Question 1

A manufacturer agrees to sell the distributor 1,000 boxes of 2-quart bowls only if he agrees to resell to the retailer at cost plus $1.10 per bowl and the retailer must agree to sell at no less than his cost plus .50 per bowl.This is:

Accepted Answer

This is an example of vertical price fixing, where the manufacturer and distributor agree on a minimum price for the product at the retail level. The agreement between the distributor and retailer is also a form of resale price maintenance, which is a type of vertical price fixing.

Question 2

Which of the following remedies are available under the Sherman Act?

Accepted Answer

The Sherman Act allows for injunctive relief as a remedy for antitrust violations. It does not provide for damages of four times the actual loss or for consequential damages.

Question 3

If a seller of a product conditions its sale upon the buyer's purchasing a second product from the seller,this is known as a:

Accepted Answer

This is known as a tying arrangement, where a seller makes the sale of one product (the tying product) conditional upon the buyer's purchase of a second product (the tied product). This can be seen as a form of anti-competitive behavior as it can limit the buyer's options and restrict competition in the market.

Question 4

If a type of restraint is characterized as per se illegal:

Accepted Answer

If a type of restraint is per se illegal, it means that it is considered inherently anti-competitive and there is no need for the plaintiff to prove that competition was limited or the court to conduct extensive economic analysis. The plaintiff only needs to show that the restraint occurred.

Question 5

The Clayton Act:

Accepted Answer

The Clayton Act was passed in 1914 and was intended to stop certain trade practices before they become restraints of trade. It sought to prevent anti-competitive mergers, price discrimination, exclusive dealing, and other practices that could harm competition. The act also established the Federal Trade Commission to enforce the antitrust laws. While it did enhance the civil remedies available in antitrust cases, it did not add criminal sanctions like the Sherman Act did. Furthermore, it did not repeal the Robinson-Patman Act, which prohibits price discrimination. Finally, while the Clayton Act did include labor organizations in its coverage, this was not its primary purpose.

Question 6

If Rocco Co.agrees with Cuszo Co.that Rocco will not sell beer in Wisconsin if Cuszo will not sell beer in Colorado,under the Sherman Act,this is:

Accepted Answer

This is a per se illegal horizontal market allocation agreement because Rocco and Cuszo are agreeing to divide the market by allocating specific territories in which they will not sell their products. This anti-competitive behavior restricts consumer choice and limits competition in both regions.

Question 7

The 1936 Act prohibiting price discrimination in interstate commerce involving commodities of like grade and quality is the:

Accepted Answer

The 1936 Act prohibiting price discrimination in interstate commerce involving commodities of like grade and quality is known as the Robinson-Patman Act. It amended the Clayton Act and aimed to prevent large firms from using their market power to discriminate against small competitors.

Question 8

The Sherman Act:

Accepted Answer

The Sherman Act prohibits contracts and combinations in restraint of trade, conspiracies in restraint of trade, and proscribes monopolization and any attempts to monopolize. Therefore, all of the choices are correct.

Question 9

Harry Jones at Jones Brothers Furniture Co.does not like the Bryte Lamp Co.representative,so he decided that Jones Brothers would boycott Bryte.Under the Sherman Act,this is:

Accepted Answer

Boycotting a company based on personal dislike by a business does not violate the Sherman Act as it does not inherently involve anticompetitive practices or agreements that restrict trade. The Sherman Act primarily targets anticompetitive agreements, monopolization, or attempts to monopolize.

Question 10

Three of the airline companies agree that they will not go any lower than $100 each way for coast-to-coast tickets.This is:

Accepted Answer

This is an example of horizontal price fixing where the competing companies have made an agreement to not compete on price and maintain a certain price point for their services.

Question 11

In order for there to be a violation of Section 2 of the Sherman Act,in addition to monopoly power,the courts must find:

Accepted Answer

Section 2 of the Sherman Act prohibits monopolization, which includes both the possession of monopoly power and the willful acquisition or maintenance of that power through improper conduct. Therefore, to establish a violation of Section 2, it is necessary to prove unfair conduct such as predatory pricing, exclusionary practices, or other anticompetitive behavior. Concerted action, competitive behavior, and economic advantage are not the only requirements for a Section 2 violation.

Question 12

A restraint involving collaboration among competitors at the same level in the chain of distribution is:

Accepted Answer

A restraint involving collaboration among competitors at the same level in the chain of distribution is a horizontal restraint. This type of restraint can include agreements among competitors such as price-fixing or market-sharing, and is generally considered anticompetitive and illegal under antitrust laws. Vertical restraints, on the other hand, involve collaboration between firms at different levels in the chain of distribution, such as between manufacturers and retailers. Trusts refer to a specific type of organized collusion among multiple firms, and are not necessarily related to horizontal or vertical restraints.

Question 13

Florence sets her prices to undercut her competitors by 10%.This is:

Accepted Answer

Setting prices to undercut competitors by a certain percentage is a common business practice and it does not necessarily imply any anticompetitive behavior. As such, it is not a violation of the Sherman Act, nor is it per se illegal.

Question 14

If Hyvac Vacuum Cleaners requires that Hyvac bags be used for the warranty to be valid,under the Sherman Act,this is:

Accepted Answer

This is considered a tying arrangement, where the sale of one product (the vacuum cleaner) is conditioned on the purchase of another product (the vacuum bags). Whether this is illegal per se or judged by the rule of reason depends on the economic power of Hyvac and the effect on interstate commerce. If Hyvac has significant market power and the tying arrangement affects a substantial amount of interstate commerce, it could be considered illegal. Otherwise, it might be evaluated under the rule of reason, which involves a more detailed analysis of its actual impact on competition.

Question 15

Under Section 1 of the Sherman Act,which of the following is illegal per se?

Accepted Answer

Horizontal market allocations are illegal per se under Section 1 of the Sherman Act. Vertical market allocations and vertical territorial and customer restrictions may be considered illegal under the rule of reason analysis, which takes into account the specific circumstances and potential anti-competitive effects of the practices. Therefore, choices A and C are not correct. Choice D is not a specific answer and does not provide a clear explanation.

Question 16

Market share greater than what percentage generally indicates monopoly power?

Accepted Answer

The answer of Market share greater than what percentage generally...

Question 17

Enforcement proceedings under the Sherman Act may not be brought by the:

Accepted Answer

The U.S. Commerce Department does not have the authority to bring enforcement proceedings under the Sherman Act. Only the U.S. Justice Department, the Federal Trade Commission, and state Attorneys General have this authority.

Question 18

If all milk producers in the area agree to set a minimum price for raw milk,this would be an example of:

Accepted Answer

Setting a minimum price for raw milk among all milk producers in the area would be an example of horizontal price fixing, in which competitors agree to set a minimum price to avoid undercutting each other and maintain higher profits. It would not be considered horizontal allocation, vertical market restraint, or a tying arrangement.

Question 19

A merger involving firms that are not competitors,customers,or suppliers is termed a:

Accepted Answer

A conglomerate merger is a merger between two firms that are not in direct competition, customers, or suppliers of each other. Instead, they may operate in completely different industries or markets, and the merger is generally viewed as a way to diversify their business operations or to expand into new areas. Tying arrangements, vertical mergers, and horizontal mergers all involve firms that are more directly connected in terms of their business relationships.

Question 20

Sareno Cheese Co.supplies mozzarella cheese to pizza restaurants at $1.50 per pound.In order to snare the business from a pizzeria,Sareno offers to sell them cheese at $1.25 per pound.This will violate the Robinson-Patman Act unless:

Accepted Answer

The Robinson-Patman Act prohibits price discrimination unless it is cost justified by quantity, the product is of a different grade or quality, or the price reduction is made to meet a competitor's price. In this case, Sareno is offering a lower price to a specific customer, which would violate the Act unless the pizzeria can already get the cheese for a lower price elsewhere or Sareno lowers the price to all its customers. Therefore, any of these options would be necessary to avoid violating the Robinson-Patman Act.

Quiz 40: Antitrust