Question 1

________ is an act that requires certain firms to notify the Federal Trade Commission and the Justice Department in advance of a proposed merger and comply with a thirty-day waiting period before the merger is approved.

Accepted Answer

The Hart-Scott-Rodino Antitrust Improvement Act requires certain firms to notify the Federal Trade Commission and the Justice Department in advance of a proposed merger and comply with a thirty-day waiting period before the merger is approved. The other options listed are antitrust laws but do not specifically address mergers and acquisitions.

Question 2

Vertical mergers create an increase in market share because the merging firms serve different markets.

Accepted Answer

Vertical mergers occur when firms involved in different stages of a supply chain merge. Such mergers may not necessarily increase market share as the merging firms continue to serve the same markets they served prior to the merger. However, vertical mergers can lead to efficiencies and cost savings in the supply chain.

Question 3

A merger between two regional fruit-sellers that do not sell fruit in the same geographical area is an example of a ________.

Accepted Answer

A market extension merger occurs when two companies that sell the same products but in different markets combine. This type of merger allows the companies to extend their market reach.

Question 4

What is a vertical merger?

Accepted Answer

A vertical merger is a merger between a supplier and a customer, or between companies involved in different stages of a production process. It involves the integration of operations between the two companies, often with the goal of improving efficiency and reducing costs.

Question 5

________ is a defense to Section 2(a) liability, which provides that a seller's price discrimination is not unlawful if the price differential is due to "differences in the cost of manufacture, sale, or delivery" of the product.

Accepted Answer

The defense referred to in the question is the cost justification defense. This defense allows a seller to justify price discrimination by showing that the price differential is based on differences in the cost of manufacturing, selling, or delivering the product. This defense is available under Section 2(a) of the Robinson-Patman Act.

Question 6

The functional interchangeability test is used in defining the relevant product or service market.

Accepted Answer

The functional interchangeability test is used to determine whether different products or services can be used for the same purpose by consumers. This helps in defining the boundaries of the relevant product or service market.

Question 7

What is a backward vertical merger?

Accepted Answer

A backward vertical merger is when a customer acquires a supplier. It is said to be "backward" because it involves acquiring a company that supports the acquirer's own operations further back in the supply chain. This type of merger can help the acquiring company gain more control over its supply chain and potentially reduce costs.

Question 8

A merger between two or more companies that compete in the same business and geographical market is known as ________.

Accepted Answer

A horizontal merger involves the combination of two or more companies that are in the same line of business and operate in the same geographical market. This type of merger is often done to increase market share, reduce competition, and achieve economies of scale. Therefore, option A is the best choice. The other options (B, C, and D) are not applicable as they refer to different types of mergers.

Question 9

It is necessary to prove actual injury in order for a plaintiff to recover damages in a price discrimination lawsuit.

Accepted Answer

According to the Robinson-Patman Act, a plaintiff must prove actual injury resulting from the price discrimination in order to recover damages. Simply showing that discrimination occurred is not enough.

Question 10

The merger of two grocery store chains that serve the same geographical market is an example of a horizontal merger.

Accepted Answer

A horizontal merger occurs when two companies operating in the same market and producing the same type of products or services combine their operations. In this case, the two grocery store chains serve the same geographical market, making it a horizontal merger.

Question 11

Natural monopolies are found to violate Section 2 of the Sherman Act.

Accepted Answer

Natural monopolies do not inherently violate Section 2 of the Sherman Act because they are not illegal per se; it's the abuse of monopoly power, rather than the monopoly itself, that the Act prohibits.

Question 12

________ is a restraint of trade in which a seller refuses to sell one product to a customer unless the customer agrees to purchase a second product from the seller.

Accepted Answer

This is a classic example of a tying arrangement, in which a seller restricts the buyer's options by requiring them to purchase a second product in addition to the desired product. This practice can harm competition by forcing customers to buy products they don't need or want, and can make it difficult for new or smaller firms to enter the market.

Question 13

Section 1 of the Sherman Act allows for intangible properties to be sold in tying arrangements.

Accepted Answer

Section 1 of the Sherman Act prohibits tying arrangements where a seller forces a buyer to buy one product or service in order to purchase another product or service. There is no provision that allows for the sale of intangible properties in tying arrangements.

Question 14

________ are mergers between firms in totally unrelated businesses.

Accepted Answer

Conglomerate mergers involve the merging of firms that operate in completely unrelated business areas. This type of merger is done with the aim of diversifying the firms' operations and reducing reliance on a single market or industry.

Question 15

How is a relevant market identified by Section 2 of the Sherman Act?

Accepted Answer

The answer of How is a relevant market identified by...

Question 16

Predatory pricing has been held to violate Section 2 of the Sherman Act.

Accepted Answer

Predatory pricing, which involves selling goods or services at below-market rates to eliminate competition, has been found to violate Section 2 of the Sherman Antitrust Act by the Supreme Court in its decision in the case of Brooke Group Ltd. v. Brown & Williamson Tobacco Corp. in 1993.

Question 17

The unfair advantage theory is intended to prevent wealthy companies from overwhelming the competition in a given market.

Accepted Answer

The unfair advantage theory aims to prevent companies with significant financial resources from using their financial clout to dominate a market, creating an uneven playing field for smaller or less well-funded competitors.

Question 18

Which of the following is considered to be a primary defense against Section 7 of the Clayton Act?

Accepted Answer

The failing company doctrine is considered a primary defense against Section 7 of the Clayton Act because it allows a merger or acquisition that might otherwise reduce competition if one of the companies is in imminent danger of failing and has no other viable alternatives.

Question 19

What is a premerger notification? Explain the process outlined by the Hart-Scott-Rodino Antitrust Improvement Act to execute a merger.

Accepted Answer

The answer of What is a premerger notification? Explain the...

Question 20

According to the failing company doctrine, two or more smaller companies are allowed to merge to compete with a larger company even if they are highly profitable as smaller companies.

Accepted Answer

The failing company doctrine allows for mergers between failing companies to prevent them from going bankrupt, but it does not allow profitable smaller companies to merge solely to compete with a larger company. The antitrust laws would view such a merger as anti-competitive and could block the merger.

Quiz 46: Antitrust Law and Unfair Trade Practices