Deck 16: Regulating Competitionantitrust Laws

Question 1

The Clayton Act is general in its terms and does not specifically set forth every act that would constitute a violation of the law.

Answer 1

False
Explanation: The Sherman Act is general in its terms and does not specifically set forth every act that would constitute a violation of the law. In 1914 Congress, recognizing that the Sherman Act needed to be more specific, enacted the Clayton Act as an amendment to the Sherman Act. Congress later amended the Clayton Act (1936, 1950, and 1980) to clarify its provisions.

Question 2

Maximum-price agreements are just as illegal as minimum-price agreements.

Answer 2

True
Explanation: Maximum-price agreements are just as illegal as minimum-price agreements. The per se rule makes price fixing illegal whether the parties to it have control of the market or not and whether or not they are trying to raise or lower the market price.

Question 3

Horizontal price fixing is not illegal per se under the Sherman Act.

Answer 3

False
Explanation: The per se rule makes price fixing illegal whether the parties to it have control of the market or not and whether or not they are trying to raise or lower the market price. It is just as illegal to fix a low price as it is to fix a high price.

Question 4

Resale price maintenance is legal only if there is no coercion or pressure other than the announced policy and its implementation.

Question 5

Courts develop the distinction between rule of reason and per se illegality on a case-by-case basis.

Question 6

It is legal for small competitors to engage in price fixing to allow them to compete with larger competitors.

Question 7

If an activity is deemed as illegal per se,proof of the activity is proof of a violation and proof that it is in restraint of trade.

Question 8

It now appears the Supreme Court is comfortable limiting the per se illegality analysis to vertical agreements among competitors.

Question 9

The goal of the Sherman Act is to eliminate competition.

Question 10

Agreements falling within the per se category have such a pernicious effect on competition that elaborate inquiry as to the precise harm they may cause or a business excuse for them is unnecessary.

Question 11

Private parties may bring criminal suits seeking monetary damages or injunction as a means of enforcing antitrust laws.

Question 12

The Federal Trade Commission is an independent administrative agency charged with eliminating competition through the enforcement of the Sherman Act.

Question 13

To analyze potential violations of the Sherman Act,the test of reasonableness asks whether challenged contracts or acts are unreasonably restrictive of competitive conditions.

Question 14

Section 1 of the Sherman Act prohibits contracts,combinations,and conspiracies in restraint of trade or commerce.

Question 15

Attempting to determine the price of services through the use of relative-value scales is a legal method for controlling prices.

Question 16

According to the per se rule,price fixing is illegal only when the parties to the price fixing agreement have control of a market.

Question 17

The Federal Trade Commission enforces the Clayton Act.

Question 18

Conduct directed at price stabilization is per se anticompetitive.

Question 19

Only the federal government plays a role in the enforcement of antitrust laws.

Question 20

Sherman Act cases need not satisfy an interstate commerce element to be constitutionally valid.

Question 21

Concerted activities are illegal as they are always harmful to the society.

Question 22

Territorial arrangements within channels of distribution are analyzed under the rule of reason.

Question 23

In 1914,Congress,recognizing that the Sherman Act needed to be more specific,enacted the ______ as an amendment to the Sherman Act.

A) Clayton Act
B) Fair Credit Billing Act
C) Securities Act
D) Truth in Lending Act
E) Robinson-Patman Act

Question 24

The Federal Trade Commission prevents wrongful actions by the use of cease and desist orders.

Question 25

Crimes under the Sherman Act are felonies.

Question 26

Section 2 of the Sherman Act does not regulate attempts to monopolize any part of interstate or foreign commerce.

Question 27

The mere exchange of price information among competitors is likely to constitute a Sherman Act violation.

Question 28

The Federal Trade Commission issues industry guides,which must be followed by all industries.

Question 29

Tying arrangements do not violate the Sherman Act.

Question 30

Which of the following statements is true of the role of state governments in enforcement of antitrust laws?

A) State governments have made all forms of monopolies illegal to create a fair trade environment.
B) State governments have prohibited private parties from bringing civil suits seeking injunction as a means of enforcing antitrust laws.
C) A state high court may allow a company to fix its price as long as the price is low.
D) A state attorney general may bring civil suits for damages under the Sherman Act.
E) State legislators have banned the use of trust agreements.

Question 31

The ______,announced by the Supreme Court in Standard Oil Co.v.United States,holds that contracts or conspiracies in restraint of trade are illegal only if they constituted undue or unreasonable restraints of trade and that only unreasonable attempts to monopolize are covered by the Sherman Act.

A) rule of per se illegality
B) Parker v. Brown doctrine
C) rule of reason
D) duty-to-deal doctrine
E) Ker-Frisbie doctrine

Question 32

The University of Kay and Kaytech University are bitter cross-town rivals.They compete in everything from sports to academics.Due to decreasing enrollment,the schools make an agreement to give all incoming students free tuition for one semester before raising the existing rates the following semester.This action is most likely to be considered a

A) horizontal agreement in violation of the Sherman Act.
B) vertical agreement in violation of the Sherman Act.
C) tying agreement in violation of the Clayton Act.
D) reciprocal dealing agreement violating the Clayton Act.
E) licensing agreement violating the Clayton Act.

Question 33

Any property owned in violation of Section 1 of the Sherman Act that is being transported from one state to another is subject to a seizure by and forfeiture to the United States.

Question 34

The Robinson-Patman amendment extends only to transactions in intrastate commerce.

Question 35

The burden of proof to enjoin an activity is greater than the burden of proof to convict someone of a crime.

Question 36

Some monopolies are lawful.

Question 37

It is just as illegal to receive the benefit of price discrimination as it is to give a lower price to one or two buyers.

Question 38

The Department of Justice alone has the power to bring criminal proceedings,but it shares its civil enforcement powers with the ______.

A) Federal Trade Commission
B) Treasury Department
C) Department of Revenue and Taxation
D) U.S. Supreme Court
E) Department of Labor

Question 39

Trusts are a legal arrangement in which a fiduciary

A) forfeits his or her title to property.
B) benefits from the profits of a company.
C) acts as a bailor to another.
D) provides financial support to another.
E) holds legal title to property for benefit of another.

Question 40

The Federal Trade Commission has broad,sweeping powers and a mandate to determine what methods,acts,or practices in commerce constitute unfair competition.

Question 41

For the purpose of giving each an exclusive territory,competing businesses may enter into a ______.

A) bilateral territorial agreement
B) vertical territorial agreement
C) horizontal territorial agreement
D) competitive territorial agreement
E) congeneric territorial agreement

Question 42

Which of the following statements is true of the Sherman Act?

A) The Sherman Act applies only to the sale of goods.
B) Price fixing in the service sector is permitted under the Sherman Act.
C) Maximum-price agreements are illegal, while minimum-price agreements are not illegal.
D) The Sherman Act covers services, including those performed by learned professions.
E) An action is not considered to be price fixing if the prices fixed are fair or reasonable.

Question 43

The use of ethical standards to avoid restrictions on price fixing is

A) a violation of the Sherman Act.
B) illegal per se under the Clayton Act.
C) legal as long as relative-value scales are used.
D) legal for services.
E) only allowed for healthcare products.

Question 44

Attempts by manufacturers to control the ultimate retail prices are known as ______.

A) transfer price fixing
B) vertical price fixing
C) lateral price fixing
D) congestion price fixing
E) rational price fixing

Question 45

When competitors attempt to share some activities or join together in the performance of a function,they are performing ______.

A) derivative activities
B) appellate activities
C) preemptive activities
D) arbitrated activities
E) concerted activities

Question 46

Which of the following statements is true of concerted activities?

A) They are illegal as they are never beneficial to the society.
B) They are only legal if a firm has monopoly power.
C) They reduce competition.
D) They are only legal when firms have a vertical territorial agreement.
E) They are performed by state governments to restrict monopolization.

Question 47

A ______ is one between a manufacturer and a dealer,which assigns the dealer an exclusive territory,and the manufacturer agrees not to sell to other dealers in that territory in exchange for an agreement by the dealer that it will not operate outside the area assigned.

A) vertical territorial agreement
B) conglomerate territorial agreement
C) congeneric territorial agreement
D) tying territorial agreement
E) per se territorial agreement

Question 48

A corporation found guilty under the Sherman Act may be fined up to ______ for each offense.

A) $10 million
B) $1 million
C) $100 million
D) $500 million
E) $300 million

Question 49

______ takes place when a seller sells at unreasonably low prices to drive out a competitor.

A) Transfer pricing
B) Translational pricing
C) Congestion pricing
D) Predatory pricing
E) Psychological pricing

Question 50

The president of a bottling company agreed with a competitor to stop discounts to retailers,which earned him a jail sentence.Which of the following is indicated in this scenario?

A) variable pricing
B) product bundling
C) mixed-leader bundling
D) predatory conduct
E) horizontal price fixing

Question 51

Which of the following statements is true of monopoly power?

A) Mere possession of monopoly power violates Section 1 of the Sherman Act.
B) If monopoly power is thrust upon a firm, there is a violation Section 2 of the Sherman Act.
C) Monopoly power which exists because of a patent or franchise violates the Clayton Act.
D) If a firm engages in conduct that has the effect of extending its monopoly power, it does not violate the Sherman Act.
E) Proof of monopoly power alone is insufficient to qualify as a violation of the Sherman Act.

Question 52

Which of the following statements is true about the sanctions of the Sherman Act?

A) Violations may be subject to criminal fines or imprisonment, but not both.
B) Injured parties may collect a maximum of double damages.
C) Violations of the Sherman Act may be enjoined by the courts.
D) Its sanctions are only civil punishments and not criminal punishments.
E) Crimes under the Sherman Act are misdemeanors.

Question 53

In ______,the price of goods and services is limited to levels that tend to discourage new entry to markets.

A) congestion pricing
B) exemption pricing
C) limit pricing
D) per se pricing
E) variable pricing

Question 54

Which of the following statements is true of the triple damages awarded to the injured parties under the Sherman Act?

A) Triple damages apply only to individuals, and not corporations or larger institutions.
B) The government cannot directly or indirectly receive triple damages.
C) Triple damages are only meant to compensate a plaintiff for actual injury.
D) Only injured members of the general public can enforce the law.
E) Legislation allows both federal and state governments to file a suit for triple damages.

Question 55

Game designers Troy and Jeff have designed a new computer game system.This system is manufactured and sold by their company,GameTech Corp.The game system they devised uses new technology that they created and their system far exceeds the capabilities of any current gaming systems.This gives them a monopoly in the gaming market.Which of the following statements is true in this scenario?

A) GameTech is guilty of engaging in predatory conduct.
B) GameTech has monopoly power that violates the Sherman Act.
C) GameTech has monopoly power that violates the Clayton Act but not the Sherman Act.
D) GameTech has monopoly power that does not violate the Sherman Act.
E) GameTech is guilty of monopoly that violates both the Clayton and Sherman Act.

Question 56

An individual found guilty under the Sherman Act may be fined up to ______.

A) $1 million
B) $5 million
C) $100 million
D) $50 million
E) $30 million

Question 57

For a seller's pricing to be considered predatory conduct,there must be proof that

A) the seller was selling the product at a price above the cost price.
B) the prices were intended to drive competitors out of business followed by the wrongdoer recouping the initial losses.
C) the prices were higher than those of all competitors within the same product group.
D) the buyers were willing to buy a product at the seller's prices despite having a wide range of options.
E) a buyer had other options in the same product line available in different price ranges.

Question 58

Which of the following is a violation of the Sherman Act?

A) market extension mergers between companies from different fields
B) conglomerate mergers between small companies
C) price fixing agreements between large companies
D) gaining monopoly through the use of franchising agreements
E) gaining monopoly due to the use of patent technology

Question 59

Vertical price fixing is also called ______.

A) resale price maintenance
B) predatory maintenance
C) linear price fixing
D) express price fixing
E) gold fixing

Question 60

Under the Colgate doctrine,the Supreme Court recognizes that

A) individuals are allowed to engage in horizontal price fixing.
B) a franchisor can require that franchisees purchase all of its equipment and inventory.
C) resale price maintenance is illegal.
D) individuals are allowed to engage in horizontal price fixing for provision of services.
E) manufacturers can announce their prices and refuse to deal with those who fail to comply.

Question 61

One party offers to buy the other's goods but only if the second party buys other goods from the first party.This is known as a(n)______.

A) franchise arrangement
B) exclusive dealing arrangement
C) reciprocal dealing arrangement
D) tying arrangement
E) requirements arrangement

Question 62

Which of the following statements is true of the good-faith meeting-of-competition defense as permitted by the Robinson-Patman amendment?

A) It applies to a situation when sellers select their own customers in good faith and not in restraint of trade.
B) It applies to a situation when there are price differentials based on differences in the cost of manufacture, sale, or delivery of commodities.
C) It applies to a situation that involves the setting up of barriers to market entry around a product, brand, product line, market, or market segment.
D) It applies to a situation when a seller in good faith meets the equally low price of a competitor.
E) It applies to a situation when price changes are made in response to changing conditions such as sales in good faith in discontinuance of business in the goods concerned.

Question 63

Sifco Inc.,a tire manufacturing company,stipulates that Rambox Corp.should buy its entire line of Roadgrip tires.Sifco has significant market power in a particular variety of Roadgrip tires for which no substitutes are available in the market.It uses this power to its advantage and does not agree to let Rambox buy less than the entire line of Roadgrip tires.The sales contract between Sifco and Rambox is an example of a ______.

A) tying arrangement
B) reciprocal dealing arrangement
C) rescission contract
D) premerger arrangement
E) justification contract

Question 64

Which of the following is an exemption from the Sherman Act that extends to concerted efforts to lobby government officials?

A) Noerr-Pennington doctrine
B) quick look doctrine
C) state action doctrine
D) per se illegality doctrine
E) doctrine of inherency

Question 65

A ______ is one in which a product is sold or leased only on the condition that a buyer or lessee purchase a different product or service from a seller or lessor.

A) executory contract
B) exclusive dealing contract
C) reciprocal dealing arrangement
D) tying contract
E) licensing agreement

Question 66

Mobi Telecom Inc.and Broadcom Inc.are manufactures of cell phones competing in the same markets.If Broadcom decides to acquire and merge with Mobi,the merger is most likely to be called a ______.

A) vertical merger
B) horizontal merger
C) product extension merger
D) geographic extension merger
E) freeze-out merger

Question 67

When a state acts in its sovereign capacity,______.

A) it is immune from federal antitrust scrutiny
B) it can legalize bribery
C) it can force defendants to civil suits to enter a plea of nolo contendere
D) it is liable for triple damages
E) it has the right to forgive corporations for violations of the Clayton Act

Question 68

The ______ that permits price differentials based on differences in the cost of manufacture,sale,or delivery of commodities is recognized by the Robinson-Patman amendment.

A) good-faith meeting-of-competition defense
B) mobile defense
C) cost justification defense
D) changing conditions defense
E) position defense

Question 69

In 1976,the Hart-Scott-Rodino Antitrust Improvements Act was passed to provide for ______.

A) premerger notification
B) reciprocal dealing
C) merger extension rights
D) post-merger bailout
E) full-line forcing

Question 70

To avoid the impact of a guilty plea or a conviction on a pending civil antitrust suit,a criminally accused defendant is most likely to plead ______.

A) nolo contendere
B) stare decisis
C) voir dire
D) res judicata
E) obiter dicta

Question 71

Bosh,an American corporation,acquires and merges with KnightD,a Belgian corporation,in a multibillion-dollar merger.Bosh,prior to the merger,sold beer only in the United States.After the merger,Bosh sells beer to most of the EU countries.The merger between Bosh and KnightD is an example of a ______.

A) vertical merger
B) horizontal merger
C) freeze-out merger
D) geographic extension merger
E) product extension merger

Question 72

In ______,a form of tying arrangement,a seller compels a buyer or lessee to take a complete product range from the seller.

A) reciprocal agreement
B) med-arb forcing
C) rescission contract
D) restitution agreement
E) full-line forcing

Question 73

Parker v.Brown doctrine is based on the reasoning that

A) individuals cannot be fined for violations of the Sherman Act.
B) concerted efforts to lobby government officials are not anticompetitive.
C) the Sherman Act does not apply to state governments.
D) not all independent actions by a manufacturer is a per se violation of the Sherman Act.
E) only unreasonable attempts to monopolize a market were covered by the Sherman Act.

Question 74

Which of the following statements is true of the Clayton Act?

A) The original Clayton Act contained no sanction for forfeiture of property.
B) The original Clayton Act did not allow individuals to obtain injunctive relief.
C) The Clayton Act permits price fixing.
D) The Clayton Act has prohibited a plaintiff's claim to triple damages.
E) The Clayton Act allows companies to extend their monopoly power.

Question 75

The ______ attempted to eliminate the advantage that a large buyer could secure over a small buyer solely because of the larger buyer's quantity-purchasing ability.

A) monopoly leveraging
B) buy and sell amendment
C) Wheeler-Lea amendment
D) Parker v. Brown doctrine
E) Robinson-Patman amendment

Question 76

The Robinson-Patman amendment gives the Federal Trade Commission jurisdiction and authority to

A) control production amounts.
B) regulate the retail price of products.
C) regulate quantity discounts.
D) control market share.
E) enforce trade bans.

Question 77

In a 1943 case known as Parker v.Brown,the Supreme Court created a ______ to the Sherman Act.

A) limited liability exemption
B) double tax exemption
C) general action exemption
D) merger monopoly exemption
E) state action exemption

Question 78

Joshua owns orange groves.He enters into a contract with the local food processing plant,Gram Corp.,which stipulates that he will sell oranges only to Gram.In this scenario,the contract between Joshua and Gram Corp.is known as a(n)______.

A) instalment contract
B) exclusive dealing contract
C) reciprocal dealing contract
D) tying contract
E) franchise contract

Question 79

The ______ makes it a crime for a seller to sell at lower prices in one geographic area than elsewhere in the United States to eliminate competition or a competitor.

A) Robinson-Patman amendment to the Clayton Act
B) Federal Trade Commission Act
C) Free Exercise Act
D) Wheeler-Lea amendment to the Clayton Act
E) Gramm-Rudman-Hollings Act

Question 80

In a(n)______,a buyer agrees to purchase all of its needs of a given contract from a seller during a certain period of time.

A) franchise contract
B) installment contract
C) reciprocal dealing contract
D) tying contract
E) requirements contract