Question 1

Greenmail requires that a friendly suitor is given an option to buy a valuable piece of property owned by the target corporation should a hostile bidder gain control of the corporation.

Accepted Answer

Greenmail refers to the practice where a company buys back its own shares at a premium from a potential acquirer (who has purchased the shares in the open market with the aim of taking over the company) to prevent the takeover attempt, rather than involving the sale of property to a friendly suitor.

Question 2

In the Opening Case,Asadi v.GE Energy,the Court of Appeals used a purposive approach in its holding and analysis.

Accepted Answer

In Asadi v. G.E. Energy (USA), L.L.C., the Court of Appeals for the Fifth Circuit used a textualist approach, focusing on the specific language of the statute rather than the broader purpose or intent behind the law.

Question 3

If Auto Supply refuses to sell hoses to Small Retail Co.unless Small also buys brake shoes from Auto,the action will be classified as an RPM agreement.

Accepted Answer

This action is classified as a tying arrangement, not a Resale Price Maintenance (RPM) agreement. RPM involves the control of prices at which a product is resold, while a tying arrangement requires a buyer to purchase a second product in order to buy the desired product.

Question 4

The process of doing business as a corporate person can sometimes be called ultra vires.

Accepted Answer

Ultra vires refers to actions taken by a corporation that are beyond the scope of its authority as defined in its charter or governing documents.

Question 5

Congress passed the Clayton Act to police and prohibit specific business practices such as interlocking directorates.

Accepted Answer

The Clayton Act was passed in 1914 to strengthen antitrust laws and prohibit specific business practices such as price discrimination and tying arrangements. Interlocking directorates were also addressed in the act as a potential violation of antitrust laws.

Question 6

A golden parachute is an offer by a target corporation to the bidder to acquire a portion of the shares,which are already held by the bidder,at a price greater than when it was originally sold.

Accepted Answer

A golden parachute is actually an agreement in which key executives and employees of a company receive significant benefits if the company is taken over or merged with another company. It is not an offer made to the bidder.

Question 7

Under the quick-look standard,a court will determine whether an objective observer with elementary financial knowledge see that the arrangement under scrutiny could damage competition.

Accepted Answer

The quick-look standard involves a court determining whether an arrangement appears so plainly anticompetitive that it can be declared illegal without a detailed analysis of its market impact. It does not specifically require the perspective of an "objective observer with elementary financial knowledge."

Question 8

If ABC Co.and XYZ Co.agree to charge consumers a fixed,but fair,price for their products,the courts will judge the legality of the practice based on a per se approach,

Accepted Answer

The statement describes a horizontal price fixing agreement between two companies, which is considered illegal under antitrust laws. The courts would apply the rule of reason approach to evaluate the competitive impact and potential justifications of such an agreement, rather than using per se illegality.

Question 9

Under Dodd-Frank,Title IX,known as the Investor Protection and Securities Reform Act,now allows corporations more freedom to self-regulate under the Sarbanes-Oxley Act.

Accepted Answer

The answer of Under Dodd-Frank,Title IX,known as the Investor Protection...

Question 10

In the Classic Case,American Needle,Inc.v.The NFL,the court applied the rule-of-reason standard,which asks judges to balance the pro-competitive results of a challenged arrangement with the anti-competitive results.

Accepted Answer

The statement is true.

Question 11

The power of the states to regulate commerce comes from a state's federal power.

Accepted Answer

The power of the states to regulate commerce is derived from their own inherent police powers to regulate for the health, safety, and welfare of their citizens, not from federal power. The federal government's power to regulate commerce comes from the Commerce Clause of the U.S. Constitution.

Question 12

The Wickard v.Filburn (1824)case held that commercial activity that occurred within a state was subject to federal regulation if that completely in-state activity affected interstate commerce.

Accepted Answer

The Wickard v. Filburn case was decided in 1942, not 1824, and it held that even non-commercial, intrastate activity that could affect interstate commerce might be regulated by the federal government under the Commerce Clause.

Question 13

If ABC Co.is to merge with XYZ Co. ,typically a unanimous vote (100%)of the shareholders will be required.

Accepted Answer

Typically, a merger requires a majority vote of the shareholders, not a unanimous vote. However, it may depend on the specific rules and regulations set by the company and the jurisdiction where it is incorporated.

Question 14

Under the Foreign Trade Antitrust Improvements Act (FTAIA),if an American company is operating totally in a foreign market,that company is not subject to American antitrust law.

Accepted Answer

The FTAIA provides that American antitrust law does not apply to conduct involving foreign commerce unless certain conditions are met, including a direct, substantial, and reasonably foreseeable effect on domestic commerce. If an American company is operating totally in a foreign market without affecting domestic commerce, it would not be subject to American antitrust law.

Question 15

The Robinson-Patman Act gave the President the power to challenge false advertising of food,drugs,and cosmetics,regardless of the advertiser's knowledge of the advertisement's truth or falsity.

Accepted Answer

The Robinson-Patman Act prohibits price discrimination between buyers of the same product, not false advertising. This statement is incorrect.

Question 16

Under Dodd-Frank,the SEC outlawed swap transactions (swaps)which are derivatives that are made in an over-the-counter market.

Accepted Answer

Under Dodd-Frank, the SEC implemented new regulations on swaps transactions in order to increase transparency and reduce risk, but swaps are not outlawed. Swaps are still allowed to be traded in the over-the-counter market, but they must be reported to a swap data repository and cleared through a central counterparty.

Question 17

A leveraged buyout (LBO)always includes junk bonds as part of the investment.

Accepted Answer

While junk bonds are often used in LBOs, they are not a required component and other types of financing can also be used.

Question 18

ABC Co.makes a tender offer to acquire 3% of the stock of XYZ Co.This is considered a merger,and ABC must file with the SEC.

Accepted Answer

A tender offer to acquire only 3% of the stock is not considered a merger and does not require SEC filing.

Question 19

Under Dodd-Frank,a golden parachute is a compensation package that protects executives who might lose their positions following a merger or consolidation.

Accepted Answer

This is an accurate definition of a golden parachute as defined under Dodd-Frank.

Question 20

In the Wickard v.Filburn case (1942),the Supreme Court declared that the private use of wheat on a single-family farm could not be curtailed by the federal government because it did not have a substantial impact on interstate commerce.

Accepted Answer

In the Wickard v. Filburn case (1942), the Supreme Court declared that even the private use of wheat on a single-family farm could be regulated by the federal government under the Commerce Clause because it could potentially have a substantial impact on interstate commerce. Therefore, the statement given in the question is false.

Quiz 28: Government Regulation of the Corporate Entity