Deck 21: Antitrust

Question 1

The Clayton Act:

A) was passed because the courts were too strict in their enforcement of the Sherman Act.
B) was passed to clarify the provisions of the Sherman Act.
C) contained provisions intended to eliminate price discrimination that reduced competition.
D) All the above.

Answer 1

B

Question 2

If a company has violated antitrust laws:

A) the Justice Department can initiate only noncriminal charges against the violator.
B) the Federal Trade Commission may file criminal proceedings against the violator.
C) any private person or company that has been harmed by the violator can file a lawsuit to recover damages.
D) All the above.

Answer 2

C

Question 3

Horizontal cooperative strategies would include all EXCEPT:

A) market division.
B) price fixing.
C) reciprocal dealing.
D) bid-rigging.

Answer 3

C

Question 4

Great Source Co.has an 85 percent market share.Under modern antitrust law,Great Source necessarily has a monopoly.

Question 5

The only defense available to a defendant in a per se violation is that the violation never occurred.

Question 6

Per se violations of the antitrust laws are subject to both civil and criminal penalties.

Question 7

Under the Robinson-Patman Act,charging different prices to different purchasers is always illegal.

Question 8

Gary,Louise,and Brian,who own competing gas stations in town,happen to see each other at a restaurant one morning and have breakfast together.While talking,they decide to set their gas prices at the same amount.They have committed an illegal act only if the agreed price is unfair to consumers.

Question 9

Since companies have the right to decide with whom they will or will not do business,a refusal to deal is not a violation of the Sherman Act.

Question 10

John D.Rockefeller was the main reason which legislation was enacted?

A) Sherman Act.
B) Robinson-Patman Act.
C) Clayton Act.
D) NLRA.

Question 11

Both the Justice Department and the Federal Trade Commission can bring criminal proceedings under the antitrust laws.

Question 12

The Sherman Act was designed to prevent extreme concentrations of economic power.

Question 13

Both "per se" and "rule of reason" violations of the Sherman Act are automatically illegal.

Question 14

Most countries other than the United States do not permit private parties to sue for violation of antitrust laws.

Question 15

A vertical merger involves companies at different stages of the production process.

Question 16

The post Chicago School's position on antitrust policy would be to ask:

A) "Has a competitor been harmed?"
B) "Has competition been harmed?"
C) "Will competitors be allowed to freely enter the market?"
D) "Will this action cause consumers to pay higher prices?"

Question 17

The Clayton Act prohibits anticompetitive mergers.

Question 18

Antitrust policy remained constant throughout the 1900s.

Question 19

The FTC blocked the merger of Staples,Inc.and Office Depot because of the large percentage of the national market for office supplies they would control if they merged.

Question 20

Recently the Supreme Court held resale price maintenance is a rule of reason violation of the Sherman Act.

Question 21

In the case of United States v.Waste Management,Inc.,the U.S.Court of Appeals had to consider whether a merger of two large trash removal services was illegal.The merger created a company that controlled nearly 50 percent of the Dallas,Texas regional market.The court ruled that:

A) such merger created a presumption of illegality.
B) the merger was not illegal since it did not substantially lessen competition in the relevant market.
C) Both of the above are correct.
D) None of the above.

Question 22

A monopoly is illegal:

A) under any circumstances, under Section 2 of the Sherman Act.
B) only if it is gained or maintained by using wrongful tactics.
C) if you have greater than 50 percent of market share.
D) any time there are no interchangeable products.

Question 23

What law prohibits mergers that are anticompetitive?

A) Sherman Act.
B) Clayton Act.
C) Robinson-Patman Act.
D) Radmon Act.

Question 24

Ed was an independent owner of a chain of TV stores.He successfully got customers into his store by cutting his prices on widely advertised name-brand products in order to sell other products for which he received a bigger profit.When the manufacturers of three of the name-brand products discovered Ed's actions,they agreed secretly to stop selling him their TVs.The three manufacturers:

A) are doing nothing illegal, as they did not get Ed to agree to anything.
B) are free to agree not to deal with Ed since the public can go elsewhere and will not be hurt economically.
C) can choose either as a group to deal or not to deal with any retailer they want.
D) are engaged in a rule of reason violation of the antitrust laws.

Question 25

Cowan Manufacturing would commit:

A) a rule of reason violation of the Sherman Act by setting a maximum, but not a minimum, price its distributors can charge.
B) a rule of reason violation of the Sherman Act by setting a minimum, but not a maximum, price its distributors can charge.
C) a rule of reason violation of the Sherman Act by setting either a minimum or a maximum price its distributors can charge.
D) a per se violation of the Sherman Act by setting a minimum price its distributors can charge and a rule of reason violation of the Sherman Act by setting a maximum price its distributors can charge for its products.
E) no violation of the Sherman Act by setting minimum or maximum prices its distributors can charge for its products.

Question 26

The traditional formula for determining damages for a violation of the Robinson-Patman Act was to:

A) calculate the estimated amount of lost profits.
B) determine the difference between the two prices and multiply the difference by the number of units purchased.
C) allow a jury to determine the amount of punitive damages without using any particular formula.
D) All the above.

Question 27

In the Fears v.Wilhelmina Model Agency,Inc.case,the court held:

A) parallel business behavior conclusively establishes agreement sufficient to constitute a Sherman Act offense.
B) in this case the defendants did not possess a common rational motive to conspire.
C) plaintiffs offering parallel conduct as evidence of an antitrust conspiracy must demonstrate additional circumstances in order to infer a conspiracy.
D) plaintiffs did not need to demonstrate "plus factors" in this case since the defendants' conduct was egregious.

Question 28

Such an agreement is:

A) a per se violation of antitrust law.
B) subject to the rule of reason test to determine if it violates antitrust law.
C) not governed by antitrust law since educational institutions are exempt from this area of law.
D) subject to state regulations but not to the Justice Department.

Question 29

What is the Justice Department's current position relative to reciprocal dealing agreements?

A) The Justice Department actively enforces this illegal activity.
B) The Justice Department is only concerned about these agreements if a large, national company is involved.
C) The Justice Department only gets involved if such an agreement will foreclose a significant share of the market and if the participants agreed not to buy from other competitors.
D) None of the above is correct.

Question 30

A vertical allocation of customers or territory:

A) has the same legal effect as a horizontal agreement by competitors to allocate customers and territories.
B) is a per se violation of Section 1 of the Sherman Act.
C) is a rule of reason violation of Section 1 of the Sherman Act.
D) Both (a) and (b).
E) is no violation of the Sherman Act.

Question 31

A refusal to deal:

A) is a right to decide with whom to do or not to do business and cannot be legally limited.
B) is a rule of reason violation of the Sherman Act and is illegal if it harms competition.
C) is an agreement in which a buyer refuses to purchase goods from a supplier unless the supplier also purchases items from the buyer.
D) occurs when a manager refuses to recognize that price-fixing is a problem.

Question 32

A major motion picture distributor offers to provide a television station with three very popular,desirable films.However,as part of the agreement,the distributor requires that the television station also purchase four films that are not very desirable.This type of arrangement is called a:

A) reciprocal dealing agreement.
B) tying arrangement.
C) joint custody arrangement.
D) reverter arrangement.

Question 33

Asher Furniture Store offered customers the option to purchase living room furniture as a set.Each set included a sofa,chair,coffee table,and end table.The set price is 10% less than the cost of the individual pieces.In selling the furniture in sets,Asher Furniture has:

A) violated antitrust law. This is an illegal tying arrangement.
B) violated antitrust law. This is illegal price discrimination.
C) violated antitrust law. This is vertical price maintenance.
D) not violated antitrust law.

Question 34

This agreement violates the:

A) Sherman Act.
B) Clayton Act.
C) Robinson-Patman Act.
D) None of the above.

Question 35

The U.S.Attorney General brought a Sherman Act lawsuit against competitors in the widget market.The Attorney General alleged that these companies agreed to charge $20 for widgets.Which of the following defenses may apply?

A) That the $20 price was fair.
B) That the $20 price was lower than the price before the agreement.
C) That the businesses did not agree to charge $20 for widgets.
D) That the competitors would have gone out of business without the agreement.

Question 36

Larger Hardware advertises very low prices on standard items.Smalltown Hardware is having trouble competing and files a predatory pricing lawsuit against Larger.To win the case,Smalltown must prove:

A) Larger Hardware is selling its products below cost.
B) Larger Hardware intends Smalltown to go out of business.
C) if Smalltown goes out of business, Larger will be able to earn sufficient profits to recoup its prior losses.
D) All of the above.
E) Only (a) and (b).

Question 37

The most accurate statement about the Robinson-Patman Act is that:

A) it has rarely been enforced in recent years.
B) the U. S. government has stepped up its enforcement during the last decade.
C) it has been declared unconstitutional.
D) it was repealed by Congress in 2004.

Question 38

Gorhan Construction,Brighton Bros.,and Tirenn Construction agreed that on three upcoming projects,Gorhan would bid lowest on one,Brighton would submit the lowest bid on the second project,and Tirenn would submit the lowest bid on the third project.In this way,they would each be assured of work for the upcoming season.This behavior:

A) is legal and an acceptable practice in the construction industry to spread work more evenly.
B) is a per se violation of the Sherman Act.
C) is a rule of reason violation of the Sherman Act.
D) violates ethical, but not legal, standards.

Question 39

Assume that Lake Mirage Houseboats,Reflections Houseboats,and Upscale Houseboats all merged into one houseboat manufacturing company.Such a merger would be a(n):

A) vertical merger.
B) vertical cooperative arrangement merger.
C) horizontal merger.
D) intracompetitive merger.

Question 40

In determining if an exclusive dealing contract has an anticompetitive impact on the market,a court would consider all but which of the following factors?

A) The number of other distributors available.
B) The portion of the market foreclosed by the exclusive dealing agreement.
C) The number of previous antitrust violations by the parties to the agreement.
D) The ease with which new distributors can enter the market.

Question 41

Explain horizontal price-fixing and vertical minimum and maximum price-fixing.Discuss their status under antitrust laws.

Question 42

Violations of antitrust law are either "per se" violations or "rule of reason" violations.What are the differences between these two types of violations? Give examples of each.

Question 43

Discuss when monopoly power is not a violation of Section 2 of the Sherman Act.

Question 44

Smalltown has two family-owned hardware stores that have been in business for years.Major Hardware decides that Smalltown would be a good place to build one of its superstores.Major opens,advertising unbelievably low prices;in fact,at below cost.Because Major owns stores nationally,it is able to keep prices extremely low until both of the family-owned stores have to go out of business because they cannot compete.After Major is the only hardware store in town,it raises its prices enough to make up for its former losses and to make some additional profit.Discuss this behavior in relation to antitrust law.

Question 45

Explain the overall purposes of the Sherman Antitrust Act,the Clayton Act,and the Robinson-Patman Act.How do each of these Acts relate to each other?