Deck 14: Antitrust and Trade Regulation

Question 1

Monopsony power falls within §2 of the Sherman Act and has been examined in courts much like monopoly power.

Answer 1

True
Explanation: A buyer having price and quantity power is said to have a monopsony on the buying or demand side of the market. Monopsony power falls within §2 of the Sherman Act and has been examined in courts much like monopoly power.

Question 2

Section 2 of the _____ was enforceable against unjustified discounts offered to buyers for the sole purpose of running other suppliers out of the market.

A) Federal Trade Commission Act
B) Robinson-Patman Act
C) Clayton Act
D) Sherman Antitrust Act

Answer 2

B
Explanation: The Robinson-Patman Act was enacted in 1936 to amend §2 of the Clayton Act. Section 2 of the Act was enforceable against unjustified discounts offered to buyers for the sole purpose of running other suppliers out of the market.

Question 3

Antitrust is the area of law which keeps the market open by regulating business activities.

Answer 3

True
Explanation: The system regulates production and marketing of goods so that those markets stay open and free to whoever wishes to compete. Antitrust is the area of law which keeps the market open by regulating business activities.

Question 4

A downstream merger occurs when the purchaser acquires the supplier.

Question 5

Failure to comply with the antitrust laws and regulations can result in:

A) improved product quality.
B) increased competition for consumers.
C) liability for the businesses.
D) lower prices.

Question 6

All the member countries of the European Commission (EC) can impose criminal as well as civil and injunctive relief against antitrust violations.

Question 7

Two telecom companies in the same market are vertical competitors.

Question 8

The U.S. basketball leagues are exempt from antitrust laws.

Question 9

The Federal Trade Commission has both criminal and civil jurisdiction.

Question 10

The Clayton Act:

A) declared interlocking directorates both unlawful and criminal.
B) allows selling a product at different prices to similarly situated buyers.
C) is enforced solely by the Department of Justice.
D) declared corporate mergers unlawful but not criminal. The Clayton Act declared four practices unlawful but not criminal: (1) price discrimination-selling a product at different prices to similarly situated buyers; (2) exclusive dealing contracts including tie-ins; (3) corporate mergers; and (4) interlocking directorates.

Question 11

Vertical boycott agreements occur when a seller agrees with some of its customers that it will not sell to another.

Question 12

Oligopolies are not free to interact independently outside the reach of the Sherman Act and the FTC §5.

Question 13

Suppression of free trade does not include a business buying or merging with all of its competition so that consumers no longer have a choice.

Question 14

Price sharing activities by trade associations are per se violations of the antitrust laws.

Question 15

Failure to notify the DOJ of the intent to merge can hold companies liable under the Hart-Scott-Rodino Act of 1976.

Question 16

State attorneys general are free to litigate on behalf of their state citizens individually.

Question 17

Like horizontal agreements, the per se rule also applies to vertical agreements which merely affect prices.

Question 18

Which of the following statements is true about the Sherman Antitrust Act?

A) It does not penalize contracts in restraint of trade or commerce.
B) Section 2 of the Act prohibits monopolizing or the attempt to monopolize.
C) The provisions of this act are enforced by the Federal Trade Commission.
D) It declared interlocking directorates unlawful.

Question 19

The per se analysis is a conclusive presumption of illegality.

Question 20

According to the American system of economics:

A) the market of goods and services should remain free, and open to all.
B) the market of goods and services is not open to those who deliver shoddy goods.
C) decreased competition will increase consumer choices.
D) decreased competition will lead to improvement in the quality of goods or services delivered. The heart of the American system of economics is its capitalist approach to business.

Question 21

GenX Mobiles' most popular product is their 3G smart phone called "Sphinx." They recently launched a new series of MP3 players; but the product failed to garner the desired market share. GenX then decided to tie the sales of the MP3 player to "Sphinx". This marketing strategy used by GenX Mobiles would be a violation of the:

A) Federal Trade Commission Act.
B) Robinson-Patman Act.
C) Clayton Act.
D) Sherman Antitrust Act.

Question 22

Two shipping companies, primarily involved with the transport for oil, decide to sign an agreement fixing their carrier prices. A court reviewing this conduct:

A) will hold the agreement as a per se violation of the antitrust laws.
B) will declare the conduct as a reasonable restraint on trade.
C) will use the rule of reason approach to decide on its unreasonableness.
D) will hold the agreement valid as per the Sherman Antitrust Act.

Question 23

A cement company and a company that supplies sand to the cement manufacturer are _____.

A) lateral competitors
B) vertical competitors
C) horizontal competitors
D) zonal competitors

Question 24

A(n) _____ is an agreement between two or more competitors not to sell to or buy from an individual or company or group.

A) boycott
B) tie-in
C) cartel
D) merger

Question 25

Which of the following statements is true for cartels?

A) Their purpose is to try to control prices through control of the output.
B) They are prohibited under §2 of the Sherman Act.
C) They are most successful when they have a large number of members.
D) They are a way to attain vertical price fixing.

Question 26

The National Association of Attorneys General (NAAG):

A) published guidelines by which antitrust laws can be enforced uniformly across all states, through federal activity.
B) formed the Multistate Antitrust Task Force to bring about a uniform approach to antitrust law in the states.
C) does not permit indirect suits on behalf of aggrieved citizens who are impacted by antitrust violations.
D) does not permit state attorneys general to litigate freely on behalf of their state citizens individually.

Question 27

A _____ is determined by looking at like products in a particular market.

A) demographic market
B) labor market
C) geographic market
D) product market

Question 28

Which of the following statements is true for per se violations?

A) All vertical anticompetitive efforts are per se violations.
B) Such violations are not always regarded illegal.
C) An attempt to monopolize is not a type of per se violation.
D) They are held by courts to be inherently unreasonable.

Question 29

The _____ was created by the Congress to further enforce antitrust violations and to improve, and develop antitrust policy.

A) NAAG
B) DOJ
C) UCC
D) FTC

Question 30

Which of the following behaviors is a horizontal per se violation?

A) Tie-ins
B) Exclusive dealing contracts
C) Cartels
D) Exclusive selling agreements

Question 31

Which of the following statements is true for the Federal Trade Commission Act of 1914?

A) It limits the Federal Trade Commission (FTC) to equitable remedies.
B) The Act provides criminal penalties to those whose violate it.
C) It provides that unfair or deceptive practices are subject to criminal penalties.
D) It only covers monopolization cases and declares them unlawful.

Question 32

Boycotts:

A) aren't anticompetitive.
B) don't restrain trade.
C) increase competition.
D) are illegal per se.

Question 33

In order to establish a per se violation alleging tying,

A) there must be two products.
B) there must be power in the tied product market.
C) the power in the tied product must be used to eliminate competition for the tying product.
D) there must be an insubstantial amount of commerce affected in the tied product market.

Question 34

Fresno Computers and Seattle Softwares are two computer manufacturing companies in the west coast of the U.S.A. They, non-contractually, agreed on a price range within which they will set the prices of their laptops. Under this situation:

A) they are not in violation of any antitrust laws because they only agreed upon a price range, not a definite fixed price.
B) the courts will not consider their agreement inherently anticompetitive and examine it as per the rule of reason approach.
C) they are not in violation of any antitrust laws because there was no written agreement between the two companies regarding the price fixing.
D) the courts will consider their act anticompetitive because price fixing agreements which merely affect price are also per se violations.

Question 35

Arrangements whereby dealers agree to resell the product only within specified territories and to solicit business only from specified classes of customers are:

A) subject to per se violations.
B) subject to the rule of reason.
C) found to be anticompetitive.
D) found to be inherently unreasonable.

Question 36

The Robinson-Patman Act barred price discrimination unless:

A) it was necessary to facilitate a corporate merger.
B) it was supported by the need to eliminate competition.
C) it was supported by cost savings.
D) it was necessary to create a monopoly.

Question 37

A court can measure the anticompetitive effects of a defendant's conduct by the:

A) unfair practices approach.
B) antitrust approach.
C) per se approach.
D) grievance method.

Question 38

Identify the behavior which is both a horizontal and vertical per se violation.

A) Cartels
B) Price fixing
C) Exclusive dealing contracts
D) Exclusive selling agreements

Question 39

An agreement among competitors to divide markets by territory:

A) is analyzed under the rule of reason approach.
B) does not require a proof of agreement to be declared anticompetitive.
C) has a greater effect than even price fixing.
D) is not regarded by courts as being inherently unreasonable.

Question 40

The rule of reason approach:

A) examines the effects of the anticompetitive behavior before passing judgment.
B) is a conclusive presumption of illegality.
C) assumes a conduct to be inherently unreasonable.
D) requires no inquiry to determine the reasonableness of an anticompetitive act.

Question 41

Which of the following activities by trade associations may be viewed as anticompetitive?

A) Decisions to exclude buyers that do not support the trade association.
B) Price sharing without identification of individual customers.
C) Open business meetings or open membership meetings.
D) Price sharing without requiring its members to make daily reports.

Question 42

A silicon chip manufacturer agreed to purchase computers from a computer firm that buys its silicon chips from the first firm. After the agreement, neither of the two companies bought from outside competitors, thereby closing off the markets of the two firms. This is an example of _____.

A) foreclosure
B) entrenchment
C) reciprocity
D) arbitration

Question 43

The retail gas market, where a small number of firms control a large majority of the market, is an example of a(an) _____.

A) monopoly
B) oligopsony
C) monopsony
D) oligopoly

Question 44

The practice of selling below cost for the purpose of eliminating competition is called:

A) group boycotting.
B) predatory pricing.
C) price skimming.
D) price gouging.

Question 45

A merger:

A) is not covered by the United States antitrust laws and regulations.
B) occurs through either a stock or asset purchase of one firm by another.
C) doesn't come under the jurisdiction of the Department of Justice.
D) can only be of the conglomerate type to be anticompetitive.

Question 46

Which of the following statements is true for conglomerate mergers?

A) They occur when one firm purchases either a customer or a supplier.
B) They do not change the ownership of firms in the markets.
C) There are no anticompetitive effects of forming a conglomerate.
D) They are mergers in which the merging firms had no prior relationship. Conglomerate mergers are those in which the merging firms had no prior relationship.

Question 47

Monopolistic behavior includes:

A) acquisition of competitors.
B) charging unreasonably high cost for products.
C) forming sports franchises.
D) making tying arrangements.

Question 48

In either an upstream or downstream merger:

A) the ownership of the competitors change.
B) the number of competitors increase.
C) the market share of the purchaser decreases.
D) the anticompetitive effects are not apparent.

Question 49

Which of the following professional sports is exempt from antitrust laws?

A) Ice Hockey
B) Soccer
C) Baseball
D) Basketball

Question 50

Exclusive dealing agreements, pursuant to which the buyer undertakes to purchase all its requirements for the product from the seller, are governed by the _____.

A) Robinson-Patman Act
B) Clayton Act
C) Federal Trade Commission Act
D) Sherman Antitrust Act

Question 51

When there is an acquisition, _____ means that other firms can no longer deal with the acquired firm.

A) boycotting
B) foreclosure
C) arbitration
D) entrenchment

Question 52

The EC Treaty:

A) governs anticompetitive measures between the member states.
B) does not have any jurisdiction over mergers in the European Union.
C) permits the EC to take private causes of action in antitrust cases.
D) does not allow members to bring an action against violators.

Question 53

_____ is a defense to price discrimination.

A) Noncompetitive defense
B) Practical liability
C) Meeting competition defense
D) Cost verification defense

Question 54

If a cell phone manufacturer purchases a microchip business, it creates a(an):

A) downstream merger.
B) horizontal merger.
C) upstream merger.
D) conglomerate merger.

Question 55

Power of a buyer to dominate the market is called _____.

A) oligopsony
B) monopsony
C) monopoly
D) oligopoly

Question 56

Identify the correct statement about a monopsony.

A) It happens when there is a monopoly on the demand side of the market.
B) It is not regarded as a violation of the antitrust laws.
C) It refers to the power of a large seller on the market share.
D) Monopsony power falls within §1 of the Sherman Act.

Question 57

Which of the following statements is true for monopolies?

A) Section 1 of the Sherman Antitrust Act makes it unlawful to monopolize.
B) It is defined as the power to control prices or exclude competition.
C) Market power cannot be measured by the monopolist's share of the relevant market.
D) Some companies enjoy absolute monopoly over their relevant markets.

Question 58

Which of the following statements is true for price discrimination?

A) The Robinson-Patman Act doesn't provide any defenses to price discrimination.
B) It is permitted on discounts or gifts given in connection with the sale of a product.
C) It refers to charging different prices to buyers of the same product at different times.
D) It is a violation under section 2 of the Robinson-Patman Act.

Question 59

The new Chinese antimonopoly law enacted in August 2007:

A) is the first antitrust law in South East Asia.
B) regulates the concentration of undertakings.
C) promotes a healthy capitalist market economy.
D) imposes criminal liability against violators.

Question 60

An oligopoly:

A) includes only one company that exerts control over most of the market.
B) comprises of a large number of competitors who own the market.
C) includes only one large buyer dominating a particular market.
D) comes under Section 1 of the Sherman Act.

Question 61

Explain the defenses to price discrimination.

Question 62

What are per se violations? Give two examples.

Question 63

Why are horizontal mergers subject to most scrutiny?

Question 64

Distinguish between a monopoly and a monopsony.

Question 65

What is meant by oligopoly?

Question 66

Describe Section 1 and Section 2 of the Sherman Antitrust Act. Which covers an oligopoly?

Question 67

Define horizontal and vertical boycott.

Question 68

State the main goals of the new Chinese antimonopoly law.

Question 69

What is entrenchment?

Question 70

Give a few examples under which trade associations can be held liable for violation of the antitrust laws.

Question 71

What is meant by horizontal price fixing?

Question 72

Explain the Hart-Scott-Rodino Act of 1976.

Question 73

What are the two main elements of monopolization?

Question 74

Describe the provisions of the Robinson-Patman Act.

Question 75

What is a vertical merger? Distinguish between upstream and downstream mergers.