Deck 46: Antitrust Law and Unfair Trade Practices

Question 1

Under the Sherman Act,some horizontal price-fixing arrangements are allowed under the rule of reason.

Answer 1

True

Question 2

The history and duration of the restraint have no impact on applying the rule of reason.

Answer 2

False

Question 3

Antitrust laws were designed to limit anticompetitive behavior.

Answer 3

True

Question 4

Horizontal price-fixing occurs when the competitors in the same type of business agree to set the price of goods or services they sell.

Question 5

Vertical restraints on trade occur when two or more parties on different levels of distribution enter into a contract.

Question 6

A per se violation of the Sherman Act is illegal regardless of the circumstances in which the activity took place.

Question 7

If Any Town Blinds,a mini-blind manufacturer,sells its mini-blinds to retailers that agree to resell them at the prices set by the manufacturer,then Any Town Blinds would be involved in a violation of Section 1 of the Sherman Act.

Question 8

A corporation may be fined up to $100 million per violation of the Sherman Act.

Question 9

A refusal to deal is the same as a group boycott.

Question 10

The Sherman Act is the only major antitrust act with criminal sanctions.

Question 11

The Robinson-Patman Act was the first antitrust law enacted in the United States.

Question 12

Under the Sherman Antitrust Act,division of markets on a product line basis is a rule of reason violation,whereas division of markets on a geographic basis is a per se violation.

Question 13

The first antitrust laws were passed in the late 1800s.

Question 14

All federal criminal antitrust enforcement is done by the Justice Department.

Question 15

Most of the major antitrust statutes provide for both civil and criminal penalties.

Question 16

Under the rule of reason for violations under the Sherman Act,certain restraints of trade can be legal in some circumstances and illegal in others.

Question 17

The aggressiveness with which antitrust laws are enforced differs considerably based on the politics of the President of the United States.

Question 18

Today,resale price maintenance is a per se violation for both price floors and price ceilings.

Question 19

A restraint that is automatically in violation of Section 1 of the Sherman Act is said to be a per se violation.

Question 20

A consumer can recover from a violation of an antitrust law,but only if he or she deals directly with the violator.

Question 21

The doctrine of conscious parallelism states that if competing firms reach similar independent judgments to not deal with a particular supplier,it will be considered evidence of a conspiracy.

Question 22

The term relevant market is important in determining a defendant's monopoly power.

Question 23

Plaintiffs often argue for a narrow definition of the defendant's product or service market.

Question 24

The failing company doctrine is not a valid defense to a Section 7 Action.

Question 25

If a merger allows two or more small companies to merge without liability under Section 7,then the court will permit the merger to take place.

Question 26

The rule of reason has no application when determining the legality of non-price vertical restraints on trade.

Question 27

Under Section 2 of the Sherman Act,possession of monopoly power is wrongful regardless of how the monopoly power was obtained.

Question 28

A firm can unilaterally decide not to deal with another firm without violating the law.

Question 29

The U.S.government antitrust case against Microsoft was based upon alleged violations of Section 2 of the Sherman Act.

Question 30

The Clayton Act governs tying arrangements involving goods only.

Question 31

The probability of a substantial lessening of competition can be used under the Clayton Act to prevent mergers of companies that do not currently compete in each other's markets,but are perceived as having the potential to lessen competition or create a monopoly.

Question 32

The traditional way to determine the line of commerce that will be affected by a merger is by applying the functional interchangeability test.

Question 33

Section 7 of the Clayton Act gave the federal government the power to prevent anticompetitive mergers.

Question 34

If a steel company acquired an iron mining company,it would be a vertical merger.

Question 35

In a Sherman Act Section 2 action,a court need not define both the relevant geographic market and the relevant product or service market.

Question 36

If a textbook publisher acquired a paper mill,it would be a backward vertical merger.

Question 37

To be liable for a Section 2 violation of the Sherman Antitrust Act,there must be concerted action between two or more firms.

Question 38

For an antitrust action to be sustained under Section 2 of the Sherman Act,the defendant must possess monopoly power in the relevant market.

Question 39

Under the Noerr doctrine two or more persons may petition the government to enact laws or take other action without violating the antitrust laws.

Question 40

If a hardware store chain on the East Coast merged with a hardware store chain on the West Coast,it would be a horizontal merger.

Question 41

A party can violate Section 5 of the Federal Trade Commission Act,by violating the "spirit" of the antitrust laws even though no specific provision of the antirust laws is violated.

Question 42

Treble damages are available in a civil suit for violation of Section 5 of the Federal Trade Commission Act.

Question 43

Which kind(s)of boycott(s)violate the antitrust laws?

A) an agreement among competitors to boycott a particular supplier
B) an agreement among competitors to not sell to a particular customer
C) an agreement among competitors to boycott a particular supplier and an agreement among competitors to not sell to a particular customer
D) any refusal to sell to a particular customer or purchase from a particular supplier
E) any refusal to sell to a particular customer

Question 44

Labor unions are exempt from antitrust laws.

Question 45

Which of the following is not one of the antitrust statutes?

A) the Sherman Act
B) the Clayton Act
C) the Federal Trade Commission Act
D) the Fair Competition Regulation Act
E) the Robinson-Patman Act

Question 46

Which of the following best describes horizontal division of markets?

A) An agreement by competitors to serve only a designated portion of the market for their products.
B) Any action in which a company distributes some products in one geographic area and other products in another geographic area.
C) Any action in which a company charges different prices for a product depending on the geographic market.
D) An agreement under which two companies agree to jointly market related products,such as sport utility vehicles and outdoor sports equipment.
E) The granting of exclusive geographic territory to salespersons.

Question 47

Professional basketball and football have been found to be exempt from antitrust laws.

Question 48

The antitrust laws were passed in response to general changes in the national business environment caused by:

A) the United States gaining independence from England
B) the expansion of the United States west of the Mississippi River following the Louisiana Purchase
C) the rise of the railroads and industrialization in the latter part of the 1800s
D) the stock market crash of 1929 and the Great Depression
E) the rapid boom in consumer products following the Second World War

Question 49

The meeting-the-competition defense does not allow a seller to lower his price below that of his competitor even if it is discriminatory.

Question 50

What is the usual effect of a nolo contendere plea by the defendant in a government antitrust case?

A) A penalty imposed on the defendant without an admission of guilt.
B) A penalty imposed on the defendant without an admission of guilt and automatic liability to any private plaintiffs in related cases.
C) A requirement that a defendant cease business in the line of business or market where the violation occurred.
D) An admission of guilt accompanied by a lighter penalty than if a verdict of guilty were issued following a trial.
E) No penalty in the current case,but an increased penalty for any similar future violation.

Question 51

A horizontal division of markets can be a per se violation of the Sherman Act if it is based on:

A) geography
B) customers
C) products
D) geography and customers
E) A,B,and C

Question 52

Horizontal price-fixing occurs when:

A) one or more companies charge the same prices for goods at all their stores for an unreasonable length of time
B) a manufacturer requires its independent dealers to sell its products at a given price
C) a company with the entire market on a patented product sells the product at a fixed price
D) two or more competing companies agree on the prices to charge for their products
E) prices are determined with reference to an index,such as the average price of crude oil,which neither the seller nor the purchaser can control

Question 53

Where quality control of products is an issue,tying arrangements can be legal.

Question 54

Which of the following is true about restraints of trade?

A) Under the per se rules,all restraints of trade are illegal.
B) Under the rule of reason,all restraints of trade are illegal.
C) Some acts are illegal per se,but other actions must be judged by the rule of reason.
D) Price-fixing is always judged by the rule of reason.
E) Tying agreements are always illegal per se.

Question 55

What is the legal significance of the distinction between rule of reason violations and per se violations under the Sherman Act?

A) Rule of reason violations must be proven beyond a reasonable doubt,and per se violations must be proven with a preponderance of the evidence.
B) Rule of reason violations require an agreement with at least one other party,but per se violations can occur without an agreement with others.
C) Rule of reason violations relate to horizontal situations,and per se violations relate to vertical situations.
D) Rule of reason violations relate to actions brought by private parties,and per se violations relate to actions brought by the government.
E) Rule of reason violations might be proven to be acceptable,but per se violations cannot be acceptable under any circumstances.

Question 56

Quantity or volume discounts are lawful to the extent they are supported by cost savings.

Question 57

Only a seller may be held liable under the price discrimination laws.

Question 58

Price discrimination is lawful if it is in response to "changing conditions in the market or the marketability of the goods."

Question 59

The primary source of the antitrust laws is:

A) the United States Constitution
B) the Uniform Commercial Code
C) the Federal Trade Commission
D) Federal Statutes
E) common law

Question 60

The cost-justification defense to price discrimination applies only to the cost of manufacture,not to shipping or advertising.

Question 61

Resale price maintenance occurs when:

A) a retailer refuses to lower its price even though competitors have lowered their prices
B) a wholesaler refuses to offer volume discounts to its high-volume customers
C) a manufacturer sells its products only to those dealers who agree to charge a certain price
D) a manufacturer sells its products to its dealers for the same price in all states even though the retail market is much more competitive in some states than in others
E) competitors agree to sell their products for the same price

Question 62

Under Section 2 of the Clayton Act,rather than making a presumption about whether monopoly power exists,the courts will examine all the facts and circumstances to determine whether monopoly power exists when the defendant holds between ________ percent and ________ percent of the relevant market.

A) 30; 80
B) 20; 70
C) 0; 50
D) 33; 70
E) 50; 70

Question 63

Orange Mist Corporation has been charged by the government with violating the antitrust laws.Orange Mist wants to dispose of this matter without a trial,but it is worried about possible private actions in the future.If Orange Mist wants to minimize its possible future exposure,which of the following is the best way for it to plead?

A) Guilty,because this is not an admission of wrongdoing or liability.
B) Guilty,because this plea cannot be used in subsequent private action.
C) Nolo contendere,because this plea cannot be used against Orange Mist in a subsequent private action.
D) Per se,because this plea cannot be used in a subsequent private action.
E) It does not matter because the plea here cannot be used in a subsequent private action in any case.

Question 64

Which of the following best describes a tying arrangement?

A) Two companies jointly market their products or services.
B) A seller requires the purchase of one product or service in order to be able to purchase a second product or service.
C) A seller sets her price according to a market index.
D) A seller offers a volume discount for purchases of large quantities.
E) A seller refuses to deliver merchandise until payment has been received.

Question 65

If a paper manufacturer merged with a printing company,it would be a:

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

Question 66

In determining the lawfulness of a merger,which of the following factors need not be shown?

A) an actual lessening of competition
B) the relevant product market
C) the relevant geographic market
D) the likelihood of a substantially lessening of competition or the tendency to create a monopoly

Question 67

The Hart-Scott-Rodino Antitrust Improvement Act led to rules requiring:

A) that certain activities are classified as per se violations
B) that failing companies be rescued through mergers whenever possible
C) that violators of antitrust laws be liable for treble damages
D) that mergers be allowed if United States competitiveness in world markets is improved
E) that the Federal Trade Commission and the Justice Department be notified in advance of any merger involving certain firms

Question 68

Which of the following organizations is exempt from the antitrust laws?

A) labor unions
B) railroads
C) businesses that are substantially regulated by the states
D) A,B,and C
E) A and B only

Question 69

The following are required to be proven in order to use the failing company doctrine except for which of the following?

A) There is no other reasonable alternative for the failing company.
B) No other purchaser is available.
C) The failure of the failing company is not due to negligence of its management.
D) The assets of the failing company would disappear from the market without the merger.

Question 70

To be guilty of monopolization,the defendant must:

A) possess monopoly power
B) have obtained the monopoly power by some improper act or be abusing the monopoly power
C) must be part of a conspiracy,combination,or contract
D) A,B,and C
E) A and B only

Question 71

Which of the following is not a defense to a price discrimination charge?

A) cost justification
B) failing company
C) changing conditions
D) meeting the competition
E) A and C only

Question 72

Which of the following is true about the Sherman Act?

A) Liability under Section 1 for restraint of trade requires agreement with another party,but liability under Section 2 for monopolization does not.
B) Liability under Section 2 for monopolization requires agreement with another party,but liability under Section 1 for restraint of trade does not.
C) Liability under either Section 1 or Section 2 requires agreement with another party.
D) A business can be liable under either Section 1 or Section 2 without any agreement with another party.

Question 73

Which of the following is true about tying arrangements?

A) Tying arrangements are always illegal.
B) Tying arrangements are always legal.
C) Tying arrangements are legal for companies without monopoly power and illegal for companies with monopoly power.
D) Tying arrangements are illegal unless there is a justifiable reason for the seller to have the tying arrangement.
E) Tying arrangements are legal so long as the purchaser is not harmed.

Question 74

Antitrust laws apply to which of the following?

A) labor unions
B) professional football
C) professional baseball
D) agricultural cooperatives
E) All of these are correct.

Question 75

Which of the following can be a rule of reason antitrust violation?

A) horizontal price-fixing
B) horizontal market divisions
C) vertical price-fixing
D) group boycotts
E) C and D

Question 76

Which of the following theories is used to examine the legality of conglomerate mergers?

A) the market closure theory
B) the unfair advantage theory
C) the potential competition theory
D) the potential reciprocity theory
E) A and D are not used

Question 77

Which of the following is not a basis for an unfair competition claim under Section 5 of the Fair Trade Commission Act?

A) The action violates a provision of the Sherman Act.
B) The action violates the "spirit" of the antitrust laws.
C) The action allows the party to earn excessive profits.
D) The action violates public policy.
E) The action is oppressive or unscrupulous.

Question 78

The U.S.Supreme Court has held the following actions by a distributor imposed on the retail sellers of its products will be evaluated under the rule of reason:

A) price ceilings
B) price floors
C) both price ceilings and price floors
D) neither price ceilings nor price floors

Question 79

Which of the following best describes the activities allowable under the Noerr doctrine?

A) Competitors can work together to lobby for passage of laws without being in violation of the antitrust laws.
B) Competitors can agree on the prices at which they will sell their products when the agreement results in lower prices for consumers.
C) Mergers will be allowed under the antitrust laws when one of the companies would have failed in the absence of a merger.
D) Monopoly power is not a violation when it was acquired through superior business skill.
E) A company is free to compete or not compete with any other business,so long as the decision is made unilaterally.

Question 80

Which of the following actions could be acceptable if the purpose is to prevent a company from going bankrupt?

A) price-fixing
B) resale price maintenance
C) price-fixing and setting a price floor
D) merger with another firm
E) merger with another firm and resale price maintenance