Deck 42: Antitrust Law

Question 1

Any activity that substantially affects interstate commerce falls outside the Sherman Act.

Answer 1

False

Question 2

A refusal to deal by a single seller acting unilaterally cannot violate Section 2 of the Sherman Act.

Answer 2

False

Question 3

Section 1 of the Sherman Act allows a group boycott to be undertaken with the intention of preventing entry into a given market.

Answer 3

False

Question 4

Under the market-share test, the relevant product market includes only products that have identical attributes.

Question 5

Any agreement among competitors that artificially fixes prices is a per se violation of Section 1 of the Sherman Act.

Question 6

Any threat of monopolization is condemned as a violation of antitrust law.

Question 7

Section 2 of the Sherman Act condemns monopolization.

Question 8

Antitrust legislation is based on a desire to limit competition.

Question 9

How a firm uses its monopoly power and how its actions affect competition may make its practices illegal.

Question 10

Restraints of trade are laws that regulate economic competition.

Question 11

The offense of monopolization does not require an intent to monopolize.

Question 12

If the legitimate benefits outweigh the anticompetitive effects of an agreement between competitors, the agreement may be held lawful.

Question 13

Antitrust laws are direct descendants of common law actions intended to limit agreements to eliminate competition.

Question 14

To deem an agreement a per se violation of antitrust law, a court must determine whether the agreement actually injures competition.

Question 15

Predatory pricing is the pricing of a product below cost with the intent to drive competitors out of the market.

Question 16

A firm may have monopoly power even though it is not the only seller in a market.

Question 17

An attempt to monopolize is not likely to succeed unless the alleged offender possesses some degree of market power.

Question 18

Section 1 of the Sherman Act permits rival firms to join in an agreement that consolidates their market power.

Question 19

All agreements that result in enhanced market power are unlawful.

Question 20

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

Question 21

Price discrimination is unlawful even if it can be justified by differences in production or transportation costs.

Question 22

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

Question 23

Laws that regulate economic competition are referred to as

A) antitrust laws.
B) anticompetitive agreements.
C) monopolies.
D) restraints of trade .

Question 24

Plastic Company and Pliable Inc. agree to abide by the decisions of Polymer Corporation as to their respective levels of production, markets, and prices, effectively reducing competition and increasing profits. This is most likely

A) a common, legal, time-honored type of business arrangement.
B) an illegal restraint of trade .
C) an innovative, legally efficient approach to doing business.
D) an outdated, but legal business trust.

Question 25

There are no legislative or constitutional limitations on antitrust enforcement.

Question 26

The Clayton Act is aimed at the same practices that are covered by the Sherman Act.

Question 27

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

Question 28

Foreign individuals cannot be sued for violations of U.S. antitrust law.

Question 29

U.S. antitrust laws do not apply outside U.S. territory.

Question 30

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

Question 31

A seller can always reduce its prices to levels substantially below those charged by its competitors without violating antitrust law.

Question 32

Petro Inc. and QualGas Corporation refine and sell natural gas. To limit the supply on the market and thereby raise prices, Petro 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 33

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 34

Antirust law is based on the desire to

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

Question 35

One of the most significant violations of antitrust law involves joint efforts by businesspersons to obtain government action.

Question 36

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

Question 37

Under an exclusive-dealing contract , a group of competitors refuse to deal with a particular person or firm.

Question 38

A private party can sue for damages and fees if the party is injured as a result of a violation of any of the federal antitrust laws.

Question 39

The Federal Trade Commission enforces the Sherman Act.

Question 40

To fall under the Sherman Act, an activity must substantially affect

A) any of the choices.
B) in- state commerce.
C) inter state commerce.
D) intra state commerce.

Question 41

A suit is filed against Drill-Bits Corporation, alleging that the firm committed the offense of monopolization. To determine whether Drill-Bits has monopoly power requires looking at

A) the price of a share of Drill-Bits' stock.
B) Drill-Bits' size alone.
C) Drill-Bits' production methods and marketing techniques.
D) the relevant market.

Question 42

Net Access Inc. wants to merge with Open Source Corporation. Under the Clayton Act, the merger is

A) a per se violation.
B) a violation, depending on the market value of the firms' stock.
C) a violation, depending on its effect on competition.
D) not a violation.

Question 43

A court deems an agreement between BioTech Inc. and ChemCorp to be a per se violation of the Sherman Act. With respect to this agreement, the court can

A) not determine whether its benefits outweigh its anticompetitive effects.
B) considers its benefits to the firms' customers .
C) apply the rule of reason.
D) review its effect on the relevant market.

Question 44

Spa Company makes and sells beauty supplies. By selling its products at prices substantially below the normal cost of production, Spa hopes to drive its competitors from the market. This is

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

Question 45

Snobords Inc. refuses to sell its products to Timber WinterSports Stores, Inc., a retail snowboard dealership. This violates Section 2 of the Sherman Act if Snobords 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 46

Refer to Fact Pattern 42-1. A court would most likely rule that the agreement between Pharma and Renew is

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

Question 47

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

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

Question 48

Transformer Corporation and United Voltage Inc. are the principal suppliers of their product in their market. They agree that Transformer will sell exclusively to retailers and United 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 49

Dairy Cream Corporation makes and sells ice cream. Dairy wants to merge with EZ Freeze Inc., its main competitor and a maker of ice cream and other frozen deserts. 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 50

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 51

Tacos Inc., Tamales Ltd., and Tostadas Corporation agree to exchange information and share advertising. This trade association is most likely

A) a deal that restrains trade but does not harm 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 52

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 53

The Association of Organic Food Growers, which does not include all organic farmers and ranchers, refuses to deal with any parties who do not carry the products of its members. This group boycott 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 54

Micro Chip Corporation is charged with violating the Sherman Act through conduct subject to the rule of reason. When applying the rule of reason in this situation, 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 55

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 56

Gearbox Inc., a maker of vehicle parts, refuses to sell to Motor Repair Inc., a national vehicle service firm. Gearbox convinces Cam Company, a competitor, to do the same. This is

A) a group boycott.
B) a customer restriction.
C) a trade association.
D) a market division.

Question 57

Fact Pattern 42-1 Pharma Corporation makes and sells QualMed, the most prescribed name-brand pain-relief medication. Renew Drugs Inc. has the potential to make a generic version of the same drug.
Refer to Fact Pattern 42-1. Pharma pays Renew not to sell the generic product. This is

A) a market division.
B) a rule of reason arrangement.
C) a tying arrangement.
D) a price-fixing agreement .

Question 58

Dredge Inc. is the major wholesale distributor of heavy equipment in the state of Texas. Its closest competitor is Excavator Company, another Texas firm. The two firms agree that Excavator will operate in east Texas and Dredge will operate in west Texas. This is

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

Question 59

Agreements that are deemed illegal per se under Section 1 of the Sherman Act include all of the following except

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

Question 60

Trail Bikes Inc. makes and distributes Trail-brand products to authorized dealers. To prevent price-cutting by dealers in direct competition, Trail 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 61

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 62

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) the Food and Drug Administration.

Question 63

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 64

Precision Parts Corporation and Aligned 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. Precision Parts and Aligned Gears agree that Precision Parts will no longer sell in Minnesota and that Aligned Gears will no longer sell in North and South Dakota. Have Precision Parts and Aligned Gears violated any antitrust law? If so, which one? Explain. If they had divided their market by type of customer rather than geographic area, would the result be the same? Why or why not?

Question 65

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 66

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

A) none of the federal antitrust laws.
B) the Clayton Act only.
C) most of the federal antitrust laws.
D) the Sherman Act only.

Question 67

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 68

Meat Packing Corporation buys National Butcher Shops Inc. in an attempt to gain monopoly power. Remedies that a court might impose in a suit against Meat Packing for a violation of the antitrust laws include divesting itself of

A) control of the butcher shops.
B) ownership of the butcher shops
C) all of the choices.
D) damages and attorneys' fees.

Question 69

Exempt from antitrust laws are

A) video-streaming companies.
B) movie producers.
C) professional football teams.
D) professional baseball teams.

Question 70

American Oil Company joins a foreign cartel to set the price of oil. The cartel has a substantial effect on U.S. commerce. With respect to 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 71

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 72

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.