Ch 23 Antitrust

false

t/f if competitors set identical prices but did not explicitly agree to do so, or even communicate with each other about pricing, they still have committed a per se violation

tying arrangement

A major motion picture distributor offers to provide a television station with three very popular, desirable films. However, as part of the agreement, the distributor requires that the television station also purchase four films that are not very desirable. This type of arrangement is called a

b.

A refusal to deal Question options: is a right to decide with whom to do or not to do business and cannot be legally limited. is a rule of reason violation of the Sherman Act and is illegal if it harms competition. is an agreement in which a buyer refuses to purchase goods from a supplier unless the supplier also purchases items from the buyer. occurs when a manager refuses to recognize that price-fixing is a problem.

false

t/f While courts did not historically pursue predatory pricing violations aggressively, there has been an increase in the number of predatory pricing cases in recent years.

false

t/f an agreement among competitors to allocate territory, customers, or products is a rule of reason violation

b.

Assume that three automobile manufacturers all merged into one car company. Such a merger would be a Question options: vertical merger. vertical cooperative arrangement merger. horizontal merger. intracompetitive merger.

vertical maximum price fixing

manufacturers' practice of setting maximum price that retailers may charge for the manufacturer's product

resale price maintenance

manufacturers' practice of setting minimum price that retailers must charge for the manufacturer's product

true

Collective boycotts of suppliers by retailers, even if for moral reasons (i.e. the suppliers use unethical business practices) are illegal if they have an anticompetitive effect.

false

t/f congress passed the Clayton Act in 1914 because the courts were enforcing the previously enacted Sherman Act more strictly than Congress had intended

spin-offs

Cooperative strategies include all EXCEPT

b.

Gorhan Construction, Brighton Bros., and Tirenn Construction agreed that on three upcoming projects, Gorhan would bid lowest on one, Brighton would submit the lowest bid on the second project, and Tirenn would submit the lowest bid on the third project. In this way, they would each be assured of work for the upcoming season. This behavior Question options: is legal and acceptable practice in the construction industry to spread work more evenly. is a per se violation of the Sherman Act. is a rule of reason violation of the Sherman Act. violates ethical, but not legal, standards.

competitors market participants stages of the production process

Horizontal cooperative strategies involve agreement among ________ in the same ______ , while vertical strategies involve agreement among _______ in different __________

c.

If a company has violated antitrust laws, Question options: the Justice Department can initiate only noncriminal charges against the violator. the Federal Trade Commission may file criminal proceedings against the violator. any private person or company that has been harmed by the violator can file a lawsuit to recover damages. both the Justice Department and the Federal Trade Commission can bring criminal proceedings.

substitues product market geographical market

If buyers view two products as _________, then the items are in the same market. Every product has two markets: a _______ , consisting of other items a consumer could purchase, and a _________ , consisting of other areas where the purchase could be made.

section 2 of sherman

prohibits "monopolization"

section 1 of sherman

prohibits agreements "in restraint of trade"

interbrand competition

In Leegin Creative Leather Products, Inc. v. PSKS, Inc. the court focused on the effects of the resale price maintenance on

clayton act

prohibits anticompetitive mergers, tying arrangements and exclusive dealing agreements

robinson-patman act

prohibits price discrimination that reduces competition

sherman act

John D. Rockefeller's oil business was the main reason which legislation was enacted?

c.

Pat's Pen Co. manufacturers and sells an inexpensive ball-point pen. Salley's Stationery purchases the pens for $.25 each in quantities of 1,000. Salley's discovers that a national chain, a competitor of Salley's, buys the pen at $.20 each for quantities of 1,000. If Salley's Stationery sues Pat's Pen Co. for price discrimination Question options: Pat's Pen Co. will win if it can prove that it has been selling to the national chain continuously at the cheaper rate. Pat's Pen Co. will win if it can prove that it did not intend to economically harm Salley's Stationery. Salley's Stationery will win if it can prove price discrimination occurred and that it lessened competition. Salley's Stationery will win since price discrimination is a per se violation with no real defenses.

clayton act anticompetitive before horizontal raise prices

The ________ prohibits mergers that are _________. Companies with substantial assets must notify the FTC ________ a merger occurs. The government is more likely to challenge a(n) ________ merger, because it views these types of mergers as more likely to reduce competition and ________.

c. d.

To determine if a rule of reason violation has occurred from conduct overseas, courts will consider: (select all that apply) a. the unique position of the plaintiff. b. the alleged violator's history of antitrust violations. c. the alleged violator's intent. d. the impact of the actions taken.

a.

To determine the relevant product market, economists look at the product's cross-elasticity of demand by asking: a. how high the product's price may rise before consumers switch to a different product. b. how much of the product consumers need at any one time. c. how much the product's price has risen in the last five years. d. how many direct competitors there are in the applicable geographic market.

a. b.

To have control of a market, which of the following must a company have? Select all that apply. a. Control over prices b. The ability to exclude competitors c. Exclusive legal authority to sell a certain product d. The highest sales in the market e. The largest market share out of all of its competitors

market divison

Two universities located within 30 miles of each other agree to allocate their customers so as to help them both. The two schools draw a line down a map, and each university agrees to accept students only on their side of the line. What type of horizontal cooperative strategy does this represent?

a. e. f.

Under what circumstances is it legal to charge different prices to different consumers for the same product? a. The costs of serving the buyer paying the lower price are lower. b. The buying paying the higher price signs a written contract. c. The products sold are agricultural. d. There are low barriers to entry to the market. e. Seller is meeting competition. f. The different prices do not have an anticompetitive effect.

a. d. g.

What elements must be established to prove that a company committed predatory pricing? Select all that apply. a. The company will be able to recoup prior losses if the plaintiff goes out of business. b. The company disparaged the plaintiff's product. c. The company entered the market within the last year. d. The company sold products below cost. e. The company raised prices after the plaintiff went out of business. f. The company deliberately set prices lower than its competitors. g. The company intended to make the plaintiff go out of business.

b. e.

What factors, if true, are likely to cause the government to take action against a reciprocal dealing agreement today? Select all that apply. a. The parties did not publicize their agreement to consumers. b. A significant portion of the market is foreclosed by the agreement. c. There are low barriers to entry in the relevant industry. d. The parties experience a considerable increase in profits as a result of the agreement. e. The parties agreed not to buy from others.

b. c. f.

What questions must be considered to determine whether an illegal monopolization has occurred? Select all that apply. a. What is the impact on prices? b. Does the company control the market? c. What is the market? d. Is there an anticompetitive effect? e. Are there high barriers to entry to the market? f. How did the company acquire or maintain its control?

oil

Which industry played a crucial role in bringing about national, rather than local, markets and the creation of antitrust laws?

b. c. d.

Which of the following horizontal cooperative strategies are per se violations of the Sherman Act? Select all that apply. a. Refusal to deal b. Market division c. Bid rigging d. Price fixing

reciprocal dealing

Which of the following is a vertical cooperative strategy?

true

t/f A company that is able to produce a better product cheaper than its competitors is entitled to a monopoly.

private citizens treble damages the government

_______, in addition to the government, may sue for antitrust violations. If successful, they are entitled to ____. This is unlike other countries, where only______ mat sue for antitrust violations.

wrongful tactics

a monopoly is only illegal if it gained or maintained by use of ____________

joint venture

a partnership for the limited purpose of a single project

rule of reason violation of sherman act

a vertical allocation of customers or territory

price fixing

agreement among competitors on what price they will set for their products

exclusive deal

agreement by distributor or retailer with supplier not to carry the product(s) of another supplier

tying arrangement

agreement to sell a product on the condition that the buyer also purchases another, different product from seller

true

t/f In an industry with low barriers to entry and heavy competition, a horizontal merger may not be considered an antitrust violation even if it results in a consolidation of a large portion of the market share.

refusal to deal

boycott of buyer, supplier, or other competitor by group of competitors

post-chicago school

business practices and organizations that harm consumers should be prohibited, even if a market remains competitive

reciprocal dealing agreement

buyer refuses to buy goods from supplier unless supplier also buys from buyer

price discrimination

charging different prices for the same goods in a manner that lessens competition

chicago school

concentration of economic power are permissible if efficient, and only those that harm competition should be prohibited

pre-chicago school

concentrations of economic power are suspect, even if they do not have an obvious effect on competition

FTC DOJ

government agencies with authority to enforce antitrust laws

rule of reason

illegal if have anticompetitive effect subject to civil penalties lawsuits; criminal penalties rarely sought both are _______ antitrust violations

per se violation

in united states v. apple, in the court found that apple committed a ________

true

t/f Today, exclusive dealing agreements, resale price maintenance, and vertical price maximums are all rule of reason violations.

price fixing

united states v. apple involved ______

clayton act

what law prohibits mergers that are anticompetitive