Deck 16: Antitrust

Question 1

Sections 1 and 2 of the Sherman Act have extraterritorial reach.

Answer 1

True

Question 2

Firms can incur liability under Section 2 of the Sherman Act by acquiring or maintaining monopoly power through corporate mergers or acquisitions.

Answer 2

True

Question 3

Courts apply the per se rule when reviewing most tying arrangements and will,therefore,consider business justifications proffered by the tying firm.

Answer 3

False

Question 4

The merger of an airplane manufacturer and an airplane engine manufacturer would normally be considered a conglomerate merger.

Question 5

Market power,the power to control prices or exclude competition in a relevant market,is different from monopoly power.

Question 6

Vertical market division between a franchisor and a franchisee may be lawful when interbrand competition is enhanced by the limitation on intrabrand competition.

Question 7

In Pac.Bell Tel.Co.v.Linkline Commc'ns,Inc.(2009),the Supreme Court ruled that a price-squeezing claim may not be brought under Section 2 when the retail price does not constitute predatory pricing,which requires below-cost retail pricing.

Question 8

Horizontal agreements among competitors to avoid competition on nonprice matters cannot be a violation of Section 1 of the Sherman Act.

Question 9

Predatory pricing is the attempt to eliminate rivals by undercutting their prices to the extent that their competitors lose money and go out of business.

Question 10

The Federal Trade Commission,an independent administrative agency,has the exclusive power to enforce the Federal Trade Commission Act,which is broader than the other antitrust laws.

Question 11

The courts will not require evidence of an explicit agreement to violate the law against horizontal arrangements that restrain trade.

Question 12

The Sherman Act applies only to "trade or commerce" within a state,between the states,or with foreign nations.​

Question 13

Patented or copyrighted products may confer market power on the owner in tying cases when there are high switching costs.

Question 14

Even when a U.S.court finds a foreign corporation in violation of the antitrust laws,any award of damages is meaningless without foreign enforcement of the award unless the foreign corporation has assets in the United States that can be attached to satisfy the judgment.

Question 15

In their interpretation of the Sherman Act,the courts have construed Section 1 to prohibit only those restraints of trade that unreasonably restrict competition.

Question 16

Without further inquiry,boycotts are per se illegal under the Sherman Act.

Question 17

Unilateral conduct may violate Section 1 of the Sherman Act under some circumstances.

Question 18

The Robinson-Patman Act prohibits a manufacturer from making any price discrimination among its customers.

Question 19

In order to avoid an unworkable construction of the Sherman Act,the courts have construed Section 1 to prohibit only those restraints of trade that unreasonably restrict competition.

Question 20

The Local Government Antitrust Act expressly exempts municipalities from antitrust monetary damages,while expressly limiting equitable remedies such as injunctions.

Question 21

The Robinson-Patman Act prohibits:

A) certain price discrimination.
B) monopolies and attempts to monopolize.
C) every contract,combination or conspiracy in restraint of trade.
D) mergers that threaten competition.

Question 22

An equilibrium in which scarce societal resources are allocated to the production of various goods and services up to the point where the cost of the resources equals the benefit society reaps from their use is:

A) productive efficiency.
B) allocative efficiency.
C) true efficiency.
D) product efficiency.

Question 23

Which of the following is true regarding monopoly law in China?

A) Each offense is specifically set forth with no catch-all provisions.
B) It is not used against foreign investors.
C) It prevents behavior classified as abuse of dominant market position.
D) China lacks an antimonopoly law,although drafting has been in process for several years.

Question 24

Showing that ostensibly independent firms consistently set prices at the same levels and change prices at the same time in an attempt to conspire horizontally is known as:

A) conscious parallelism.
B) intrabrand competition.
C) tying arrangements.
D) predatory pricing.

Question 25

What was the first U.S.antitrust law?

A) The Hart-Scott-Rodino Antitrust Improvements Act
B) The Robinson-Patman Act
C) The Clayton Act
D) The Sherman Act

Question 26

Section 2 of the Sherman Act prohibits:

A) price discrimination.
B) monopolies and attempts to monopolize.
C) every contract,combination,or conspiracy in restraint of trade.
D) mergers that threaten competition.

Question 27

Which of the following is true regarding conscious parallelism?

A) Proof,standing alone,that firms changed prices at the same time is sufficient to prove a horizontal conspiracy to set prices regardless of whether the firms initially set prices at the same levels.
B) Proof,standing alone,that firms initially set prices at the same levels is sufficient to prove a horizontal conspiracy to set prices regardless of whether the firms later changed prices at the same time.
C) Showing that firms consistently set prices at the same levels and change prices at the same time is sufficient to prove a horizontal conspiracy to set prices.
D) Merely showing that firms consistently set prices at the same levels and change prices at the same time is insufficient to prove a horizontal conspiracy to set prices.

Question 28

__________ competition is competition between companies producing the same type of product.

A) Intrabrand
B) Interbrand
C) Vertical
D) Oriented

Question 29

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

A) The U.S.Department of Justice and the Federal Trade Commission act as enforcement agents for the federal antitrust laws.
B) Only the U.S.Department of Justice acts as an enforcement agent for the federal antitrust laws.
C) Only the Federal Trade Commission acts as an enforcement agent for the federal antitrust laws.
D) The U.S.Department of Justice and the Consumer Fairness Commission act as enforcement agents for the federal antitrust laws.

Question 30

Which of the following is a tenet of the Chicago School's economic thought?

A) Attempts at regulation often actually decrease the competitiveness of markets.
B) The efficacy of the government's regulation of commerce and markets is unquestionable.
C) The number of truly per se violations of the antitrust laws is masked by the Sherman Act.
D) Market forces are seldom sufficient to defeat most anticompetitive practices.

Question 31

Under which of the following situations will courts usually find pricing legal?

A) When the prices are above average variable cost but below average total cost and the company has excess capacity.
B) When the prices are above average variable cost but below average total cost and the company does not have excess capacity.
C) When the prices are below average variable cost and below average total cost and the company does not have excess capacity.
D) Only when prices are above both average variable cost and average total cost.

Question 32

Which of the following is true regarding private suits to enforce the Sherman Act?

A) Private plaintiffs may recover three times the damages they have sustained as a result of violations of the act.
B) Liability is joint and several among all conspirators.
C) There is no requirement of standing.
D) Private plaintiffs may recover three times the damages they have sustained as a result of violations of the act,and liability is joint and several among all conspirators.

Question 33

For a monopoly to be found illegal,which of the following is relevant after market power is established?

A) Single brand market
B) Multiple brand market
C) Collusion
D) Monopolistic intent

Question 34

Which of the following is an approach to analyzing the reasonableness of a restraint of trade?

A) Totality rule
B) Per se rule
C) Rule of reason
D) Both the per se rule and the rule of reason

Question 35

The European Union takes a stricter view of vertical territorial restraints because of their tendency to impede continent-wide market integration.

Question 36

The per se ban on horizontal market division extends to:

A) conglomeration activity.
B) both potential and actual competitors.
C) setting of prices only.
D) The per se rule is not applicable in horizontal market division.

Question 37

The main goal of Section 7 of the Clayton Act is to prohibit:

A) price discrimination.
B) monopolies and attempts to monopolize.
C) every contract,combination or conspiracy in restraint of trade.
D) mergers that threaten competition.

Question 38

Which of the following refers to the principle that unless barriers to entry or other factors make a market structurally conducive to monopolization,pricing below cost is not a Sherman Act violation,regardless of whether the defendant had monopolistic intent?

A) The principle of certainty
B) The principle of uncertainty
C) The rule of improbability
D) The rule of impossibility

Question 39

One of the major differences between U.S.and European Union competition laws is the European Union's treatment of horizontal agreements.

Question 40

A(n)__________ is made up of product or service offerings by different manufacturers or sellers that are economically interchangeable and may therefore be said to compete.

A) interchangeable-brand product market
B) market power interchange
C) multiple-brand product market
D) consumer surplus brand market

Question 41

The agreement of all the commercial airlines not to lower their fares would be an example of a:

A) vertical restraint of trade.
B) horizontal restraint of trade.
C) tying arrangement.
D) monopoly.

Question 42

In CASE 16.1 Leegin Creative Leather Products,Inc.v.PSKS,Inc.(2007),Leegin instituted a retail pricing and promotion policy and refused to sell to retailers that discounted Brighton goods below Leegin's suggested retail prices.PSKS sued Leegin,alleging that Leegin had violated the antitrust laws by "enter[ing] into agreements with retailers to charge only those prices fixed by Leegin." The court agreed with PSKS that it is per se illegal for a manufacturer to agree with its distributor to set the minimum price that the distributor can charge for the manufacturer's goods.The appeal of this decision involved a question of whether _____ should be analyzed under the _____.

A) resale price maintenance agreements; rule of reason
B) a horizontal conspiracy; per se rule
C) conglomerate mergers; per se rule
D) a vertical conspiracy; rule of reason

Question 43

Which of the following is NOT a defense to a Robinson-Patman price discrimination claim?

A) Predatory pricing
B) Not actual competitors for the same customer
C) Cost justification
D) Changing conditions

Question 44

Which of the following is NOT true regarding Section 2 of the Sherman Act?

A) Unilateral conduct may violate Section 2.
B) Section 2 allows the mere possession of monopoly power.
C) A firm violates Section 2 even if attains the monopoly power by superior performance.
D) The offense of monopolization has two elements: monopoly power and proof that the defendant willfully acquired or maintained that power through anticompetitive acts.

Question 45

Horizontal price-fixing,such as an agreement between retailers to set a common price for a product,is the classic example of a(n)__________ violation of Section 1 of the Sherman Act.

A) per se
B) intentional
C) rule of reason
D) willful

Question 46

In a monopolized market,the deadweight loss is calculated as:

A) the difference between the value of a good to consumers (measured by the price they would be willing to pay for the good)and the price they actually must pay to obtain the good.
B) the difference between the cost to producers of producing a good (measured by the minimum price at which they would sell a given quantity of the good)and the price they actually receive in the market.
C) the difference between total surplus in a competitive market and total surplus in a monopolized market.
D) the equilibrium at which scarce societal resources are allocated to the production of various goods and services up to the point where the cost of the resources equals the benefit society reaps from their use.

Question 47

What must a plaintiff demonstrate for liability to attach under Section 1 of the Sherman Act?

Question 48

What is a natural monopoly,and what can be done to keep natural monopolies from overcharging customers?

Question 49

In Illinois Tool Works,Inc.v.Independent Ink,Inc.,the question was whether a patented product in a tying arrangement creates a presumption of market power in that product.What did the court rule?

A) The court upheld earlier law and ruled that the existence of a patent in a tying arrangement creates a presumption of market power.
B) The court ruled that tying arrangements involving a patented product should be evaluated under the rule of reason standard rather than under the per se rule.
C) The court ruled that tying arrangements involving a patented product should be evaluated under the per se rule rather than under the rule of reason standard.
D) Overturning prior law,the court ruled that the matter was irrelevant because all tying arrangements are illegal regardless of whether or not a patented product is involved.

Question 50

Happy City has three distributors of milk products.Shawn,who owns a grocery store,angers one of the distributors by insisting that additional milk be delivered on Christmas Eve.Shawn annoys another distributor after making a delivery driver wait to deliver milk.The three distributors get together and discuss the fact that they like all the other grocers in town better than Shawn.One of them has an idea that they should stop selling milk products to Shawn.The milk distributors call their friends the meat distributors and talk them into not selling meat to Shawn either.Shawn hears about the plot and wants to stop it.Which of the following best describes the agreements between the distributors of milk and meat to not sell to Shawn?

A) It would likely be a boycott.
B) It would likely be a horizontal distribution agreement.
C) It would likely be a vertical distribution agreement.
D) There is no descriptive term in antitrust law because this agreement was among sellers who do not legally have to sell to any particular buyer.

Question 51

A manufacturer that sells its goods both wholesale and at retail is called a(n):

A) conglomerate merger.
B) dual distributor.
C) essential facility.
D) franchise.

Question 52

Which of the following is NOT a factor used in determining the anticompetitive effects of a horizontal merger under the Clayton Act?

A) The level of concentration in the market
B) The market shares of the firms involved in the transaction
C) Whether the market is structurally conducive to anticompetitive behavior
D) The market price of the buyer's stock

Question 53

__________ is the power to control prices or exclude competition in a relevant market.

A) ​Horizontal price-fixing
B) ​Vertical market division
C) ​A tying arrangement
D) ​Market power

Question 54

An acquisition of a magazine publisher by a manufacturer of televisions is considered to be a:

A) vertical merger.
B) horizontal merger.
C) conglomerate merger.
D) product-line merger.

Question 55

The principal European Union rules concerning competition are set forth in Articles 101 and 102 of the:

A) Treaty on the Functioning of the European Union (TFEU).
B) European Commission.
C) Paris Agreement.
D) Global Compact.

Question 56

Which of the following is a component of a market?

A) A product component
B) A geographic component
C) A defined component
D) Both a product component and a geographic component

Question 57

Which of the following best describes the objective of the rule of reason rule?

A) To determine whether the requirements of the per se rule have been satisfied
B) To determine whether,on balance,the activity at issue promotes or restrains competition
C) To determine whether in a particular situation a horizontal price fixing has actually harmed consumers
D) To determine whether providers of a good acted reasonably in engaging in a boycott

Question 58

Merritt runs the best dog grooming shop in town.All the dogs love Merritt,as do the owners.Merritt's popularity is helped by a special type of dog biscuit provided as treats that result in such energy that owners have been known to try them too.Slowly but surely all the other dog grooming shops start to go out of business.Merritt claims surprise when charged with unlawfully monopolizing the dog grooming business.Which of the following would be Merritt's best defense?

A) Merritt primarily provided biscuits,not grooming.
B) Merritt did not intentionally obtain monopoly power or retain it through anticompetitive acts.
C) Merritt did not intentionally obtain monopoly power,and it was legally acceptable to willfully attempt to keep it.
D) Services,not goods,were involved.

Question 59

With a(n)__________ distributorship,a manufacturer limits itself to a single distributor in a given territory,which is a form of _____ restraint of trade.

A) dual; horizontal
B) exclusive; vertical
C) franchise; vertical
D) market-power; horizontal

Question 60

In a __________ action under the Sherman Act,state attorneys general may bring civil actions for injuries sustained by residents of their respective states.

A) parens patriae
B) private attorneys general
C) Herfindahl-Hirschman
D) resale price maintenance

Question 61

Discuss the basic U.S.rule for evaluating whether monopolistic action under the Sherman Act is violated by acts affecting U.S.imports where the anticompetitive conduct occurs offshore,but the adverse impact is felt in the United States.When,if ever,is conflicting law between a foreign country and the United States a defense?

Question 62

How would a plaintiff establish the existence of a tying arrangement,and under what laws may tying arrangements be challenged?

Question 63

What three factors does a court primarily look to in determining whether a horizontal merger is permissible once the market is defined? Discuss fully.

Question 64

What agencies are responsible for enforcing federal antitrust laws,and how does a Type A corporate leniency from criminal prosecution differ from a Type B leniency?

Question 65

Explain the purpose and scope of the Robinson-Patman Act.What factors will courts use in determining whether a violation has occurred? Discuss fully.