Deck 20: Antitrust and Regulation of Competition

Question 1

Vertical price-fixing occurs when a seller attempts to control the resale price at a _______ in the supply chain.

Answer 1

lower level

Question 2

Gas station owners agreeing on the price per gallon is not a violation of the Sherman Act.

Answer 2

False
Explanation: This is an example of illegal price-fixing under the Sherman Act.

Question 3

The Sherman Act does not prevent an entity from becoming a monopoly.

Answer 3

True
Explanation: It outlaws affirmative action toward monopolizing. A naturally created monopoly does not violate the law.

Question 4

Vertical restraints are restrictions in which one company colludes with a ________ company.

Question 5

The ________ Act was designed to prevent companies from creating monopolies through mergers.

Question 6

Under the Robinson-Patman Act, businesses that are considering mergers that are over a certain dollar amount are required to give advance notice to the FTC and Department of Justice.

Question 7

Circumstantial evidence is not enough to show a meeting of the minds.

Question 8

Antitrust legislation was enacted in response to the robber barons of the late 18th century.

Question 9

A book publisher suggesting a retail price for the latest best seller is an example of price-fixing.

Question 10

________ is an agreement between competitors to divide markets or geographic regions.

Question 11

The NBA signing an agreement for all the teams to wear a single brand of shoes would not fall under the Sherman Act.

Question 12

The per se standard applies to nonprice vertical restraints.

Question 13

Every buyer boycotting a supplier that uses child labor to produce its raw materials is committing a per se violation of the Sherman Act.

Question 14

The Sherman Act applies only to entities that have acted in an unreasonable manner.

Question 15

An agreement between the government and a party that details conditions and compliance measures that the party will follow in exchange for the government not filing suit is called a _____.

Question 16

The standards courts use to determine violations of the Sherman Act are the rule of reason standard and the ________ standard.

Question 17

Horizontal restraints are restrictions on trade through an agreement with a _______ company.

Question 18

The Sherman Act prohibits ________ by a business to gain monopoly power.

Question 19

A _______ is a concerted refusal to deal with a third party.

Question 20

In the case of U.S. v. Colgate, the court found that ________ boycotts do not fall under the Sherman Act.

Question 21

The test for determining a monopoly under the Sherman Act is the entity's share of the relative market.

Question 22

Price-fixing is a clear example of a per se violation.

Question 23

The Clayton Act was enacted to limit the provisions of the Sherman Act.

Question 24

The Federal Trade Commission Act was the first antitrust act.

Question 25

U.S. v. Microsoft held that the appropriate standard for analyzing Microsoft's actions in the browser market was the rule of reason.

Question 26

Violators of antitrust legislation are subject to both civil and criminal suits.

Question 27

There is a bright-line test for determining the amount of market share necessary to be considered a monopoly.

Question 28

The court order for Microsoft to break apart into multiple entities in U.S. v. Microsoft was overturned on appeal.

Question 29

Rockefeller's Standard Oil Trust is an example of a company that participated in antitrust behavior.

Question 30

Proof of a seller's economic power in the market is necessary to prove an antitrust violation under the Clayton Act.

Question 31

The Celler-Kefauver Antimerger Act covers general antitrust prohibitions.

Question 32

In American Needle Inc. v. National Football League, the 32 football teams were treated as a single entity because they belong to the same sports league.

Question 33

It is not market allocation if two different airlines agree to split the major travel routes between them, rather than both fly to all the same cities.

Question 34

All monopolies are illegal.

Question 35

It is not illegal for a grocery store to require a customer to buy milk in order to buy cookies.

Question 36

The Clayton Act was amended by the Robinson-Patman Act.

Question 37

Adam Smith's book, The Wealth of Nations, is a source of support for some elements of antitrust law.

Question 38

The Sherman Act prohibits only contracts, combinations, and conspiracies in restraint of trade.

Question 39

The courts have adopted a soft per se analysis for cases involving tying agreements.

Question 40

The Clayton Act was enacted to prohibit anticompetitive practices not included in the Sherman Act.

Question 41

Vertical restraints are agreements between:

A) business and government.
B) noncompetitors.
C) competitors.
D) consumers and government.

Question 42

Which of the following is not one of the steps in a three-step test for attempted monopolization under the Sherman Act?

A) The entity had a demonstrable and specific intent to achieve a monopoly.
B) The entity acted in an anticompetitive manner designed to injure its competitors.
C) The entity formed an agreement with others to achieve a monopoly.
D) There must exist a dangerous probability that monopoly power would in fact be achieved.

Question 43

Which act was designed to prevent monopolies from being created through mergers?

A) Clayton Act
B) Celler-Kefauver Antimerger Act
C) Sherman Act
D) Federal Trade Commission Act

Question 44

Which of the following was the first major antitrust law?

A) Clayton Act
B) Celler-Kefauver Antimerger Act
C) Sherman Act
D) Federal Trade Commission Act

Question 45

Horizontal restraints are agreements between:

A) business and government.
B) noncompetitors.
C) competitors.
D) consumers and government.

Question 46

Which economist/philosopher is cited in support of frequent meetings being circumstantial evidence of anticompetitive collusion?

A) Plato
B) Socrates
C) John Locke
D) Adam Smith

Question 47

The Robinson-Patman Act makes it illegal for a business entity to discriminate in price "between different purchasers of commodities of like quality or grade." In order to violate this act, the business must:

A) make sales at different prices to at least three different purchasers.
B) make one sale of a different price to a purchaser.
C) make two or more sales to different purchasers at different prices.
D) give different price quotes to different purchasers.

Question 48

Which of the following agencies enforces federal antitrust laws?

A) Securities and Exchange Commission
B) Federal Bureau of Investigation
C) Better Business Bureau
D) Federal Trade Commission

Question 49

Joe and Arthur each own a chain of restaurants. In order to ensure successful restaurants, Joe and Arthur enter into an agreement that Joe will open his new locations in Kansas City but not St. Louis and Arthur vice versa. This is an example of:

A) price-fixing.
B) market allocation.
C) tying agreements.
D) boycotts.

Question 50

If there is no direct evidence of an agreement to manipulate the competitive market between two CEOs, a prosecutor may use their calendars and subsequent actions that were not in the usual course of business as circumstantial evidence to prove the ________ requirement of an antitrust violation.

A) price-fixing
B) vertical restraint
C) horizontal restraint
D) meeting-of-the-minds

Question 51

There are two ice cream stands at the same intersection. In order to protect their businesses, the two owners agree that they will charge their customers the same prices for an ice cream cone. What type of horizontal restraint is this?

A) none (It is not a horizontal restraint.)
B) price-fixing
C) market allocation
D) boycott

Question 52

When is a monopoly illegal under the Sherman Act?

A) A monopoly is illegal when it has horizontal restraints.
B) A monopoly is illegal when it is acquired or maintained through prohibited means.
C) All monopolies are illegal under the Sherman Act.
D) The Sherman Act does not address monopolies.

Question 53

Which of the following is not a type of horizontal restraint?

A) tying agreement
B) allocation of markets
C) price-fixing
D) boycotts

Question 54

Modern antitrust law's focus is on:

A) protecting individual companies.
B) protecting the competitive process.
C) protecting individual companies and the competitive process.
D) protecting neither individual companies nor the competitive process.

Question 55

In Texaco Inc. v. Dagher et al., two oil refiners and gas suppliers, Texaco and Shell Oil, entered into a joint venture called Equilon to consolidate their operations in the western United States. Historically, Texaco and Shell were competitors, but for their joint venture they shared expenses and profits equally. The products produced by Equilon were sold under the brand names Texaco and Shell at a mutually agreed-upon price. Texaco and Shell retailers brought a class action lawsuit against the two companies, claiming there was a per se violation of the Sherman Antitrust Act because of the lack of price competition. The court held that:

A) there was a per se violation because the joint venture was plainly anticompetitive.
B) there was a per se violation because oil companies are automatically held to this standard.
C) the rule of reason standard should apply because a market analysis was relevant.
D) the rule of reason standard should apply because it is a joint venture and not a meeting of the minds.

Question 56

The U.S. Supreme Court held that the Sherman Act applies to commercial agreements in which the parties acted in ________ manner.

A) an unreasonable
B) a deceptive
C) a controlling
D) any kind of

Question 57

The law firm of Smith, Brown, and Jones has just held a meeting in which the three partners decided that all fees charged by each of them will be $500 per hour with no exceptions. They also set nonnegotiable fees for such things as preparation of wills, real estate settlements, and other types of standard cases. Smith, Brown, and Jones:

A) are guilty of horizontal price-fixing under the Sherman Act.
B) are guilty of vertical price-fixing under the Sherman Act.
C) are guilty of price discrimination under the Robinson-Patman Act.
D) have broken no laws.

Question 58

The University of Dover and Dover University are bitter cross-town rivals. They compete in everything from sports to academics. The schools, because of shrinking enrollment, make an agreement to give all incoming students free tuition for one semester before raising the existing rates the following semester. This action would be considered:

A) a horizontal restraint violating the Sherman Act.
B) a vertical restraint violating the Sherman Act.
C) a tying agreement in violation of the Clayton Act.
D) price discrimination in violation of the Robinson-Patman Act.

Question 59

Which act does the Robinson-Patman Act amend?

A) McCarthy Act
B) Hart-Scott-Rodino Act
C) Sherman Act
D) Clayton Act

Question 60

Which of the following is an example of a tying agreement?

A) As part of purchasing a new computer, a buyer must also purchase a new monitor.
B) When purchasing a new digital music player, a buyer is given the option of buying songs.
C) When purchasing a used car, a buyer is offered a discount on new tires.
D) When purchasing a couch, the buyer is given free throw pillows.

Question 61

Antitrust laws designed to combat the problem of monopolization are known as:

A) horizontal restraints.
B) structural-offense laws.
C) rules of reason.
D) consent orders.

Question 62

Which of the following is not a vertical restraint?

A) market allocation
B) tying agreements
C) exclusive selling, territorial, and dealing agreements
D) price-fixing

Question 63

Discuss the difference between horizontal and vertical price-fixing.

Question 64

What constitutes a meeting of the minds for antitrust laws? Why is it important?

Question 65

What evidence may a company offer in defense to allegations of an antitrust violation under the rule of reason standard?

A) The anticompetitive harm was not harmful to the government.
B) If the company violates the standard, there is no defense.
C) Its actions were justified and necessary under the economic conditions.
D) There was no economic harm to the consumer.

Question 66

Discuss the differences between the per se and rule of reason standards.

Question 67

Boston Bikes makes mountain bikes and sells them through Sid's Sports and Mountain All Sports as exclusive distributors. Boston Bikes' interest is in making sure that Sid's Sports and Mountain All Sports do not compete with each other in the same geographic market to ensure that their pricing is in line with their competitors. May Boston Bikes put limits on its distributors' markets?

Question 68

Which president is known for leading the antitrust reform movement?

A) Theodore Roosevelt
B) Harry Truman
C) Woodrow Wilson
D) Franklin Roosevelt

Question 69

The CEO of a major computer technology firm wants to form an organization for computer firms in order to share data, information, and ideas. Depending on what was shared at the meetings, the organization may violate antitrust laws. What standard should be used to analyze the organization?

Question 70

In U.S. v. Microsoft, the appellate court reversed the finding of the district court that:

A) Microsoft fundamentally employed illegal anticompetitive means to maintain and further its monopoly of the operating system market.
B) Microsoft should be broken apart.
C) Microsoft business practices were a per se violation of the Sherman Act.
D) Microsoft did not employ illegal anticompetitive means to maintain and further its monopoly of the operating system market.

Question 71

What is the test to determine whether an entity has monopoly power?

A) share of the relevant market
B) rule of reason
C) vertical integration test
D) bright-line test

Question 72

In American Needle Inc. v. National Football League, the NFL had entered into an agreement with Reebok for the manufacture of all of its teams' official goods and claimed that all 32 teams were a single entity. American Needle sued, claiming that the Reebok agreement was an illegal conspiracy under the Sherman Act. The U.S. Supreme Court found that:

A) the 32 teams were a collective unit and not subject to the Sherman Act.
B) the 32 teams were not a collective unit and were subject to the Sherman Act.
C) the 32 teams were not a collective unit but were exempt from the Sherman Act because of the economic environment of sports.
D) there was no Sherman Act violation.

Question 73

Give an example of a boycott that would not be a per se horizontal restraint. Explain why it is not a per se horizontal restraint.

Question 74

In which case did the Supreme Court hold that a unilateral boycott does not fall under the Sherman Act?

A) Greyhound v. International Business Machines Corp.
B) United States v. Colgate
C) United States v. Grinnell
D) Covad Communications Co. v. BellSouth Corp.

Question 75

John owns a company that makes televisions. The company makes high-quality TVs and has a large share of the market. Recently John's company decided to expand its business into surround-sound systems. If the company requires its distributors to buy the surround-sound system as a condition of sale for the TVs, would there be an illegal restraint? Why or why not?

Question 76

Christian and Jimmy both design and manufacture popular shoes. They believe that one of the department stores that carries both of their designs is undercutting the other department stores' prices. After discussion, Christian and Jimmy decide that they should not sell their shoes to the department store again. What type of restraint is this?

A) meeting of the minds
B) price-fixing
C) boycott
D) market allocation

Question 77

Two car manufacturers entered into a joint venture to consolidate their efforts to create more fuel-efficient vehicles. The manufacturers agreed to split the expenses and profits from the joint venture equally. If an antitrust violation is alleged, what standard would be used to evaluate the manufacturers' actions?

Question 78

The U.S. Major League Soccer league wants to have more similarity in its licensed goods, so the league decides to contract with a single company to produce all of the licensed goods for every team. Will MLS be able to do so?

Question 79

Discuss the early motivations for enacting antitrust laws.

Question 80

In U.S. v. Microsoft, the appellate court found that:

A) Microsoft's business practices were a per se violation of the Sherman Act.
B) Microsoft illegally attempted to monopolize the browser market.
C) Microsoft did not employ illegal anticompetitive means to maintain and further its monopoly of the operating system market.
D) Microsoft employed illegal anticompetitive means to maintain and further its monopoly of the operating system market.