Question 1

The U.S. Securities Act of 1933 requires that all securities offered to the public must be registered with the government.

Accepted Answer

This is a requirement of the U.S. Securities Act of 1933.

Question 2

The Williams Act of 1968 consists of a series of amendments to the Securities Act of 1933, and it is intended to protect target firm shareholders from lighting fast takeovers in which they would not have enough time to adequately assess the value of an acquirer's offer.

Accepted Answer

The Williams Act of 1968 is indeed a series of amendments to the Securities Act of 1933, and its purpose is to provide target firm shareholders with enough time to assess the value of an acquirer's offer before a takeover is completed.

Question 3

Mergers and acquisitions are subject to federal regulation only.

Accepted Answer

Mergers and acquisitions are subject to both federal and state regulation. The Federal Trade Commission and the Department of Justice enforce federal antitrust laws, while state attorney generals also have the power to review and challenge mergers under state antitrust laws.

Question 4

A heavily concentrated market is one in which a single or a few firms control a disproportionately large share of the total market.

Accepted Answer

A heavily concentrated market refers to a market in which a single or a few large firms dominate the market, which can create barriers to entry for smaller firms and limit competition.

Question 5

Unlike the Sherman Act, which contains criminal penalties, the Clayton Act is a civil statute and allows private parties injured by the antitrust violations to sue in federal court for a multiple of their actual damages.

Accepted Answer

The statement is true. The Sherman Act contains criminal penalties, while the Clayton Act is a civil statute that allows private parties to sue for damages.

Question 6

Market share is usually easy to define.

Accepted Answer

Market share is not always easy to define because it can depend on how a market is segmented or defined. The scope can vary widely (e.g., by geography, product type, or customer segment), making it complex to accurately determine a company's share of the market.

Question 7

About 40% of all proposed M&A transactions are disallowed by the U.S. antitrust regulators, because they are believed to be anti-competitive.

Accepted Answer

The percentage of proposed M&A transactions disallowed by U.S. antitrust regulators is significantly lower than 40%. Most transactions are approved, with only a small fraction facing regulatory challenges or being blocked due to antitrust concerns.

Question 8

Acquisitions involving companies of a certain size cannot be completed until certain information is supplied to the federal government and until a specific waiting period has elapsed.

Accepted Answer

This statement is referring to the Hart-Scott-Rodino Antitrust Improvements Act, which requires that certain information be provided to the Federal Trade Commission and the Department of Justice before mergers or acquisitions of a certain size can be completed. A waiting period of 30 days (or longer, depending on certain factors) must also elapse before the transaction can be completed.

Question 9

Negotiated agreements between the buyer and seller rarely have a provision enabling the parties to back out, if the proposed transaction is challenged by the FTC or SEC.

Accepted Answer

Negotiated agreements often have provisions allowing for termination or modification if regulatory challenges arise, such as a merger being blocked by the FTC or SEC.

Question 10

Under a consent decree, the regulatory authorities agree to approve a proposed transaction if the parties involved agree to take certain actions following closing.

Accepted Answer

This is true. Consent decrees are often used in mergers and acquisitions to address potential antitrust concerns by requiring the parties to take specific actions after the transaction, such as divesting certain assets or agreeing to pricing limits.

Question 11

In the U.S., the Sherman Act makes illegal all contracts, combinations and conspiracies, which "unreasonably" restrain trade. The Act applies to all transactions and businesses engaging in both interstate and intrastate trade.

Accepted Answer

The Sherman Act primarily applies to interstate commerce. While it has been interpreted broadly to cover a wide range of activities affecting interstate trade, its direct application is to those activities that have a substantial effect on interstate commerce, rather than intrastate trade which is generally governed by state laws.

Question 12

Whenever either the acquiring or the target firm's stock is publicly traded, the transaction is subject to the substantial reporting requirements of federal securities laws.

Accepted Answer

Whenever a publicly traded firm is involved in a transaction, especially in mergers and acquisitions, it is subject to the substantial reporting requirements of federal securities laws such as the Securities Act of 1933 and Securities Exchange Act of 1934. These laws require companies to provide detailed financial and other information to ensure transparency and protect investors.

Question 13

Whenever an investor accumulates 5% or more of a public company's stock, it must make a so-called 13(d) filing with the SEC.

Accepted Answer

This is true. The filing is required by the Securities Exchange Act of 1934 and is intended to provide transparency around significant ownership stakes in public companies.

Question 14

If the regulatory authorities suspect that a potential transaction may be anti-competitive, they will file a lawsuit to prevent completion of the transaction.

Accepted Answer

This is true. Regulatory authorities have the power to block transactions that they believe would lead to anti-competitive outcomes. They will often file a lawsuit or take other legal action to prevent completion of the transaction.

Question 15

In the U.S., the Federal Trade Commission has the exclusive right to approve mergers and acquisitions if they are determined to be potentially anti-competitive.

Accepted Answer

While the Federal Trade Commission (FTC) plays a significant role in reviewing mergers and acquisitions for anti-competitive concerns, it does not have exclusive rights to do so. The Department of Justice (DOJ) also has authority to review and challenge mergers and acquisitions under antitrust laws.

Question 16

Antitrust laws exist to prevent individual corporations from assuming too much market power such that they can limit their output and raise prices without concern for how their competitors might react.

Accepted Answer

Antitrust laws, also known as competition laws, are designed to promote fair competition in the marketplace and prevent monopolies or oligopolies from controlling the market and limiting competition. This is achieved by regulating mergers and acquisitions, prohibiting anticompetitive behavior such as price fixing and market allocation, and enforcing remedies if an individual corporation is found to have violated the antitrust laws.

Question 17

If an investor initiates a tender offer, it must make a 14(d) filing with the SEC.

Accepted Answer

This statement is true. According to the Securities Exchange Act of 1934, any investor initiating a tender offer must file a Schedule 14D with the SEC. This filing provides important information to shareholders, such as the purpose of the tender offer, the price being offered, and the potential risks and benefits of accepting the offer.

Question 18

The market share of the combined firms is rarely an important factor in determining whether a proposed transaction is likely to be considered anti-competitive.

Accepted Answer

The market share of the combined firms is often a crucial factor in determining whether a proposed transaction is likely to be considered anti-competitive. The higher the market share, the more likely it is that the combined entity will have significant market power to raise prices, limit output or choice, or exclude competitors. Thus, the competition authorities often look at the market share of the merged firms, as well as other factors such as barriers to entry, countervailing buyer power, and efficiencies, to assess the potential anti-competitive effects of the merger.

Question 19

Whenever an investor acquires 5% or more of public company, it must disclose its intentions, the identities of all investors, their occupation, sources of financing, and the purpose of the acquisition.

Accepted Answer

This statement is true as per the US Securities and Exchange Commission's rules under Section 13D of the Securities Exchange Act of 1934.

Question 20

The U.S. antitrust regulators are likely to be most concerned about vertical mergers.

Accepted Answer

U.S. antitrust regulators are typically more concerned with horizontal mergers, which occur between companies that compete in the same industry, as these are more likely to reduce competition. Vertical mergers, involving companies at different stages of the production process, are generally less scrutinized unless they significantly impede competition.

Quiz 2: The Regulatory Environment