Question 1

The Clayton Act was enacted in 1914 to plug the loopholes in the Sherman Act.

Accepted Answer

The Clayton Act was indeed enacted in 1914 to supplement and strengthen the Sherman Act of 1890 by addressing the issues and loopholes that had arisen since the Sherman Act's enactment.

Question 2

It would be lawful for Toyota and Ford to agree that Ford would sell no cars in California provided that Toyota would sell no cars in Illinois, Indiana, Michigan, and Ohio.

Accepted Answer

This agreement would violate antitrust laws, specifically the Sherman Antitrust Act. Such an agreement is known as a market allocation agreement, where competitors agree to divide up territories and not compete with each other. This reduces competition and harms consumers by limiting their choices and potentially increasing prices.

Question 3

A horizontal restraint of trade differs from a vertical restraint of trade in that the horizontal restraint of trade:

Accepted Answer

A horizontal restraint of trade is an agreement between firms at the same level of the supply chain to restrict competition between them. Examples include price-fixing agreements between competing firms. Such restraints are typically considered illegal under antitrust laws, particularly the Sherman Antitrust Act. Neither the Robinson-Patman Act nor the Clayton Antitrust Act specifically regulates horizontal restraints of trade.

Question 4

The Robinson - Patman Act applies only to sale of commodities.

Accepted Answer

The Robinson-Patman Act specifically addresses price discrimination in the sale of tangible goods or commodities, not services or intangible products.

Question 5

A vertical allocation of customers or territory is only illegal if competition to the markets as a whole is adversely affected.

Accepted Answer

A vertical allocation of customers or territory is only considered illegal if it impacts competition in the overall market. Vertical allocations that do not restrict competition in the market as a whole may be considered legal under certain circumstances. However, if such an allocation harms competition in any way, it may be deemed illegal under antitrust laws.

Question 6

It is not unlawful for a union to bargain with an employer to sell its products above a certain price floor.

Accepted Answer

It is unlawful for a union to engage in price-fixing with an employer or to attempt to control the market price of goods or services. This violates antitrust laws and can result in fines and legal penalties for both the union and the employer.

Question 7

T&U Ltd. drives its competitors out of business by charging low prices for its mopeds, thus becoming the only moped provider in the market. This resultant market is known as a(n)_____.

Accepted Answer

The scenario described indicates that T&U Ltd. has become the sole provider of mopeds in the market. This is a clear indication of a monopoly, where only one seller exists for a product or service.

Question 8

The Sherman Antitrust Act of 1890 was formed to:

Accepted Answer

The Sherman Antitrust Act of 1890 was created to prohibit combinations in restraint of trade and monopolizing. This means that it aimed to prevent businesses from forming trusts or other monopolies that restricted competition in a specific industry, which could harm consumers and smaller businesses.

Question 9

The owner of B&K Inc., a cookie manufacturing company, entered into an agreement with Edwin, a retailer. According to the agreement, Edwin was not allowed to sell the cookies of B&K at a price lesser than $2 per pack. This is an example of a(n) _____.

Accepted Answer

The agreement between B&K and Edwin is a form of vertical restraint of trade, which involves agreements or arrangements between firms at different levels of the supply chain to control or influence the prices or terms of trade. In this case, B&K is imposing a minimum price restriction on its retailer.

Question 10

A consent decree is a judicial order entered into by defendants in lieu of litigating, in which they admit their guilt but agree to not carry on certain activities complained of.

Accepted Answer

A consent decree is a legal resolution whereby a defendant acknowledges their misconduct and agrees to abstain from certain activities in the future. It is frequently used in civil cases to settle legal disputes out of court.

Question 11

In 1888, both Republicans and Democrats put an antitrust plank in their platforms.

Accepted Answer

It is true that in the year 1888, both Republicans and Democrats included an antitrust plank in their party platforms.

Question 12

A horizontal merger might occur when a baby store operating in California acquires a movie ticket distributor in Los Angeles.

Accepted Answer

A horizontal merger occurs when two companies in the same industry merge. In the given scenario, a baby store and a movie ticket distributor are not in the same industry, and thus this would be an example of a conglomerate merger instead.

Question 13

The Federal Trade Commission Act is a civil statute, involving no criminal penalties.

Accepted Answer

The Federal Trade Commission Act is a civil statute and does not involve criminal penalties. It is enforced by the Federal Trade Commission, which has the authority to investigate and address unfair or deceptive practices in commerce. However, in some cases, violations of the Act can lead to other legal consequences or penalties, such as fines or cease-and-desist orders.

Question 14

Sherman Act violations against price-fixing are limited to minimum prices, not maximum prices.

Accepted Answer

Sherman Act violations against price-fixing can apply to both minimum and maximum prices. Any agreement or conspiracy to set or maintain prices at a certain level, whether it be a minimum or maximum, is considered illegal under the Sherman Act.

Question 15

_____ is a remedy used to break up a firm into smaller, independent units, where the firm has exercised its monopoly power unlawfully.

Accepted Answer

Divestiture is a remedy used to break up a firm into smaller, independent units, where the firm has exercised its monopoly power unlawfully. It aims to create competition and prevent the firm from continuing its anti-competitive behavior. Amalgamation refers to the process of combining two or more companies into a single entity, which is the opposite of divestiture. Arson and money laundering are illegal activities, whereas abatement refers to the reduction or elimination of something, but is not relevant to the given scenario.

Question 16

Drafters of the Sherman Act based the act on a common-law policy against monopolies and other infringements on competition.

Accepted Answer

The drafters of the Sherman Act did base the act on a common-law policy against monopolies and other infringements on competition, making the statement true.

Question 17

Agreements by competitors to boycott those who engage in undesirable practices are unlawful.

Accepted Answer

Agreements between competitors to boycott those who engage in undesirable practices are considered anti-competitive behavior and violate antitrust laws. Such boycotts can harm competition by excluding certain players from the market and raising prices for consumers.

Question 18

Price-fixing agreements are per se violations of Section 1 of the Sherman Act.

Accepted Answer

Price-fixing agreements are considered illegal and anti-competitive by the courts and are therefore per se violations of Section 1 of the Sherman Act.

Question 19

Possessing a monopoly is not per se unlawful.

Accepted Answer

Possessing a monopoly in and of itself is not illegal. However, if the monopoly is achieved through anti-competitive practices such as predatory pricing or exclusionary conduct, it can be deemed unlawful under antitrust laws.

Question 20

A horizontal merger occurs between competitors.

Accepted Answer

A horizontal merger occurs when two or more competitors in the same industry combine their operations. This can lead to decreased competition and potential market power for the merged entity.

Quiz 48: Antitrust Law