Humongous Corp. ,a conglomerate with interests in various industries,recently acquired Perfect Petrochemicals Co. ,a prominent producer of petroleum products that are used in manufacturing plastic.This acquisition was a complete surprise to Perfect's competitors,who never thought that Humongous had any desire to become involved in the petrochemical production business.Companies A and B,owned by Humongous,used plastic as a raw material.None of the companies under the Humongous umbrella made plastic,therefore A and B bought plastic from outside suppliers who used petrochemical products as raw material to make plastic.Which of the following theories is the most appropriate one for challenging the acquisition of Perfect by Humongous under Section 7 of the Clayton Act?

Question

Humongous Corp. ,a conglomerate with interests in various industries,recently acquired Perfect Petrochemicals Co. ,a prominent producer of petroleum products that are used in manufacturing plastic.This acquisition was a complete surprise to Perfect's competitors,who never thought that Humongous had any desire to become involved in the petrochemical production business.Companies A and B,owned by Humongous,used plastic as a raw material.None of the companies under the Humongous umbrella made plastic,therefore A and B bought plastic from outside suppliers who used petrochemical products as raw material to make plastic.Which of the following theories is the most appropriate one for challenging the acquisition of Perfect by Humongous under Section 7 of the Clayton Act?

Quizplus · Accepted Answer

Acquisition of Perfect by Humongous,a conglomerate,has created a risk of potential reciprocity because Perfect produces petrochemical products that are regularly purchased by suppliers of many of Humongous's companies.Such suppliers,who supply plastic to Humongous,may thereafter purchase Humongous's petrochemical products rather than those of its competitors.Such conglomerate mergers are among those sometimes held to be prohibited by Section 7 of the Clayton Act.