Question 1

Which of the following is an accurate statement about vertical mergers?

Accepted Answer

Vertical mergers,unlike horizontal mergers,do not directly result in an increase in concentration.Nonetheless,they traditionally have been thought to threaten competition in various ways.

Question 2

Zenith Co.is a company that manufactures cloth.It purchases the cotton required as raw material from Yell Mart.Zenith Co.acquires Yell Mart.Identify the type of merger.

Accepted Answer

A vertical merger is a merger between firms that previously had,or could have had,a supplier-customer relationship.Since Zenith and Yell Mart had a supplier-customer relationship-Zenith being the customer of cotton from supplier Yell Mart-Zenith's acquisition of Yell Mart would be classified as a vertical merger.

Question 3

Section 7 of the Clayton Act prohibits mergers where evidence indicates that the merger:

Accepted Answer

Section 7 of the Clayton Act prohibits mergers where evidence indicates that the merger's effect,in any line of commerce or any activity affecting commerce in any section of the country,may be to substantially lessen competition or tend to create a monopoly.

Question 4

Which of the following is a market share factor that federal regulators consider when determining the legality of horizontal mergers?

Accepted Answer

Courts have traditionally looked at the market share factors when determining legality of horizontal mergers.One of those factors is whether there is a trend toward concentration in the relevant market.

Question 5

The qualitative substantiality test was employed by the Supreme Court in the landmark case of:

Accepted Answer

The qualitative substantiality test was employed by the Supreme Court in the landmark case of Tampa Electric Co.v.Nashville Coal Co.

Question 6

Which Act did the Congress envision as a vehicle in 1914 for attacking practices that monopolists employed to acquire monopoly power?

Accepted Answer

Congress envisioned the Clayton Act as a vehicle for attacking practices that monopolists historically employed to acquire monopoly power.

Question 7

Huge,Inc.owns an East coast grocery chain.It has recently acquired a West coast grocery chain.This is an example of a:

Accepted Answer

In a market extension merger,the acquiring firm expands into a new geographic market by purchasing a firm already doing business in that market.Acquisition of a West coast grocery chain by Huge,which owns an East coast grocery chain,is an example of a market extension merger.

Question 8

One of the elements that must be demonstrated before a challenged tying agreement will be held to violate Section 3 of the Clayton Act is that:

Accepted Answer

For a Section 3 Clayton Act violation,one of the elements that must be demonstrated is that the seller's tying arrangements restrained a "not insubstantial" amount of commerce in the tied product market.

Question 9

Which of the following is an accurate statement about exclusive dealing agreements?

Accepted Answer

Exclusive dealing agreements initially were treated in much the same way as tying agreements.Courts looked at the dollar amount of commerce involved and declared illegal those agreements involving a "not insubstantial" amount of commerce.

Question 10

There is/are no _____ for violating the provisions of the Clayton Act.

Accepted Answer

Because the Clayton Act focuses on probable harms to competition,there are no criminal penalties for violating its provisions.

Question 11

Strong Corp.and Marginal,Inc.are competitors.Strong plans to acquire ownership of Marginal.Which of the following,if true,would help bolster a conclusion that the acquisition is lawful under Clayton Act Section 7?

Accepted Answer

Since Strong and Marginal are competitors,their merger will essentially be a horizontal merger.Such a merger may be deemed lawful under Section 7 of the Clayton Act if there is a "failing company" justification.In this case,that justification would be present if it is true that Marginal is teetering on the brink of bankruptcy and only Strong is interested in purchasing Marginal.

Question 12

_____ attempts to bar mergers that may have an anticompetitive effect.

Accepted Answer

Section 7 of the Clayton Act attempts to bar mergers that may have an anticompetitive effect.

Question 13

Historically,courts seeking to determine the legality of vertical mergers have first tended to look at:

Accepted Answer

Historically,courts seeking to determine the legality of vertical mergers have tended to look at the share of the relevant market foreclosed to competition.If a more than insignificant market share is foreclosed to competition,courts consider other economic and historical factors.

Question 14

Which of the following requires parties to the merger agreement for planned mergers involving dollar values of stock or assets exceeding certain amounts to provide advance notice to the FTC and the Justice Department?

Accepted Answer

The Hart-Scott-Rodino Antitrust Improvement Act of 1976 requires that for planned mergers involving dollar values of stock or assets exceeding certain amounts,the parties to the merger agreement must provide advance notice to the FTC and the Justice Department.

Question 15

Which types of mergers have traditionally been subject to the greatest degree of scrutiny under the Clayton Act?

Accepted Answer

Horizontal mergers-mergers among firms competing in the same product and geographic markets-have traditionally been subjected to the most rigorous scrutiny because they clearly lead to increased concentration in the relevant market.

Question 16

Reliable Corp.owns the nationwide chain of Reliable Auto Repair shops.Although Reliable has the single largest share in the nationwide auto repair market,the intensely competitive nature of this market means that Reliable's share is only 8 percent.In a lawsuit filed against Reliable,the plaintiff alleges that Reliable regularly agrees to provide automobile repairs only if the customer whose car needs repairs also agrees to purchase a certain paste wax manufactured by Reliable.The plaintiff asserts that this practice by Reliable violated Clayton Act Section 3.Which of the following is the strongest argument for Reliable to make in an effort to avoid liability?

Accepted Answer

A major limitation of the Clayton Act Section 3 is that it applies only to tying agreements and exclusive dealing contracts involving the leasing or sale of commodities.Since the plaintiff has alleged that Reliable's tying agreement (auto repair only when customers also buy a paste manufactured by Reliable)has violated Section 3 of the Clayton Act,Reliable's strongest argument in an effort to avoid liability would be that auto repairs are not a commodity.

Question 17

The courts in determining if a merger is anticompetitive will look at the area that will have effects that are direct and immediate.What is the term for this analysis?

Accepted Answer

In evaluating mergers courts will look to the areas that will be directly and immediately affected.This is called the relevant geographic market.

Question 18

Mr.Blue and Mr.Yellow own all the casinos in Delta City.Mr.Green wants to open but finds it too difficult to break into the market.Mr.Green sues Mr.Blue and Mr.Yellow for antitrust violation under the Clayton Act.What is the likely reason for the case being dismissed?

Accepted Answer

A major limitation on the Clayton Act is that is does not cover antitrust allegations surrounding real estate and services.

Question 19

Technoco,Inc. ,a manufacturer of computers and related equipment,has been requiring wholesalers and retailers who purchase computers from it to also purchase printers as a condition of buying computers.One of Technoco's customers has challenged the legality of this practice.Which of the following factors would weigh against the illegality of this practice?

Accepted Answer

Evidence that Technoco is a small company whose total printer sales in the period in question amounted to $19,000 indicates that Technoco's tying arrangements did not restrain a "not insubstantial" amount of commerce in the printer (tied product market).This evidence will confirm that Technoco's tying agreement has not violated Section 3 of the Clayton Act.

Question 20

Mini Corp.and Huge,Inc.are competitors.Mini holds the single largest market share in the markets they compete in.Huge is third in terms of market share.Mini plans to acquire Huge.Which of the following,if true,would help bolster a conclusion that the acquisition is lawful under Clayton Act Section 7?

Accepted Answer

One of the factors that courts have traditionally considered relevant in determining the legality of horizontal mergers is whether there is a trend toward concentration in the relevant market.If it is true that apart from Mini and Huge,there are 25 other competitors now while there were only ten competitors ten years back,then it indicates a trend away from concentration in the market Mini and Huge compete.Therefore,this argument will bolster the conclusion that the acquisition of Huge by Mini is lawful under Clayton Act Section 7.

Quiz 50: The Clayton Act, the Robinson-Patman Act, and Antitrust Exemptions and Immunities