Question 1

Zippy Moto-Bikes,Inc. ,wants to prevent discount dealers that carry its products without providing warranty services from cutting into the business of full-service dealers.Zippy's decision to restrict discount dealers to one type of customer and full-service dealers to another is
A)not subject to antitrust law.
B)per se violations of the Sherman Act.
C)subject to evaluation under the rule of reason.
D)violations of the Clayton Act.

Accepted Answer

Zippy Moto-Bikes, Inc.'s decision to restrict discount dealers to one type of customer and full-service dealers to another is subject to evaluation under the rule of reason, which weighs the anti-competitive effects of a business practice against its pro-competitive benefits. It is not an automatic violation of antitrust law, but it could be deemed unlawful if it substantially harms competition without serving a legitimate business purpose. The Sherman Act's per se violations apply to horizontal price-fixing, market allocation, and group boycotts, none of which appear to be present in this scenario. The Clayton Act prohibits certain types of conduct that may substantially lessen competition or tend to create a monopoly.

Question 2

Electroplate Dishware Corporation conditions shipments of its products to Flo-Thru Stores,Inc. ,on Flo-Thru's agreement not to buy products from Glassy Ware Company,Electroplate's competitor.This is
A)an exclusive-dealing contract.
B)a smart business deal.
C)a trade association.
D)a tying arrangement.

Accepted Answer

This is an example of an exclusive-dealing contract, where one party agrees to sell its products to another party on the condition that the buyer will not purchase products from a competitor.

Question 3

Smooth Sailing,Inc. ,conditions future shipments of its products to distributors on their agreement to charge the prices set by Smooth.This is
A)a barrier to entry.
B)a horizontal restraint.
C)a merger.
D)a vertical restraint.

Accepted Answer

This is a classic example of a vertical restraint, where Smooth Sailing is imposing conditions on its distributors to charge the prices set by Smooth in exchange for future shipments of its products. This type of arrangement between manufacturers and distributors is common, but it has the potential to limit competition and consumer choice if it is applied too broadly.

Question 4

Lightning Cycles,Inc. ,makes Lightning-brand motorcycles and accessories,which are distributed to authorized dealers,including Macho Motors,Inc.Macho operates dealerships in several locations.Lightning imposes territorial restrictions on Macho to insulate other dealers from direct competition.This is
A)a situation that neither restrains trade or harms competition.
B)a legal restraint of trade.
C)a per se violation of antitrust law.
D)subject to analysis under the rule of reason.

Accepted Answer

Territorial restrictions are subject to analysis under the rule of reason, where their anticompetitive effects are weighed against any procompetitive justifications. It is necessary to assess whether the territorial restrictions harm competition, and if so, whether they promote any procompetitive effects.

Question 5

Health Resources Corporation makes and sells Intake,the most prescribed name-brand cholesterol-lowering medication.Jerichol Company has the potential to make a generic version of the same drug.Health Resources pays Jerichol not to sell its product.This is
A)a customer restriction.
B)a group boycott.
C)an exclusive-dealing contract.
D)a price-fixing agreement.

Accepted Answer

The answer of Health Resources Corporation makes and sells Intake,the...

Question 6

Seaside Cannery,Inc. ,is one of many producers of canned seafood.Seaside refuses to sell its products to Troll Harbor Restaurant Corporation.This refusal is most likely
A)an anticompetitive practice in violation of the Clayton Act.
B)a per se violation of the Sherman Act.
C)a violation of the Sherman Act under the rule of reason.
D)not a violation of antitrust law.

Accepted Answer

Refusing to sell to a particular buyer is not necessarily a violation of antitrust law, as it is within a company's rights to choose its customers. There is no evidence of anticompetitive behavior or monopolization in this scenario.

Question 7

Greeting Cards,Inc.(GCI),requires that the buyers of its line of greeting cards also agree to buy GCI t-shirts,balloons,and other products.This is
A)a group boycott.
B)an exclusive-dealing contract.
C)a price-fixing agreement.
D)a tying arrangement.

Accepted Answer

This is a tying arrangement where GCI is forcing the buyers to purchase their other products (t-shirts, balloons, etc.) along with their greeting cards. This practice can be anti-competitive as it limits the buyers' choices and can create barriers for new businesses to enter the market.

Question 8

Smoothwater Driftboat Corporation refuses to sell its products to Sportsters Weekend,Inc. ,a recreational products dealership.This is
A)price discrimination.
B)a horizontal market division.
C)an exclusive-dealing contract.
D)a unilateral refusal to deal.

Accepted Answer

This scenario describes a unilateral refusal to deal, where Smoothwater Driftboat Corporation is refusing to sell their products to Sportsters Weekend, Inc for unknown reasons. This is not price discrimination because it is not based on different pricing for different buyers. It is also not a horizontal market division because Smoothwater is not dividing up the market with other firms. It is not an exclusive-dealing contract because there is no agreement being made between the two firms.

Question 9

Nano Software,Inc. ,conditions the sale of its OfficeBooks product on Payroll Personnel Company's agreeing to buy QuikReVu,Nano's photo-editing product.This deal is
A)legal,depending on its purpose and the effect on competition.
B)legal,depending on production and transportation costs.
C)legal under any circumstances.
D)not legal under any circumstances.

Accepted Answer

This deal is a condition of sale and may fall under antitrust laws. Therefore, its legality would depend on its purpose and the effect on competition. It would have to be evaluated by regulatory authorities to determine if it violates any antitrust laws.

Question 10

Crop Yield Corporation,Dextros Harvest Company,and Equip Enterprises,Inc. ,are farm-equipment distributors that control 90 percent of the market for their products in a certain geographic area.The firms agree to sell their products for the same prices.This is
A)a group boycott.
B)a merger.
C)a price-fixing agreement.
D)a tying arrangement.

Accepted Answer

This is a price-fixing agreement, as the firms are agreeing to sell their products for the same prices, resulting in a lack of competition and artificially controlling the market.

Question 11

Cardio,Inc. ,makes and sells Drawdown,the most prescribed name-brand heart medication.Emitate Corporation has the potential to make a generic version of the same drug.Cardio pays Emitate not to sell its product.This is most likely
A)a deal that neither restrains trade or harms competition.
B)a legal restraint of trade.
C)a per se violation of the Sherman Act.
D)subject to analysis under the rule of reason.

Accepted Answer

The answer of Cardio,Inc. ,makes and sells Drawdown,the most prescribed...

Question 12

Perfecto Appliance Company,Qualité Kitchens Corporation,and Royale Products,Inc. ,control 90 percent of the market for appliances in a certain geographic area.Perfecto,Qualité,and Royale agree to sell their appliances for the same prices,and to exclude Superia Appliances,Inc. ,which controls the other 10 percent of the market.This is
A)an anticompetitive practice in violation of the Clayton Act.
B)a per se violation of the Sherman Act.
C)a violation of the Sherman Act under the rule of reason.
D)not a violation of antitrust law.

Accepted Answer

This is a per se violation of the Sherman Act since the companies have agreed to set prices and exclude a competitor. This behavior is considered illegal without needing further analysis under the rule of reason.

Question 13

Delta Services,Inc. ,is the major wholesale distributor of software in the state of Florida.Its closest competitor is Efficient Systems Company,another Florida firm.The two firms agree that Delta will operate in south Florida and Efficient will operate in north Florida.This is
A)a group boycott.
B)a market division.
C)a price-fixing agreement.
D)a tying arrangement.

Accepted Answer

This is a market division where the two firms agree to divide the market geographically instead of competing with each other.

Question 14

Engine Components,Inc. ,a manufacturer of vehicle parts,refuses to sell to Fix-It,Inc. ,a national vehicle service firm.Engine Components convinces Greasy Motor Parts Company,a competitor,to do the same.This is
A)a group boycott.
B)an exclusive-dealing contract.
C)a price-fixing agreement.
D)a tying arrangement.

Accepted Answer

This is an example of a group boycott, where two competing companies refuse to do business with a third party.

Question 15

Energy Power,Inc. ,joins with other businesses in its industry to exchange information,represent members' interests before Congress,and lobby for certain regulatory standards.These joint activities are
A)not subject to antitrust law.
B)per se violations of the Sherman Act.
C)subject to evaluation under the rule of reason.
D)violations of the Clayton Act.

Accepted Answer

Joint activities among businesses in an industry are subject to evaluation under the rule of reason. While such activities may have some anticompetitive effects, they may also have pro-competitive effects such as creating industry standards, improving efficiency, and reducing transaction costs. Therefore, these activities are evaluated on a case-by-case basis to determine whether they are anticompetitive, based on factors such as market power, potential harm to consumers, and any pro-competitive benefits.

Question 16

XtraOrdinaire Inc.competes with Yowza! Company in the same market.Their merger would be
A)a horizontal merger.
B)an interlocking directorate.
C)a tying arrangement.
D)a vertical merger.

Accepted Answer

A horizontal merger refers to the combination of two companies that operate in the same market and offer similar products/services. In this case, XtraOrdinaire Inc. and Yowza! Company are competitors in the same market. Therefore, their potential merger would be considered a horizontal merger.

Question 17

Indigo Packaging,Inc. ,a manufacturer of packaging papers and boxes,refuses to sell to Jiffy Quik,Inc. ,a delivery service firm.Indigo convinces Knotty Box Company,a competitor,to do the same.This is
A)a group boycott.
B)an exclusive-dealing contract.
C)a price-fixing agreement.
D)a tying arrangement.

Accepted Answer

This is a group boycott where two competitors, Indigo Packaging and Knotty Box Company, collaborate to refuse selling to Jiffy Quik, Inc. It is an illegal antitrust practice that restricts fair competition.

Question 18

By contract,Quality Metals Corporation forbids Resource Refining,Inc. ,a wholesale buyer of Quality's products,from purchasing the products of Quality's competitors.This exclusive-dealing contract is allowed
A)under any circumstances.
B)unless its effect is to cause a competitor a loss of any business.
C)unless its effect is to substantially lessen competition.
D)unless there is no effect on a competitor.

Accepted Answer

Exclusive-dealing contracts are generally permitted as long as they do not substantially lessen competition. In this case, the contract forbidding Resource Refining, Inc. from purchasing from Quality's competitors could potentially harm those competitors by depriving them of business. Thus, the exclusive-dealing contract would be allowed only if its effect is not to substantially lessen competition. Therefore, option C is the best choice.

Question 19

USA Cellphone Corporation requires all distributors of its products to sell the products at specified minimum prices.This resale price maintenance agreement is
A)a per se violation of antitrust law.
B)a legal restraint of trade.
C)subject to evaluation under the rule of reason.
D)not subject to antitrust law.

Accepted Answer

Resale price maintenance agreements are evaluated under the rule of reason to determine if they have anticompetitive effects or benefits. This means they are not automatically deemed illegal like per se violations, but instead require an assessment of the specific circumstances surrounding the agreement.

Question 20

Grande Zot,Inc. ,an electronics manufacturer,sells its DVD players to Hi-Lo Retail Stores for $50 but charges It's Less! Store-which is located just down the street from Hi-Lo-$75 for the same players.This may be
A)a violation of antitrust law.
B)exempt from antitrust enforcement.
C)not subject to antitrust law.
D)subject only to antitrust common law.

Accepted Answer

This pricing strategy may be seen as price discrimination and could be investigated as a violation of antitrust law. Price discrimination is the act of charging different prices to different customers for the same product. It could be seen as anti-competitive behavior as it may create an unfair advantage for one customer over another. Therefore, this pricing strategy may be subject to antitrust law enforcement.

Quiz 28: Antitrust and Restraints of Trade

Zippy Moto-Bikes,Inc. ,wants to prevent discount dealers that carry its products without providing warranty services from cutting into the business of full-service dealers.Zippy's decision to restrict discount dealers to one type of customer and full-service dealers to another is

Electroplate Dishware Corporation conditions shipments of its products to Flo-Thru Stores,Inc. ,on Flo-Thru's agreement not to buy products from Glassy Ware Company,Electroplate's competitor.This is

Smooth Sailing,Inc. ,conditions future shipments of its products to distributors on their agreement to charge the prices set by Smooth.This is

Health Resources Corporation makes and sells Intake,the most prescribed name-brand cholesterol-lowering medication.Jerichol Company has the potential to make a generic version of the same drug.Health Resources pays Jerichol not to sell its product.This is

Seaside Cannery,Inc. ,is one of many producers of canned seafood.Seaside refuses to sell its products to Troll Harbor Restaurant Corporation.This refusal is most likely

Greeting Cards,Inc.(GCI) ,requires that the buyers of its line of greeting cards also agree to buy GCI t-shirts,balloons,and other products.This is

Smoothwater Driftboat Corporation refuses to sell its products to Sportsters Weekend,Inc. ,a recreational products dealership.This is

Nano Software,Inc. ,conditions the sale of its OfficeBooks product on Payroll Personnel Company's agreeing to buy QuikReVu,Nano's photo-editing product.This deal is

Crop Yield Corporation,Dextros Harvest Company,and Equip Enterprises,Inc. ,are farm-equipment distributors that control 90 percent of the market for their products in a certain geographic area.The firms agree to sell their products for the same prices.This is

Cardio,Inc. ,makes and sells Drawdown,the most prescribed name-brand heart medication.Emitate Corporation has the potential to make a generic version of the same drug.Cardio pays Emitate not to sell its product.This is most likely

Delta Services,Inc. ,is the major wholesale distributor of software in the state of Florida.Its closest competitor is Efficient Systems Company,another Florida firm.The two firms agree that Delta will operate in south Florida and Efficient will operate in north Florida.This is

Engine Components,Inc. ,a manufacturer of vehicle parts,refuses to sell to Fix-It,Inc. ,a national vehicle service firm.Engine Components convinces Greasy Motor Parts Company,a competitor,to do the same.This is

Energy Power,Inc. ,joins with other businesses in its industry to exchange information,represent members' interests before Congress,and lobby for certain regulatory standards.These joint activities are

XtraOrdinaire Inc.competes with Yowza! Company in the same market.Their merger would be

Indigo Packaging,Inc. ,a manufacturer of packaging papers and boxes,refuses to sell to Jiffy Quik,Inc. ,a delivery service firm.Indigo convinces Knotty Box Company,a competitor,to do the same.This is

By contract,Quality Metals Corporation forbids Resource Refining,Inc. ,a wholesale buyer of Quality's products,from purchasing the products of Quality's competitors.This exclusive-dealing contract is allowed

USA Cellphone Corporation requires all distributors of its products to sell the products at specified minimum prices.This resale price maintenance agreement is

Grande Zot,Inc. ,an electronics manufacturer,sells its DVD players to Hi-Lo Retail Stores for $50 but charges It's Less! Store-which is located just down the street from Hi-Lo-$75 for the same players.This may be