Deck 43: Antitrust

Question 1

The courts have interpreted the Sherman Act as prohibiting all monopolies.

Answer 1

False

Question 2

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

Answer 2

True

Question 3

An agreement between a manufacturer and a wholesaler is horizontal.

Answer 3

False

Question 4

The Justice Department's and states' settlement with Microsoft, affirmed by the D.C.Circuit Court of Appeals in 2004, allowed Microsoft to remain one company and, among other things, allowed Microsoft to keep confidential the programming interfaces that its products rely on to link to Windows code.

Question 5

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

Question 6

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

Question 7

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 8

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

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

The Sherman Act prohibits contracts that unreasonably restrain trade.

Question 14

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

Question 15

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

Question 16

If United Widgets lowers its price to all buyers of 10 or more widgets, it is not a violation of the Robinson-Patman Act.

Question 17

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

Question 18

All tying arrangements are per se illegal.

Question 19

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

Question 20

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

Question 21

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

Question 22

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

Question 23

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

Question 24

In determining market share, the relevant geographic market is the national market.

Question 25

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 26

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

Question 27

One business by itself cannot violate Section 1 of the Sherman Act.

Question 28

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

Question 29

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

Question 30

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

Question 31

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

Question 32

In the case of Eastman Kodak Co.v.Image Technical Services, Inc.the U.S.Supreme Court stated that to violate Section 2 of the Sherman Act, Kodak would have to possess monopoly power in the relevant market and willfully acquire or maintain that power, as distinguished from growing or developing as a consequence of a superior product, business acumen, or historic accident.

Question 33

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 34

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

Question 35

A monopolistic market will produce fewer goods than a competitive market would, but price would not ordinarily be affected.

Question 36

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 37

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

Question 38

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

Question 39

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 40

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

Question 41

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 42

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 the above.

Question 43

In determining whether illegal monopolization has occurred and whether a firm has engaged in unfair conduct:

A)a firm possessing monopoly power has the burden of proving it acquired such power passively or that the power was thrust upon it.
B)the court will conclude that monopoly power, combined with conduct designed to exclude competitors, violates Section 1 of the Sherman Act.
C)a court will find that monopoly power must be accompanied by some type of predatory practice.
D)courts do not agree on what constitutes unfair conduct.Any of the above approaches may be used.

Question 44

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 45

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 46

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)None of the above.

Question 47

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 48

The definition of price-fixing includes agreements that:

A)may, among other things, depress prices.
B)stabilize prices.
C)raise prices.
D)All of the above.

Question 49

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 the above.

Question 50

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 51

Harry Jones at Jones Brothers Furniture Co.does not like the Brite Lamp Co.representative, so he decided that Jones Brothers would boycott Brite.Under the Sherman Act, this is:

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

Question 52

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 53

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 54

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

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

Question 55

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 fixing.
D)(b) and (c).

Question 56

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 57

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 58

Conglomerate mergers have been challenged only when:

A)one of the merging firms would be highly likely to enter the other firm's market.
B)the merged company would be disproportionately large, compared with the smallest competitors in its industry.
C)(a) and (b) are correct.
D)None of the above.

Question 59

In normal times, the economic community is best served by:

A)free competition in trade and industry.
B)the elimination of competition.
C)contracts and combinations that restrain trade.
D)conscious parallelism to stabilize prices.

Question 60

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 the above

Question 61

The 1992 and 1997 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)consist of four market concentration categories.
E)None of the above.

Question 62

Sarreno Cheese Co.supplies mozzarella cheese to pizza restaurants at $1.50 per pound.In order to snare the business from one large pizza chain, Sarreno offers to sell them cheese at $1.25 per pound.This will violate the Robinson-Patman Act unless:

A)the pizza chain can already get the cheese for $1.25 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)Two of the above, (b) and (c).
E)Any of the above.

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.Bargain Betty's 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

Which of the following occurs when the seller of a product, service, or intangible conditions its sale on the buyer's purchasing a second product, service, or intangible from the seller?

A)Boycott.
B)Tying agreement.
C)Monopoly.
D)Price fixing.

Question 65

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 66

If a small manufacturer of vacuum cleaners conditions the sales of its cleaners on the buyer's purchasing only that manufacturer's bags, 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 67

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 the above

Question 68

The Supreme Court in the Leegin Creative Leather Products, Inc.v.PSKS, Inc.case, held that:

A)the per se rule of unlawfulness is the appropriate standard to judge vertical price restraints.
B)the rule of reason is the appropriate standard to judge vertical price restraints.
C)resale price maintenance does not have economic dangers.
D)vertical agreements setting minimum resale prices have only anticompetitive effects.

Question 69

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 70

If 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 71

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

Question 72

Failure to comply with Section 1 or 2 of the Sherman Act:

A)is a crime 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 the above.

Question 73

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 the above.

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

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 76

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 77

The Clayton Act deals with which of the following provisions?

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

Question 78

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 79

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)Any of the above.
E)(a) and (c), but not (b)

Question 80

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.