Deck 16: Regulating Competition_Antitrust Laws

Question 1

A trust is a fiduciary relationship in which the trustee holds equitable title and the beneficiaries hold legal title to the trust property.

Answer 1

False
Explanation: A trust is a fiduciary relationship concerning property in which one person, known as the trustee, holds legal title to property for the benefit of another, known as the beneficiary.

Question 2

An express agreement is not required to create a contract in restraint of trade.

Answer 2

True
Explanation: An express agreement is not required to create a contract in restraint of trade.

Question 3

Crimes under the Sherman Act are felonies.

Answer 3

True
Explanation: Crimes under the Sherman Act are felonies.

Question 4

Under what is commonly referred to as the Colgate doctrine, the Supreme Court recognizes that independent action by a manufacturer is a per se violation of the Sherman Act.

Question 5

Mere possession of monopoly power is not a violation of the Sherman Act.

Question 6

An express agreement is a must to create a contract in restraint of trade.

Question 7

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

Question 8

Agreements between competitors relating to the price to be charged for a product or service are in violation of the Sherman Act if those agreements threaten free competition.

Question 9

The Department of Justice alone has the power to bring criminal proceedings in cases of violations of antitrust laws.

Question 10

The Sherman Act regulates monopolies after they are formed, but does not regulate mere attempts to monopolize.

Question 11

Horizontal price fixing occurs when manufacturers attempt to set the ultimate retail price for their products.

Question 12

If the prices fixed are fair or reasonable, it is not considered to be price fixing.

Question 13

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

Question 14

Defendants often use a plea of nolo contendere in civil actions to avoid the use of evidence from the trial being used in the criminal case.

Question 15

The test of reasonableness asks whether challenged contracts or acts are unreasonably restrictive of competitive conditions.

Question 16

The normal activities of labor unions are exempt from the Sherman Act.

Question 17

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

Question 18

If an action is determined to be illegal per se, the courts are not required to apply the rule of reason to analyze the case further.

Question 19

A manufacturer announcing its prices and refusing to deal with those who fail to comply is a method of legally controlling the retail price.

Question 20

The per se rule makes price fixing illegal when it results in higher prices but doesn't apply to agreements to ensure lower prices.

Question 21

Civil enforcement powers regarding federal antitrust matters belong to:

A) the FTC and the Department of Justice.
B) the Treasury Department.
C) the Department of Revenue and Taxation.
D) the courts.
E) Department of Labor

Question 22

The purpose of the Sherman Act was to:

A) legalize monopolies.
B) preserve competition.
C) create trusts.
D) restrict competition.
E) legalize trusts.

Question 23

The Federal Trade Commission Act was written without a specific definition of what constituted "unfair methods of competition" to allow the FTC to determine whether it existed on a case by case basis.

Question 24

Violations of the original Clayton Act were crimes, and the act contained sanctions for forfeiture of property.

Question 25

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 26

The Federal Trade Commission is tasked with determining whether unfair methods of competition exist but the Commission is not empowered to issue trade rules and guides.

Question 27

The Federal Trade Commission is an independent administrative agency charged with keeping competition free and fair through the enforcement of the Sherman Act.

Question 28

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 below the cost price.
B) the prices were intended to drive competitors out of business followed by the wrongdoer recouping these initial losses.
C) the prices were significantly lower than those of all competitors within the same product group.
D) the buyers were unwilling to buy the product at the seller's prices, and only bought the product from a lack of choice.
E) the buyer had other options in the same product line available in different price ranges.

Question 29

Pricing goods at a low level to discourage market entry by competitors is called:

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

Question 30

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

Question 31

Vertical agreements involving pricing (high and low) and territorial arrangements within channels of distribution are analyzed under the rule of reason.

Question 32

The _____ 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 33

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

Question 34

A vertical territorial agreement is one between a manufacturer and a dealer or distributor.

Question 35

The person who holds legal title to trust property for the benefit of another is the:

A) beneficiary.
B) bailor.
C) bailee
D) benefactor.
E) trustee.

Question 36

The FTC prevents wrongful actions by the use of cease and desist orders.

Question 37

In full-line forcing, the buyer is forced to purchase only one product of the line.

Question 38

Which of the following statements holds true for monopoly power?

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

Question 39

Game designers Troy and Jeff design a new computer game system, and it is manufactured and sold by their company, GameTech. The game system they devise uses new technology that they have created and far exceeds the capabilities of any current gaming systems. It is also so simple to manufacture that they can do so at a very minimal cost. When it hits the market it is so much better and cheaper than the "competition" that they all end up either in bankruptcy or simply withdrawing their products from the market. GameTech's system is now the only gaming system on the market.

A) GameTech is guilty of engaging in predatory conduct.
B) GameTech has a monopoly which violates the Sherman Act.
C) GameTech has a monopoly which does not violate the Sherman Act but violates the Clayton Act.
D) GameTech has a monopoly which does not violate either the Sherman or Clayton Act
E) GameTech is guilty of variable pricing.

Question 40

Concerted activities are illegal per se.

Question 41

Which of the following types of businesses enjoys a statutory exemption from the Sherman Act?

A) Insurance companies
B) Pharmaceutical companies
C) Educational institutions
D) Software companies
E) Consumer products companies

Question 42

Which of the following was established by the Noerr-Pennington doctrine?

A) Concerted efforts to lobby government officials, regardless of the anticompetitive purposes of the lobbying effort are exempt from the provisions of the Sherman Act.
B) When a state acts in its sovereign capacity, it is immune from federal antitrust scrutiny.
C) Price fixing is 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.
D) Resale price maintenance is legal only if there is no coercion or pressure other than the announced policy and its implementation.
E) Conduct directed at price stabilization is per se anticompetitive.

Question 43

Predatory pricing was declared illegal by the:

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

Question 44

Which of the following 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.
D) The Sherman Act covers services, including those performed by the learned professions.
E) An action is not considered to be price fixing if the prices fixed are fair or reasonable.

Question 45

The Colgate Doctrine allows:

A) resale price maintenance even under coercion.
B) a franchisor to require that franchisees purchase all of its equipment and inventory from them.
C) the FTC to regulate unfair and deceptive acts or practices in commerce.
D) natural monopolies to exist outside of Sherman Act jurisdiction.
E) manufacturers to set a price and refuse to deal with those that won't comply.

Question 46

In the mid-1970s, the Supreme Court interpreted the Sherman Act to include:

A) services.
B) goods.
C) interstate sale of goods.
D) real estate.
E) stocks.

Question 47

Regarding price fixing, which of the following is a correct statement?

A) Ethical standards may be used to fix prices, in which case, the price fixing is not subject to the Sherman Act.
B) It is legal for competitors to fix a low price if the consumer ultimately benefits.
C) Attempts by manufacturers to control the ultimate sale of their product are analyzed under the per se illegality.
D) The exchange of price information among creditors is a violation of the Sherman Act.
E) Cooperation and cosy relationships between competitors cannot be termed illegal.

Question 48

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

A) military
B) personal
C) participation
D) homestead
E) state action

Question 49

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 50

Attempts by manufacturers to control retail prices are known as _____ price fixing.

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

Question 51

An agreement between a manufacturer and a dealer that assigns the dealer or distributor an exclusive territory, while the manufacturer agrees to supply only that dealer in the territory is called a ______ territorial agreement.

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

Question 52

Which of the following doctrines exempts certain lobbying activities from the Sherman Act?

A) Noerr-Pennington doctrine
B) Quick look doctrine
C) State action doctrine
D) Per se illegality doctrine
E) Doctrine of inherency

Question 53

An agreement to allocate geographical areas among competitors is called a _______ territorial agreement.

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

Question 54

Which of the following is true of the Clayton Act?

A) The original Clayton Act contained no sanction for forfeiture of property.
B) Organizations injured by a violation could obtain injunctive relief, but individuals could not.
C) Enumerated practices have to actually injure competition to be wrongful.
D) The burden of proving a violation was left to the plaintiff or victim.
E) No action could be taken unless a monopolistic practice substantially affected existing competitors.

Question 55

According to the Parker v. Brown doctrine:

A) the usual and legitimate union activity that is exempt from the Sherman Act.
B) concerted efforts to lobby government officials are not anticompetitive.
C) the Sherman Act does not apply to state government.
D) not all independent action by a manufacturer is a per se violation of the Sherman Act.
E) only unreasonable attempts to monopolize were covered by the Sherman Act.

Question 56

The president of soft drinks bottling company agreed with a competitor to stop discounts to retailers, which earned him a jail sentence. What was his crime?

A) Variable pricing
B) Vertical price-fixing
C) Resale price maintenance
D) Predatory conduct
E) Horizontal price-fixing

Question 57

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

A) It applies only to individuals, and not corporations or larger institutions.
B) Triple-damage suits cannot impose a fine in excess of any the could be imposed in a criminal proceeding.
C) It can only compensate the plaintiff for actual injury.
D) Only injured members of the general public can enforce the law.
E) Both federal and state governments can file a suit for triple damages.

Question 58

The Robinson-Patman amendment gives the _____ jurisdiction and authority to regulate quantity discounts.

A) Consumers' Association
B) U.S. Consumer Product Safety Commission
C) Department of Commerce
D) Department of Justice
E) Federal Trade Commission

Question 59

_____ refers to the act of pricing below marginal cost by a company willing and able to sustain losses for a prolonged period to drive out competition.

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

Question 60

Which of the following is true of the Sherman Act?

A) Violations may be subject to criminal fines or imprisonment, but not both.
B) It covers antitrust activities by corporations, but not by individuals.
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 61

Anheuser-Bush, an American corporation, and InBev, a Belgian corporation, finalized a multibillion-dollar merger to form the largest beer company in the world. Anheuser-Bush and InBev, prior to the merger, each sold beer in many countries around the world, including both Belgium and the United States. This merger is best described as a:

A) vertical merger.
B) horizontal merger.
C) conglomerate merger.
D) congeneric merger.
E) product market extension merger.

Question 62

In a _____, a buyer agrees to purchase all of its needs of a given contract from the seller during a certain period of time.

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

Question 63

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

A) It applies to a situation when sellers may select their own customers in good-faith and not in restraint of trade.
B) It applies to a situation when there could be price differentials based on differences in the cost of manufacture, sale, or delivery of commodities.
C) It applies to a situation which involves the setting up 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 may meet the equally low price of a competitor.
E) It applies to a situation when price changes may be made in response to changing conditions such as sales in good faith in discontinuance of business in the goods concerned.

Question 64

Your school decides to expand and open a new campus in another state. Rather than acquiring land and building new buildings, the school board decides to merge with an existing school that has similar programs in the other state. The school you're merging with is a small commuter school with no dorms. 98% of its students are not only instate, but from the city the school is located in. This merger would be best described as a:

A) vertical merger.
B) geographic market extension merger.
C) product market extension merger.
D) horizontal extension merger.
E) conglomerate merger.

Question 65

Mobilink Telecom Inc. deals in the manufacture of mobile handsets. Broadcom deals in the manufacturing Bluetooth personal area network hardware systems and chips. The acquisition of Mobilink Telecom Inc. by Broadcom is an example of a _____.

A) vertical merger.
B) horizontal merger.
C) conglomerate merger.
D) geographic market extension merger.
E) freeze-out merger.

Question 66

Can the existence of a monopoly be lawful? Explain why or why not.

Question 67

Joshua owns orange groves. He enters into a contract with the local food processing plant whereby he would sell oranges only to that particular food processing plant. Joshua has entered into a contract which would be termed as a(n):

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

Question 68

What is the purpose of the Sherman Act and what does it cover?

Question 69

What is required to prove a conspiracy to monopolize?

Question 70

Full-line forcing is a typical form of a:

A) reciprocal agreement.
B) exclusive dealing contract.
C) requirements contract.
D) tying agreement.
E) licensing agreement.

Question 71

The _____, as permitted by the Robinson-Patman amendment, applies to a situation in which price changes may be made in response to events like actual or imminent deterioration of perishable goods and obsolescence of seasonal goods.

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

Question 72

The Wheeler-Lea amendment of 1938 made unfair or deceptive acts or practices in commerce illegal under:

A) the Sherman Act.
B) the Noerr-Pennington doctrine.
C) the Clayton Act.
D) the Robinson-Patman Act.
E) the Federal Trade Commission Act.

Question 73

A merger in which the companies neither compete nor are related as a customer or supplier is called a:

A) product market extension merger.
B) vertical merger.
C) horizontal merger.
D) conglomerate merger.
E) geographic market extension merger.

Question 74

Explain the concept of predatory conduct in trade.

Question 75

What led to the enactment of the Sherman Act in 1890?

Question 76

The _____ to the Clayton Act prohibits all acquisitions in which the effect lessened competition substantially in any line of commerce in any section of the country.

A) Bricker amendment
B) Tyler precedent
C) Wheeler-Lea amendment
D) Robinson-Patman amendment
E) Celler-Kefauver amendment

Question 77

When a product is sold only on condition that the buyer also purchases a second different product from the seller, the transaction is called a/an:

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

Question 78

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 contract.
B) exclusive dealing contract.
C) reciprocal dealing contract.
D) tying contract.
E) requirements contract.

Question 79

The Celler-Kefauver amendment that plugged the stock versus asset loophole in the Clayton Act applies to:

A) only corporations.
B) only partnerships.
C) corporations and partnerships.
D) corporations, partnerships and sole proprietorships.
E) only sole proprietorships.

Question 80

The _____, as permitted by the Robinson-Patman amendment refers to price differentials based on differences in the cost of manufacture, sale, or delivery of commodities.

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