Deck 24: Antitrust Laws

Question 1

George believes that antitrust policy should lead to more efficient markets. Based on George's view, which of the following statements is true?

A)George subscribes to both the Chicago and the Harvard Schools of antitrust policy.
B)George subscribes to neither the Chicago School nor the Harvard School of antitrust policy.
C)George subscribes to the Chicago School, but not the Harvard School of antitrust policy.
D)George subscribes to the Harvard School, but not the Chicago School of antitrust policy.

Answer 1

A

Question 2

Which of the following antitrust provisions focuses on monopolization and conspiracies to monopolize?

A)Clayton Act, Section 1
B)Sherman Act, Section 2
C)Sherman Act, Section 1
D)Clayton Act, Section 2

Answer 2

B

Question 3

Which of the following terms refers to an action that interferes with the economic law of supply and demand?

A)conscious parallelism
B)collusion
C)restraint of trade
D)conspiracy

Answer 3

C

Question 4

Advocates of the antitrust goal that preserves small businesses and an economy characterized by many sellers competing with one another would ________.

A)define consumer welfare as an improvement in the allocation of resources without an impairment to productive efficiency
B)argue that when large companies are allowed to merge, fix prices, and participate in joint ventures, jobs are lost and plants are shut down in some areas
C)argue that there is a direct correlation between large corporations, economic power, and control of the political process
D)break up large corporations such as General Motors (GM), International Business Machines (IBM), and Microsoft

Question 5

Which of the following antitrust provisions focuses on the unlawful selling of corporate assets to create a monopoly?

A)Clayton Act, Section 7
B)Clayton Act, Section 2
C)Sherman Act, Section 2
D)Sherman Act, Section 1

Question 6

The Antitrust Division of the Justice Department has concurrent jurisdiction with the Federal Trade Commission (FTC) to enforce the ________.

A)Clayton Act
B)Sherman Act
C)FTC Act
D)Securities Act

Question 7

Which of the following is true of a nolo contendere plea?

A)A nolo contendere plea is an admission of guilt.
B)A nolo contendere plea subjects the defendant to a lesser punishment than would result from conviction at a trial.
C)Like a consent decree, a nolo contendere plea need not be approved by the court.
D)A nolo contendere plea cannot be negotiated between the Justice Department and corporate or individual criminal defendants.

Question 8

Cal believes criminal penalties for antitrust violations should be increased. Donna believes antitrust offenses should be decriminalized. Based on the scenario, which of the following statements can be inferred?

A)Both subscribe to the Chicago School approach to antitrust policy.
B)Both subscribe to the Harvard School approach to antitrust policy.
C)Cal's views are closer to the Harvard School approach to antitrust policy.
D)Donna's views are closer to the Harvard School approach to antitrust policy.

Question 9

In the context of implied agreements established by circumstantial evidence, which of the following are the two major problems that courts have to deal with that violate the Sherman Act?

A)intra-enterprise conspiracy and restraint of trade
B)intra-enterprise conspiracy and conscious parallelism
C)class action suits and restraint of trade
D)class action suits and conscious parallelism

Question 10

A trust is defined as ________.

A)a policy that is based solely on the goal of economic efficiency or the maximization of consumer welfare
B)a business arrangement in which owners of stocks in several companies place their securities with trustees, who jointly manage the companies and pay the owners a specific share of their earnings
C)a policy that is based on the desirability of preserving competition to prevent the accumulation of economic and political power, the dislocation of labor, and market inefficiency
D)a business arrangement in which owners of stocks in several companies place their securities in an account that stores earnings

Question 11

Advocates of ________ argue that when large companies are allowed to merge, fix prices, and participate in joint ventures, jobs are lost and plants are shut down in some areas.

A)the preservation of small businesses and an economy characterized by many sellers competing with one another
B)the prevention of concentration of political and economic power in the hands of a few sellers in each industry
C)the preservation of local control of business and protection against the effects of labor dislocation
D)the promotion of the maximization of consumer welfare using market principles and efficiency criteria

Question 12

A corporation convicted of criminal conduct under the Sherman Act faces a fine of up to ________.

A)$100,000 for each offense
B)$100,000 for all offenses in the aggregate
C)$10,000,000 per offense to a maximum of $100,000,000 for all offenses in aggregate
D)$100,000,000 for each offense

Question 13

To enforce federal antitrust law in civil cases, the Justice Department ________.

A)files an administrative action at the Federal Trade Commission (FTC)
B)files suits in a federal district court
C)files an administrative action at the Interstate Commerce Commission (ICC)
D)files a suit to enforce the law through a private internal administrative action at the Justice Department

Question 14

Which of the following serves as an incentive to bring private actions for the enforcement of antitrust laws?

A)fines and imprisonment
B)precedents rendered by administrative law judges
C)presidential commendations
D)triple the amount for damages and reasonable attorney fees

Question 15

Which of the following activities is judged by the per se standard?

A)exchange of information
B)joint research and development ventures
C)group boycotts
D)vertical price and nonprice restraints

Question 16

Which of the following is true of the enforcement of antitrust laws?

A)Enforcement of antitrust laws is carried out only in the public sectors.
B)Enforcement of antitrust laws is carried out only in the private sectors.
C)The Antitrust Division of the Justice Department exclusively enforces the Sherman Act.
D)The Antitrust Division of the Justice Department has exclusive jurisdiction to enforce the Federal Trade Commission Act.

Question 17

Arnold believes that U.S. firms should be allowed to enter into joint ventures with foreign multinationals without government interference. Betty thinks that the Federal Trade Commission should monitor such joint ventures closely. Based on this scenario, which of the following statements is true?

A)Both subscribe to the Chicago School approach to antitrust policy.
B)Both subscribe to the Harvard School approach to antitrust policy.
C)Arnold's views are closer to the Chicago School approach to antitrust policy.
D)Betty's views are closer to the Chicago School approach to antitrust policy.

Question 18

The defending parties of civil suits, because of the cost of litigation and the attendant bad publicity, choose not to fight a case and instead enter into a ________.

A)consent decree
B)guilty plea
C)price-fixing clause
D)replacement order

Question 19

Which of the following refers to a concerted action by two or more individuals or business entities in violation of the Sherman Act?

A)conscious parallelism
B)collusion
C)restraint of trade
D)conspiracy

Question 20

Which of the following refers to identical actions that are taken independently but nearly simultaneously by two or more leading companies in an industry?

A)conscious parallelism
B)collusion
C)restraint of trade
D)conspiracy

Question 21

Which of the following constitutes a vertical restraint?

A)an anticompetitive agreement between two competitors
B)an exclusive-dealing contract between a manufacturer and a retailer
C)a group boycott by criminal defense attorneys seeking higher fees
D)the formation of a market division by two manufacturers

Question 22

Which of the following is true of the enforcement of the Clayton Act of 1914?

A)When the Clayton Act was enacted, it provided criminal punishment for violators.
B)The Clayton Act does not allow individuals to obtain injunctions.
C)The Justice Department, the Federal Trade Commission, and private individuals and corporations can all enforce Section 7 of the Clayton Act.
D)If a business is found guilty of violating the Sherman Act, this finding cannot be used as evidence of a violation when a party sues for damages under the Clayton Act.

Question 23

Which of the following forms of price discrimination occurs at the buyer level?

A)Secondary-line injury
B)Primary-line injury
C)Quaternary-line injury
D)Tertiary-line injury

Question 24

________ of the Clayton Act prohibits fictitious brokerage payments.

A)Section 2(a)
B)Section 2(d)
C)Section 2(c)
D)Section 2(f)

Question 25

Which of the following terms refers to a price differential that is below the average variable cost for the seller, considered predatory, and therefore illegal, under the Clayton Act?

A)variable pricing
B)price discrimination
C)tying arrangement
D)interlocking directorate

Question 26

Which of the following terms refers to one company's acquisition of another company's assets or stock in such a way that the second company is absorbed by the first?

A)diversification
B)penetration
C)merger
D)collusion

Question 27

Price differences in milk cartons that are slightly different in size falls under ________ of the Clayton Act.

A)Section 2(f)
B)Section 2(d)
C)Section 2(b)
D)Section 2(a)

Question 28

A tying arrangement involves ________.

A)a seller agreeing to sell a product on condition that the purchaser buys a second product
B)two companies with similar products merging to increase their market share
C)one company purchasing another company with similar products using a hostile takeover approach
D)a purchaser agreeing to buy a product at a "suggested retail price"

Question 29

________ involve the acquisition by one firm of another that produces products or services that are not directly related to those of the acquiring firm.

A)Conglomerate mergers
B)Forward vertical mergers
C)Backward vertical mergers
D)Horizontal mergers

Question 30

Courts generally have defined the geographic market as the area in which the defendant's firm ________.

A)competes head-on with others in the relevant product market
B)focuses the bulk of its budget on advertising
C)engages in horizontal price-fixing
D)contracts with retailers in cases involving vertical restraints

Question 31

Notions Corp. holds a dominant position in the market because of its superior line of products. In fact, it now controls 90 percent of the product market within the relevant geographic market. Consumers are willing to pay more for Notions' products despite the fact that a few competitors offer similar products at substantially lower prices. If a competitor were to charge Notions with being a monopolist under Section 2 of the Sherman Act, which of the following statements is true?

A)The competitor's case would fail because a monopoly is defined as a firm having no competition.
B)The competitor's case would fail unless it could show intent on the part of Notions to monopolize the market.
C)The competitor's case would succeed because Notions controls 90 percent of the product market within the relevant geographic market.
D)The competitor's case would succeed because Notions has attained both market power and overwhelming market share.

Question 32

Ottegal, a women's clothing line, decides to acquire a company that owns several retail outlets that sell its clothing. This is an example of a ________.

A)backward horizontal merger
B)forward horizontal merger
C)backward vertical merger
D)forward vertical merger

Question 33

________ occurs when a discriminatory price is passed along from a secondary-line buyer to a retailer.

A)Predatory pricing
B)Primary-line injury
C)Variable pricing
D)Tertiary-line injury

Question 34

The courts' major concern in cases involving vertical price-fixing has been whether the ________.

A)fixed price was reasonable to consumers
B)fixed price was in line with prices charged by competitors retailing the same product
C)retailer made the pricing decision independently or by agreement with the manufacturer
D)manufacturer could remain financially viable at the agreed price

Question 35

________ occurs when a seller cuts prices in one geographic area in order to drive out a local competitor.

A)Secondary-line injury
B)Primary-line injury
C)Quaternary-line injury
D)Tertiary-line injury

Question 36

Landmark Oil Company has a contract with Atlas Oil Stations that requires Atlas to buy all its oil and petroleum products from Landmark only. This is an example of a(n) ________.

A)market division contract
B)vertical price-fixing arrangement
C)tying arrangement
D)exclusive dealing contract

Question 37

Which of the following is true of Section 2(a) of the Clayton Act?

A)Sales can exist without enforceable contracts.
B)Services and intangibles are considered to be commodities.
C)Commodities must be of similar grade and quality.
D)Two sales by a single seller to two purchasers should take place in intrastate commerce.

Question 38

General Auto, a car manufacturer, purchased Bluestone Motors, its competitor, and thus eliminated the competition at its level in the industry. This is an example of ________.

A)a vertical merger
B)a horizontal merger
C)market diversification
D)market penetration

Question 39

Which of the following concepts is important in the determination of a company's relevant product market?

A)advertising budget
B)retail sales tax rate
C)cross-elasticity of demand
D)government spending projections

Question 40

Which of the following activities is judged by the rule-of-reason standard?

A)horizontal price-fixing
B)group boycotts
C)some divisions of markets
D)exchange of information

Question 41

Which of the following is true of the Herfindahl-Hirschman Index (HHI)?

A)The HHI is used to determine whether the Justice Department will challenge a vertical merger.
B)The HHI is calculated by multiplying the market shares of the two firms who intend to merge.
C)The smaller the HHI, the less concentrated the market, and the less likely the Justice Department is to challenge the merger.
D)A postmerger HHI below 1,000 is likely to be challenged.

Question 42

Advocates of the promotion of the maximization of consumer welfare using market principles and efficiency criteria define consumer welfare as an improvement in the allocation of resources without an impairment to productive efficiency.

Question 43

Which of the following acts amended Section 7 of the Clayton Act and introduced a premerger notification requirement into the area of mergers?

A)The Sarbanes-Oxley Act of 2002
B)The Securities Exchange Act of 1934
C)The Federal Trade Commission Act of 1914
D)The Hart-Scott-Rodino Act of 1976

Question 44

Nonprice vertical restraints are restraints used by a manufacturer to limit the territory in which a retailer may sell the manufacturer's products and the number of stores the retailer can operate, as well as the customers the retailer can serve, in a location.

Question 45

Which of the following methods is used to calculate the Herfindahl-Hirschman Index?

A)adding the squares of the market shares of a firm in the relevant product and geographic markets
B)subtracting the market shares of the defendant by the market shares of the competing firm
C)dividing the sum of the market share of each competing firm by the market share of the alleged monopolist
D)multiplying the market shares of the two firms who intend to merge

Question 46

A class action suit is brought by a member of a group of persons on behalf of all members of the group.

Question 47

Restraint of trade is the action that interferes with the political laws governing an economy.

Question 48

If not challenged by the U.S. attorney general within ________, a bank merger is still subject to liability under Section 2 of the Sherman Act if it is shown to have resulted in a monopoly.

A)15 days
B)30 days
C)60 days
D)90 days

Question 49

Price-fixing among competitors is a serious violation of the Sherman Act.

Question 50

Which of the following acts prohibits "unfair methods of competition"?

A)The Clayton Act of 1914
B)The Hart-Scott-Rodino Act of 1976
C)The Federal Trade Commission Act of 1914
D)The Securities Exchange Act of 1934

Question 51

The Chicago School is a market or efficiency approach to antitrust policy.

Question 52

The Harvard School of antitrust policy favors the consolidation of wealth and power into a few firms capable of competing with the largest foreign corporations.

Question 53

The Federal Trade Commission Act of 1914 is important because ________.

A)its narrow language focuses on monopolistic practices
B)its broad language brings antitrust enforcement actions against business conduct prohibited by the Sherman and Clayton Acts
C)it amends the Clayton Act to permit horizontal mergers in cases involving market-division activity
D)it amends the Sherman Act to permit monopolistic behaviors that would otherwise be considered unfair

Question 54

Which of the following is true of the act-of-state doctrine?

A)State-regulated models discourage price-fixing and collaboration among competitors.
B)When the illegal conduct is that of a foreign government, the courts are permitted to examine and decide the merits of any claim alleged.
C)It forbids courts of the United States from evaluating the lawfulness of acts of foreign sovereigns performed within their own territories.
D)It forbids the merger of foreign companies that have significant sales in the United States.

Question 55

Section 1 of the Sherman Act of 1890 forbids monopolizing, attempts to monopolize, or conspiracies to monopolize.

Question 56

A nolo contendere plea is an admission of guilt and is treated as such by a judge.

Question 57

________ of the Clayton Act prohibits an individual from becoming a director in two or more corporations if any of them has capital, surplus, and individual profits aggregating more than $21,327,000 or competitive sales of $2,132,000 when engaged in interstate commerce.

A)Section 2
B)Section 8
C)Section 3
D)Section 7

Question 58

The Herfindahl-Hirschman Index (HHI) is used to determine whether the Justice Department will challenge a ________.

A)forward vertical merger
B)horizontal merger
C)backward vertical merger
D)conglomerate merger

Question 59

According to the guidelines issued by the Justice Department and Federal Trade Commission in 1994, which of the following behaviors can be investigated?

A)a merger of foreign companies that have significant sales in the United States
B)conduct by foreign companies that does not have any foreseeable effect on U.S. companies' import business
C)anticompetitive schemes by exporters that have a significant impact on the United States
D)anticompetitive actions by U.S. firms selling to foreign governments

Question 60

Parens patriae suits are usually brought by a state attorney general on behalf of purchasers and taxpayers in a state.

Question 61

All tying arrangements and exclusive-dealing contracts are per se illegal.

Question 62

The Harvard School proponents of goal 1 (preserving small businesses) are criticized by adherents of the Chicago School, who favor only goal 4 (consumer welfare maximization). Discuss with examples.

Question 63

An economic market situation in which a single business has the power to fix the price of goods or services is called a monopoly.

Question 64

Merger guidelines constitute law and, therefore, serve as more than just an advisory function.

Question 65

Predatory pricing is pricing below the average variable cost in order to drive out competition.

Question 66

Explain the types of activities that are considered to be horizontal restraints of trade.

Question 67

The "sales" element that must be proved by a plaintiff in any action brought under Section 2(a) of the Clayton Act must be three or more actual sales.

Question 68

Discuss arguments for the application of rule-of-reason standard and the per se standard to vertical territorial restraints.

Question 69

State the reasons for the increase in mergers and the criteria for determining the legality of mergers.

Question 70

The Antitrust Enforcement Assistance Act of 1994 gave the Department of Justice authority to negotiate "mutual assistance" agreements with foreign antitrust enforcers.

Question 71

Compare and contrast the Chicago and Harvard Schools' approaches to antitrust policy.

Question 72

Explain the five-step approach to challenge horizontal mergers.

Question 73

If two sales by a single seller to two purchasers take place in intrastate commerce, the Clayton Act does not apply.

Question 74

If cross-elasticity of demand is positive, an increase in price of the alleged monopolistic product will result in consumers' sticking to the same product.

Question 75

Secondary-line injury occurs when competitors of one of the buyers are injured because the seller sold to that one buyer at a lower price than it sold to the others.

Question 76

State-regulated economic models discourage price-fixing and collaboration among competitors, especially when a government actually prohibits competition between firms.

Question 77

Summarize the provisions of the Clayton Act as amended by the Robinson-Patman Act.