Deck 47: Antitrust Law

Question 1

Per se violations cannot provide guidance to businesses as to what are acceptable and unacceptable business practices.

Answer 1

False

Question 2

The Federal Trade Commission has been eliminated.

Answer 2

False

Question 3

The Clayton Act was enacted to exempt specific business practices from prosecution for antitrust violations.

Answer 3

False

Question 4

According to economic theory,companies with monopoly power use their economic power to harm the consumer by:

A)limiting opportunity for product monopolies among specialized producers.
B)limiting opportunity for developing competitive products.
C)flooding the market with choices.
D)raising production to unmatchable levels.
E)limiting production and raising prices.

Question 5

In the text case United States v.Apple,Inc. ,which discussed whether Apple's agreement with five of the six major publishers in the United States setting higher prices for releases on Apple's "iBookstore violated antitrust laws,resulted in which ruling on appeal?

A)The court ruled that the agreement was a horizontal price-fixing conspiracy and thus a violation of the Sherman Act.
B)The court,relying on Verizon Commc'ns Inc.v.Law Offices of Curtis V.14 Trinko,ruled that the publishers had engaged in a horizontal price fixing conspiracy but that Apple was not liable because the price fixing was at a different level of competition.
C)The court ruled that the newness of the market and few competitors necessitated some sort of price fixing to encourage efficiency in the market.
D)The court ruled that because the agreement was within a statutory exemption to antitrust laws,it was not illegal and Apple had not violated the Sherman Act.
E)The court ruled that the agreement was a technically a horizontal price-fixing conspiracy but not a violation of the Sherman Act because the presence of a strong competitor justifies such an arrangement the "strong competitor exemption").

Question 6

Foreign companies are never subject to the Sherman Act.

Question 7

Any anticompetitive behavior not prohibited under the Sherman Act or the Clayton Act is permissible under federal law.

Question 8

Antitrust law was created to encourage anticompetitive behavior among businesses based on the belief that such behavior would lead to greater efficiency.

Question 9

Group boycotts by which two or more competing sellers refuse to sell their products to a certain customer are generally per se violations of the Sherman Act.

Question 10

A trust is a business arrangement in which stock owners appoint beneficiaries and place their securities with trustees,who manage the company and pay a share of their earnings to the stockholders.

Question 11

In the text case Spirit Airlines Inc. ,v.Northwest Airlines Inc. ,in which Spirit Airlines claimed that Northwest Airlines lowered its prices on certain flights once Spirit Airlines began to compete,what was the result on appeal?

A)That although there was insufficient evidence from which to determine that the defendant was guilty of predatory pricing,a jury trial was mandated because the defendant was guilty of inequitable conduct.
B)The court ruled that although there was sufficient evidence from which a jury could determine that the defendant was guilty of predatory pricing,the defendant was entitled to a summary judgment ruling in its favor because the plaintiff failed to establish that it could have succeeded in the market absent the defendant's predatory pricing.
C)That there was insufficient evidence from which to determine that the defendant was guilty of predatory pricing and that summary judgment was therefore properly granted to it.
D)The court ruled that there was sufficient evidence from which a jury could determine that the defendant was guilty of predatory pricing,thereby entitling the plaintiff to prevail.
E)That although there was insufficient evidence from which to determine that the defendant was guilty of predatory pricing,a jury trial was mandated because the defendant was guilty of attempted monopolization.

Question 12

When was the Interstate Commerce Act passed?

A)1887
B)1964
C)1920
D)1945
E)1934

Question 13

Section 2 of the Sherman Act applies to states,and they may be used as defendants.

Question 14

Which of the following most closely states the purpose of enacting the Sherman Act?

A)To regulate interstate commerce.
B)To stop trusts from unfairly restricting market competition.
C)To create government-sponsored monopolies to compete with powerful corporations.
D)To create exemptions from excessive government regulation in order to spur economic growth.
E)To stop trusts from acting inefficiently.

Question 15

The Sherman Act attempts to stop trusts from unfairly restricting market competition.

Question 16

In enacting the Sherman Act,Congress did not specify which specific behaviors were prohibited.

Question 17

Offers to sell the same goods to competing buyers at different prices that are never completed would not be considered price discrimination.

Question 18

Antitrust laws prohibit farmers from belonging to cooperatives that set prices.

Question 19

Bid rigging has recently been removed from the category of price fixing,and is therefore legal.

Question 20

All monopolies are prohibited by Section 2 of the Sherman Act.

Question 21

An inquiry into the competitive effects of a company's behavior to determine whether the benefits of the behavior outweigh the harm of the anticompetitive behavior is known as which of the following?

A)The rule-of-reason analysis
B)The three-prong analysis
C)The quick-look standard
D)The consumer standard
E)The per se test

Question 22

Which of the following is not an example of a horizontal restraint of trade?

A)Group boycotts
B)Joint ventures
C)Price fixing
D)Trade associations
E)Resale-price maintenance agreements

Question 23

The task of identifying which specific behaviors were prohibited under the Sherman Act was left to which of the following?

A)Congress,which amends the Sherman Act from time to time to set forth additional specific offenses.
B)The courts.
C)State legislatures.
D)Local governing bodies.
E)Both state legislatures and local governing bodies.

Question 24

Which of the following prohibits price discrimination by sellers?

A)The Federal Trade Commission Act
B)Section 2 of the Sherman Act
C)Section 2 of the Clayton Act
D)Section 3 of the Sherman Act
E)Section 1 of the Sherman Act

Question 25

When it is determined that business practices always hurt consumers,which of the following Section 1 violations of the Sherman Act has occurred?

A)Per se
B)Rule-of-reason
C)Quick-look
D)Three-prong
E)Consumer

Question 26

Which of the following standards allows a defendant to offer justification for a per se violation of Section 1 of the Sherman Act,in which case the court will engage in a rule-of-reason analysis?

A)Justifiable
B)Quick-look
C)Reasonableness
D)Needful
E)Necessary

Question 27

Which analysis,if any,is applied to territorial and customer restrictions imposed by a manufacturer on a retailer?

A)Both territorial and customer restrictions are generally analyzed under the rule-of-reason test.
B)Neither territorial nor customer restrictions are analyzed on any basis because both have been ruled legal in all cases.
C)Territorial restrictions are analyzed under the rule-of-reason test,while customer restrictions are analyzed on a per se basis.
D)Customer restrictions are analyzed under the rule-of-reason test,while territorial restrictions are analyzed on a per se basis.
E)Both territorial and customer restrictions are generally analyzed on a per se basis.

Question 28

When was the Sherman Act enacted?

A)1925
B)1890
C)1943
D)1935
E)1958

Question 29

Chicago School theorists argue that the central,and perhaps only,purpose of antitrust law is to encourage economic ________.

A)Regulation
B)Competition
C)Control
D)Efficiency
E)Success

Question 30

When a company prices one product below normal cost until competitors are eliminated and then sharply increases the price,the company is practicing _ pricing.

A)Secondary
B)Horizontal
C)Primary
D)Competitive
E)Predatory

Question 31

In the U.S.Supreme Court case Continental T.V.Inc. ,v.GTE Sylvania Inc. ,Continental argued that Sylvania violated the Sherman Act by restricting the location of retailers that could sell its product.Which of the following was the result?

A)That a per se rule of illegality is applied in a vertical restriction case unless departure from the rule is justified based upon a demonstrable economic effect.
B)The court upheld the continued used of the bright line per se rule of illegality for all vertical restrictions.
C)That the rule-of-reason should always be applied when vertical restrictions are involved.
D)That the per se rule of illegality is applied in a vertical restriction case only when a manufacturing defendant is involved;otherwise,the rule-of-reason test applies.
E)That the rule-of-reason standard should be applied in a vertical restriction case unless departure from the rule is justified based upon a demonstrable economic effect.

Question 32

Congress passed the Sherman Act by what U.S.Constitutional authority?

A)Through its authority to prevent discrimination.
B)Through its authority under the First Amendment.
C)Through its authority under the Fourth Amendment.
D)Through its authority to regulate interstate commerce.
E)Pursuant to the due process clause contained in both the Fifth and Fourteenth Amendments.

Question 33

When two parties at different levels in the manufacturing and distribution process make an agreement that restrains trade,they have made a restraint against trade.

A)Regulatory
B)Lateral
C)Vertical
D)Horizontal
E)Corresponding

Question 34

Which two markets does a court consider in identifying the relevant market for monopolization purposes?

A)Reasonable and customer
B)Reasonable and product
C)Geographic and customer
D)Customer and product
E)Product and geographic

Question 35

Which of the following is false regarding enforcement of the Sherman Act?

A)The Antitrust Division of the Department of Justice can bring criminal or civil actions against violators.
B)If a corporation commits a crime under the Sherman Act,the corporation could face a $10 million fine for each offense.
C)Treble damages are not available under the Sherman Act.
D)Officers and employees who are convicted under the Sherman Act face a maximum fine of $350,000 and/or jail time of up to three years.
E)If a party is harmed by a company's anticompetitive behavior,the party can bring a private suit under the Sherman Act.

Question 36

A seller engages in ________ when it sells the same goods to competing buyers for different prices.

A)Predatory pricing
B)Discriminatory pricing
C)Competitive pricing
D)Price discrimination
E)Price gouging

Question 37

Which of the following practices are not covered under the Sherman Act,but are identified by the Clayton Act?

A)Vertical price fixing
B)Mergers
C)Horizontal price fixing
D)Attempts to monopolize
E)Bid rigging

Question 38

Which of the following is false regarding antitrust law in Japan?

A)Cartels are illegal if they restrain competition substantially contrary to public interest.
B)The law prohibits private monopolization.
C)Mergers are regulated.
D)Keiretsu as a group have been outlawed.
E)Unfair business practices are banned.

Question 39

Which of the following is false regarding groups and activities that are exempt from antitrust law?

A)States can set their own quotas regarding the amount of oil to be sold in interstate commerce.
B)Regulatory bodies of the airline and banking industry have authority to approve behaviors that would otherwise violate antitrust law,but the same is not true for the utility industry.
C)When insurance businesses are subject to state antitrust regulation,they are exempt from federal antitrust law.
D)Labor unions can organize and bargain.
E)Individuals in the fishing industry can cooperate for purposes of catching and preparing fish for market.

Question 40

Is it a valid defense for a seller to engage in price discrimination in order to compete in good faith with another seller's low price?

A)Yes,that is a valid defense to price discrimination called the legitimate-price-discrimination defense.
B)No,that is not a defense,and the seller has violated the Clayton Act.
C)Yes,that is a valid defense to price discrimination called the meeting-the-competition defense.
D)No,that is not a defense,and the seller has violated the Sherman Act.
E)Yes,that is a valid defense to price discrimination called the meet-the-offense defense.

Question 41

Which of the following is false regarding private enforcement of antitrust laws?

A)A private party who prevails may receive attorney fees under the Sherman Act and under the Clayton Act.
B)Under the Sherman Act a private party may receive treble damages.
C)Private parties are responsible for only a minority of antitrust claims brought to court in recent years.
D)A private party can bring suit under the Clayton Act.
E)A private party can bring suit under the Sherman Act.

Question 42

In attempting to establish a violation of the Sherman Act,which of the following would be the offense the government would most likely allege?

A)Consumer misappropriation
B)Charge arrangement
C)Price fixing
D)Price gouging
E)Price raising

Question 43

What would be the government's best argument to the court regarding the conduct of Adam and Zach?

A)That a rule-of-reason violation occurred.
B)That a refusal to deal occurred.
C)That an acknowledged violation occurred.
D)That an intrastate concerted action occurred.
E)That a per se violation occurred.

Question 44

A ________ merger occurs when one company at one level of the manufacturing-distribution system acquires a company at another level of the system.

A)Joining
B)Conglomerate
C)Horizontal
D)Vertical
E)Predatory

Question 45

Section ________ of the Clayton Act prohibits anticompetitive mergers or acquisitions.

A)6
B)4
C)7
D)2
E)10

Question 46

Which of the following references the type of conglomerate merger that occurs when a firm attempts to extend the market for one of its current products by merging with a firm already active in the target market?

A)Diversification target
B)Market extension
C)Product extension
D)Vertical extension target
E)Horizontal extension

Question 47

When an acquiring firm that desires to expand to a new market where it does not have a product merges with a firm in that market,and continues to produce the other firm's product in the target market,it results in which of the following type of merger?

A)Vertical extension
B)Market extension
C)Diversification
D)Product extension
E)Horizontal extension

Question 48

When a company merges with another company that is not a competitor or a buyer or seller to the company,that merger is called a merger.

A)Joining
B)Horizontal
C)Vertical
D)Predatory
E)Conglomerate

Question 49

Under the Clayton Act,the Department of Justice is most likely to challenge which of the following types of mergers?

A)Conglomerate
B)Joining
C)Horizontal
D)Predatory
E)Vertical

Question 50

For purposes of determining the relevant market,the type of service Mateo provides would be referred to as which of the following markets?

A)Product
B)Utilized
C)Disputed
D)Offered
E)Consume r

Question 51

When a company merges with another company to produce a related product in order to add the related product to the company's production,it results in which of the following types of conglomerate merger?

A)Diversification
B)Market extension
C)Product extension
D)Horizontal extension
E)Vertical extension

Question 52

With Robyn's claim that Mateo was attempting to keep all the tour business for himself,which of the following would she mostly likely be alleging?

A)A violation of Section 2 of the Sherman Act
B)A violation of Sections 1 and 2 of the Sherman Act,but not a violation of the Business Regulation.
C)A violation of the Robinson-Patman Act
D)A violation of Section 1 of the Sherman Act
E)A violation of the Business Regulation Act

Question 53

Which of the following is false regarding the Federal Trade Commission Act?

A)While the language of the act permits the Federal Trade Commission to investigate antitrust claims,it may not bring antitrust claims against violators.
B)It prohibits unfair and deceptive methods of competition.
C)Any anticompetitive behavior not prohibited by the Sherman Act or the Clayton Act is illegal under the act.
D)It was passed when Congress passed the Clayton Act.
E)The language of the act permits the Federal Trade Commission to investigate antitrust claims.

Question 54

Have Adam and Zach violated the Sherman Act?

A)No,there is no violation because they have not established a monopoly.
B)Yes,they violated Section 2.
C)No,there is no violation because they are not engaged in intrastate commerce.
D)Yes,they violated Section 1.
E)No,there is no violation because at least three businesses must be involved in order to establish a violation of the Sherman Act.

Question 55

Which of the following is true regarding Mateo's claim that he could not have a monopoly because Robyn was also operating a tour service?

A)He was incorrect;if a company enjoys 51 percent of the relevant market,the court will usually hold that the firm has monopoly power.
B)He was incorrect;if a company enjoys 40 percent of the relevant market,the court will usually hold that the firm has monopoly power.
C)He was correct.
D)He was incorrect;if a company enjoys 60 percent of the relevant market,the court will usually hold that the firm has monopoly power.
E)He was incorrect;if a company enjoys 70 percent of the relevant market,the court will usually hold that the firm has monopoly power.

Question 56

Under the rule-of-reason analysis,which of the following factors is not taken into consideration?

A)The nature and purpose of the restraint on trade
B)The intent of the restraint
C)The effect of the restraint on business and competition
D)The effect of the restraint on the defending businesses
E)The scope of the restraint

Question 57

[Adult Floaters] Adam and Zach are both involved in businesses that manufacture bathing suits with small personal flotation devices implanted to assist with swimming.They both ship the suits to different states around the country.Adam and Zach get together and decide to raise their prices.They decide that since they are the only two manufacturers of this type of suit,if they both stick together and raise prices to an agreed upon amount,then consumers will be forced to pay that amount.They want to make a lot of money before anyone else jumps into the market.Adam's disgruntled secretary finds out about the agreement and sends out letters to consumers revealing the agreement.
In attempting to establish a violation of the Sherman Act,what type of trade violation would the government most likely allege?

A)A horizontal restraint
B)A rule-of-reason restriction
C)A vertical restraint
D)An agreed restriction
E)A corresponding restriction

Question 58

What must be proven against Mateo in order to establish that he violated antitrust laws through conduct involving monopolization?

A)Only that he had market power.
B)That he 1)possessed market power,and 2)unfairly achieved the market power or used the market power for abuse.
C)That he 1)possessed market power and 2)unfairly achieved the market power.
D)That he 1)possessed market power,2)unfairly achieved the market power,and 3)used the market power for abuse.
E)The he 1)possessed market power and 2)used the market power unfairly.

Question 59

A merger between two or more companies producing the same or similar products is a ________ merger.

A)Joining
B)Predatory
C)Vertical
D)Horizontal
E)Conglomerate

Question 60

In determining the company's ________ share,the court considers the relevant market.

A)Presumed
B)Allowabl e
C)Allocated
D)Consume r
E)?Market

Question 61

[Scuba Gear] Katie is a popular manufacturer of scuba gear.Before she allows a store to carry her line of scuba gear,she requires that the store owner agree that her line is the only line of scuba gear the store will carry.She also requires that if a store carries her line of scuba gear,it must also carry her line of wet suits.Sales of other manufacturer's gear and wet suits have begun a steady decline.Katie is accused of violating antitrust laws.However,Katie replies that she is simply conducting good business practices.Lara,the president of Deep Blue Scuba,calls Katie and tells her that she is prepared to bring suit against Katie for antitrust violations.Katie tells Lara that although she is not in violation,only the government could take action against her,and the government is way too busy to get involved in a dispute over scuba gear.
The agreements between Katie and sellers that require the stores to only carry Katie's gear are ________ contracts.

A)Exclusionary
B)Mandatory-dealing
C)Unilateral
D)Primary
E)Exclusive-dealing

Question 62

The Robinson-Patman Act:

A)abolished the Clayton Act.
B)amended the Clayton Act.
C)Created the Federal Trade Commission Act.
D)amended the Sherman Act.
E)abolished the Sherman Act.

Question 63

Which of the following is false regarding enforcement of the Sherman Act?

A)The limit on fines for a corporation found in violation of the Sherman Act is $10,000,000.
B)The limit on fines for a person found in violation of the Sherman Act is $350,000.
C)Every person who makes any contract in violation of the Sherman Act is guilty of a felony.
D)The Sherman Act only applies to business practices that restrain trade or commerce only within the United States.
E)The courts have determined the Sherman Act to prohibit efforts by competitors to fix prices,restrict output,and exclude rival companies.

Question 64

If a company possesses market power and either unfairly achieved this market power or uses this market power for abuse,it can be said to have

A)vertically restrained efficiency
B)engaged in bid rigging
C)engaged in price fixing
D)established a monopoly
E)monopolized

Question 65

What is the percentage of market share usually required to show monopoly power?

A)75
B)70
C)85
D)65
E)80

Question 66

The practices enumerated in the Clayton Act are considered illegal when they do what?

A)Promote mergers.
B)Create price discrimination.
C)Create interlocking directorates.
D)Enable exclusionary practices.
E)Cause significant harm to competition.

Question 67

Which of the following would correctly state an argument for antitrust laws given by traditional antitrust theorists?

A)Concentrated economic power does not necessarily lead to political consequences and companies should not be punished for their success.
B)Great economic power leads to greater efficiency that translates to lower costs to consumers.
C)The purpose of antitrust law is to encourage economic efficiency.
D)To foster competition,a few powerful sellers should dominate the economy.
E)An accumulation of economic power can lead to an accumulation of political power,which leads to political consequences for consumers.

Question 68

The two largest competitors in the smart television market have been accused of making an agreement to divide the country in half,where Company A will only sell in the western half of the country,and Company B will only sell in the Eastern half of the country.If proven to be true,this would be an example of an)

A)coordinated sales market reduction
B)territorial restriction
C)horizontal restraint on trade
D)horizontal division of markets
E)vertical restraint on trade

Question 69

Which of the following is true regarding Katie's statement that only the government could take action against her?

A)She is correct only if she has had no other antitrust charges brought against her;otherwise,private parties are allowed to bring suit.
B)She is incorrect,and a prevailing plaintiff is entitled to attorney fees and damages.
C)She is correct.
D)She is incorrect although private parties are limited to damages only and may not recover attorney fees.
E)She is incorrect although private parties are limited to injunctive relief only.

Question 70

What must a plaintiff prove to show a per se violation of the Sherman Act?

A)That trust activity is likely to dilute efficiency among the competition.
B)That the prohibited conduct occurred.
C)That there is an unambiguous presumption of unfair trust activity.
D)An amount of economic harm meeting standards set by the Sherman Act itself.
E)That the prohibited conduct occurred and the proper amount of economic harm.

Question 71

Katie says that her agreements with sellers that ask the sellers to carry only her scuba gear are good and legal business practices.Which of the following is true regarding her statement?

A)She is wrong because an agreement that a seller will only carry a seller's merchandise is per se illegal under the Clayton Act.
B)She is correct.
C)Additional information is needed in order to determine whether she violated either the Clayton Act or the Sherman Act because her actions will be reviewed under a rule-of-reason test with the primary inquiry being whether her actions were reasonable in view of competitive practices in the industry.
D)If the agreement lessens competition or tends to create a monopoly,the agreement is in violation of Section 3 of the Clayton Act.
E)She is wrong because an agreement that a seller will only carry a seller's merchandise is per se illegal under Section 1 of the Sherman Act.

Question 72

Colorado,being home to many microbreweries,has established an alcohol distributorship that controls all distribution of beer within the state.Breweries in the surrounding states have complained to the FTC about this,complaining that Colorado has established a monopoly on the beer distribution market in that state that is harming their business.Will their complaints result in Colorado being assessed a violation of Section 2 of the Sherman Act?

A)No,because states are exempt from Section 2 of the Sherman Act.
B)Yes,because they have established a horizontal restraint on trade.
C)No,unless it can be shown they actively intended to create a monopoly.
D)Yes,if it can be shown they have engaged in predatory pricing.
E)Yes,because they have created a monopoly.

Question 73

Which of the following is true regarding the legality of Katie's arrangement that if a store carries her line of scuba gear,it must also carry her line of wet suits?

A)It is per se illegal.
B)If the tying arrangement leads to competitive harm,the court will likely find the arrangement to be illegal.
C)The agreement is legal only if use of the wetsuit enhanced the performance of the scuba gear,which is unlikely.
D)It is legal.
E)It is legal unless the items at issue may not be used together.

Question 74

Which of the following is a defense to predatory pricing allegations?

A)The merged price defense
B)The meeting-the-competition defense
C)The quick look defense
D)The per se defense
E)The business judgment defense

Question 75

Which of the following characteristic or combination of characteristics properly constitutes a violation of Section 1 of the Sherman Act?

A)A combination,contract or conspiracy found to be unreasonable in scope.
B)An unreasonable restraint on trade that affects intrastate commerce and an unreasonable contract.
C)A combination,contract or conspiracy and a restraint that affects interstate commerce.
D)A combination,contract or conspiracy,an unreasonable restraint on trade,and a restraint that affects interstate commerce.
E)An unreasonable agreement between two parties from different states or countries affecting commerce between those two states or countries.

Question 76

In what year was the Clayton act enacted?

A)1914
B)1814
C)1890
D)1950
E)2014

Question 77

In the Supreme Court Case California Dental Association v.Federal Trade Commission,the Court

A)Overturned rule-of-reason analysis.
B)Overturned per se analysis.
C)Clarified when the quick-look analysis should be used over the rule-of-reason analysis.
D)Clarified the rule-of-reason analysis.
E)Clarified how per se and rule-of-reason analysis are both vital to enforcement of antitrust law.

Question 78

PWP Guitars,a popular market leader in the guitar manufacturing industry,has secured agreements with the two largest musical instrument dealers in America to sell only PWP guitars in their stores and not buy from their competition.Three of their competitors have filed suit as plaintiffs,alleging that this agreement prevents people from buying their products,and thus lessens competition and creates a monopoly.What specific violation would the plaintiffs claim is occurring?

A)Horizontal restraint of trade
B)Exclusive dealing
C)Predatory pricing
D)Discriminatory pricing
E)Tying arrangement

Question 79

To demonstrate a seller engaged in the violation known as price discrimination,a plaintiff must show that the defendant seller was involved in and the defendant seller's action substantially lessened competition or tended to create a monopoly.

A)Predatory pricing
B)Interstate commerce
C)Exclusionary pricing
D)Price gouging
E)Foreign investment

Question 80

Katie's requirement that before she will sell scuba gear to a business,the business must carry her line of wet suits is a ________ arrangement.

A)Requirements
B)Combination
C)Joinder
D)Tying
E)Complementary