prohibited by the Sherman Act.

Question 31

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

Question 32

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

Question 33

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 34

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

Question 35

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

Question 36

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 37

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

Question 38

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

Question 39

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

Question 40

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 41

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

A) Vertical market allocations.
B) Monopolies
C) Horizontal market allocations.
D) Vertical price restraints.

Question 42

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) economic advantage.
C) competitive behavior.
D) concerted action.

Question 43

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

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

Question 44

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

Question 45

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

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

Question 46

Which of the following is correct regarding the Clayton Act?

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

Question 47

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

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) tying arrangements.
B) price discrimination.
C) mergers.
D) None of these.

Question 49

Conglomerate mergers have been challenged only when:

A) the merged company would be disproportionately large, compared with the smallest competitors in its industry.
B) one of the merging firms would be highly likely to enter the other firm's market.
C) Both of these.
D) Neither of these.

Question 50

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

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

Question 51

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

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

Question 52

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

Question 53

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

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

Question 54

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

Question 55

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

Question 56

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

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

Question 57

The common law traditionally:

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

Question 58

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

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

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) All of these.

Question 61

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

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

Question 62

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

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

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 65

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

Question 66

The National Cooperative Research Act provides that:

A) treble damages apply to all joint ventures formed in violation of the antitrust laws.
B) joint ventures in the research and development of new technology are to be judged under the rule of reason test.
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 67

The 2010 Horizontal Merger Guidelines:

A) rejects use of the Herfindahl-Hirschman Index.
B) clarify that merger analysis does not use a single methodology.
C) were issued by the Justice Department to be additional to the FTC's separate guidelines.
D) require a mechanical application; in order to reduce the previously used analytic framework, which was far too subjective and uncertain.

Question 68

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

Question 69

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

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

Question 70

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) 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.
C) the seller's product enjoys an advantage not shared by its competitors in the tying market.
D) All of these.

Question 71

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

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

Question 72

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 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.
B) 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.
C) 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.
D) 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.

Question 73

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

Question 74

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 75

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 76

The Clayton Act deals with which of the following situations?

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

Question 77

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 78

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

Question 79

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 80

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) now requires treble damages if joint ventures are formed in violation of Section 1 of the Sherman Act.
C) is designed to clear up uncertainty about the legality of joint ventures.
D) All of these.