BUL 3350 CH40

Section 7 of the Clayton Act is the primary statutory provision used by the Department of Justice in controlling anticompetitive mergers and acquisitions. In general, the Clayton Act is invoked because a. It provides for harsher criminal penalties than does the Sherman Act. b. It enables the Department of Justice to proscribe mergers and acquisitions in their incipiency. c. It provides for exclusive jurisdiction over such activities. d. The Sherman Act applies to asset mergers or acquisitions only, not to stock mergers or acquisitions.

b

A franchisor's requirement that its franchisees buy inputs from a particular supplier is a. Illegal according to the provisions of the Robinson-Patman Act. b. Illegal according to the principles of common law. c. Legal, but the franchisor must receive approval from the Federal Trade Commission. d. Legal as long as such a requirement is necessary to assure product quality.

d

For the federal antitrust laws to apply, the illegal activity must affect goods moving in interstate commerce or a. Be committed by a business engaged in interstate commerce. b. Affect a business engaged in interstate commerce. c. Adversely affect the price of goods sold in interstate commerce. d. Have a significant effect on interstate commerce.

d

Dick Grubar's appliance sales constitute less than .001% of the market. The marketplace has an abundance of retailers, and competition is vigorous. The manufacturers and the retailers dislike Grubar's price cutting. They jointly decided to boycott Grubar to limit his access to appliances and to drive him out of business. Grubar has commenced legal action against the various parties based upon a violation of the Sherman Act. He is seeking injunctive relief and damages. Under the circumstances, a. Grubar is entitled to the relief requested because the facts indicate a per se violation. b. Grubar's complaint should be dismissed because it alleges only a private wrong as opposed to a public wrong. c. Grubar is entitled to the relief requested against the interstate commerce manufacturers, but not the intrastate retailers. d. Grubar is not entitled to injunctive relief. Only the Department of Justice is entitled to such relief.

a

Gould Machinery builds bulldozers. Prior to this year, it sold a substantial amount of equipment to Mace Contractors on credit. Mace recently went into bankruptcy. To protect its investment, Gould took over Mace. Erhart Contractors now complains that the acquisition harms its business, alleging that its business would have improved had Gould not entered the market as a competitor. Erhart can a. Not recover damages under the antitrust laws. b. Recover treble damages. c. Recover only its actual damages. d. Obtain injunctive relief ordering divestiture.

a

Gritney, Inc., manufactures and sells foibles in competition with about four other firms in the United States. It sells about 90% of the foibles sold in the Midwest, but only about 10% nationally. Gritney will probably be found a. To have monopoly power, if the relevant market is determined to be the Midwest. b. Guilty of monopolization regardless of the relevant market. c. Guilty of monopolization if it has not evidenced an intent to monopolize even if it has engaged in predatory practices. d. Guilty of monopolization if the only reason for its market share is that competitors left due to lack of sa

a

Pratt Co. manufactures and sells clocks. Its best-selling item is a grandfather clock. Taylor Co. purchased 100 of the clocks from Pratt at $99 each. Taylor discovered that Stewart, one of its competitors, had purchased the same clock from Pratt at $94 per clock. In the event the issue is litigated, a. Taylor has a presumption in its favor that it has been harmed by price discrimination. b. Pratt will prevail if it can show it did not intend to harm Taylor. c. Pratt will prevail if it can show that it sold the clocks at the lower price to all customers who had been doing business with it for 10 years or more. d. Pratt will prevail if it can establish that Taylor could have dealt with several other clock companies.

a

The Duplex Corporation has been charged by the U.S. Justice Department with an "attempt to monopolize" the duplex industry. In defending itself against such a charge, Duplex will prevail if it can establish that a. It had no intent to monopolize the duplex industry. b. Its percentage share of the relevant market was less than 50%. c. Its activities do not constitute an unreasonable restraint of trade. d. It does not have monopoly power.

a

The U.S. Justice Department and the FTC have jointly promulgated the Horizontal Merger Guidelines to inform the public of their views on the factors and considerations to be taken into account in ascertaining whether a merger is potentially illegal. The guidelines are a. Strongly influenced by the factor of size, that is, of percentage shares of the market of the parties to the proposed merger. b. Based exclusively upon the decisions of the U.S. Supreme Court. c. Binding on all parties affected by them subsequent to the date of their promulgation. d. Not of great importance because they are too indefinite and uncertain to have any meaning in respect to an actual merger.

a

Government Business Machines (GBM) has greater than an 80% share of the sales of computers to local and state governments. GBM requires all purchasers of its computers also to purchase its proprietary operating system, called GOS. Furthermore, GBM government contracts require all application software and peripherals to be purchased from GBM. Which of the following is a true statement about this tying arrangement? a. The test of whether a tying arrangement is illegal is essentially the same as for exclusive dealing. b. The test of whether a tying arrangement is illegal is essentially the same under the Sherman Act and the Clayton Act. c. It is not illegal under the Clayton Act because it is an agreement to restrain trade, which is not covered by the Clayton Act. d. It is not illegal if the tied goods are not sold by the offeror of the desired goods.

b

In a pure conglomerate merger, a. The government must establish an actual restraint on competition in the marketplace in order to prevent the merger. b. The acquiring corporation neither competes with, nor sells to/buys from, the acquired corporation. c. The merger is prima facie valid unless the government can prove the acquiring corporation had an intent to monopolize. d. Some form of additional anticompetitive behavior must be established (e.g., price fixing) to provide the basis for the government's obtaining of injunctive relief.

b

Resale price maintenance is an example of a. Horizontal price fixing. b. Vertical price fixing. c. Preemptive buying. d. Tying arrangements.

b

Super Sports, Inc., sells branded sporting goods and equipment throughout the United States. It sells to wholesalers, jobbers, and retailers who in turn sell the goods to their respective customers. The wholesalers and jobbers, who do not sell at retail, are charged lower prices than retailers but are required to purchase in larger quantities than retailers with the cost savings inherent in such purchases accounting for the lower prices. The retailers are all charged the same prices but receive discounts for quantity purchases based exclusively upon the cost savings resulting from such quantity purchases. Girard sues Super alleging an illegal price discrimination. Which defense will be most likely to prevail? a. Girard does not have the right to sue under the Robinson-Patman Act. b. The discounts are functional. c. Super does not have the requisite intent to discriminate among its purchasers. d. The prices Super charges are reasonable, and its profit margins are low.

b

The Clayton Act of 1914 prohibits a. Closed-shop labor unions. b. Sellers' price discrimination. c. Group boycotts. d. Oligopolies.

b

The Flick Corp. manufactured almost exclusively a gizmo that was sold throughout the United States. Flick required all purchasers to take at least two other Flick products to obtain the gizmo over which it has almost complete market control. As a result of this plan, gross sales of the other items increased by an amount that was a substantial portion of the total market for those items. Which of the following best describes the legality of the above situation? a. It is illegal only if the products are patented products. b. It is an illegal tying arrangement. c. It is legal as long as the price charged to retailers for the other products is competitive. d. It is legal if the retailers do not complain about purchasing the other products.

b

The Sherman Antitrust Act a. Established the Federal Trade Commission. b. Prohibits collective boycotts. c. Prohibits price discrimination. d. Established the concept of a patent.

b

Expansion Corp. is seeking to obtain control of Resistance Corp. Expansion does not currently buy from, sell to, or compete with Resistance. Which of the following statements applies? a. Given that Expansion does not buy from, sell to, or compete with Resistance, antitrust laws do not apply. b. If Expansion can consummate the acquisition before there is objection to it, the acquisition cannot be set aside. c. The acquisition is likely to be declared illegal if there will be reciprocal buying and there is a likelihood that other entrants into the market would be precluded. d. The acquisition is legal on its face if cost efficiency will result from combined marketing and advertising

c

Glick, Inc. and Yeats Corp. are large manufacturers of goods that are in substantial competition throughout the United States. Each has capital, surplus, and undivided profits aggregating more than $26,867,000. Over a 6-year period, Yeats acquired 46% of the outstanding stock of Glick. Yeats's current directors own stock in both corporations and are on the board of directors of each. Which of the following statements applies to the above situation? a. Nothing in these facts would constitute a violation of the federal antitrust laws. b. The interlocking directorate is not illegal because less than 50% of the Glick stock is owned by Yeats. c. The interlocking directorate is a clear violation of federal antitrust laws. d. No violation of the federal antitrust laws exists unless there is improvement in the competitive position of Yeats or Glick.

c

In contesting the validity of a previously consummated vertical merger, a. The Justice Department must proceed within 5 years of the consummation of the merger. b. That the acquiring corporation deliberately failed to apply for a ruling is presumptive evidence of bad faith. c. The Justice Department must show the likelihood that competition may be foreclosed in a substantial share of that market. d. Only a showing of actual substantial lessening of competition will be sufficient to establish illegality.

c

Over the years, various groups and activities have been exempted from coverage by the U.S. antitrust laws. Which one of the following statements regarding such exemptions is true? a. All sales and purchases of products by American firms outside of the U.S. are automatically exempt from coverage by the antitrust laws. b. All resale price maintenance agreements between manufacturers and retailers selling the manufacturers' product brands are exempt from the federal antitrust laws. c. Under certain conditions, a person who wishes to form an export trading company may obtain a certificate of antitrust immunity from the Commerce Department after concurrence by the Justice Department. d. Water common carriers in foreign trade may enter into price fixing and market sharing treaties or agreements provided the agreements are ratified by the U.S. Senate before being put into effect.

c

The Clayton Act, as amended, prohibits all of the following except a. Price discrimination by sellers. b. Interlocking directorates in large competing organizations. c. Unfair and deceptive business practices, such as misleading advertising. d. A merger of companies that substantially lessens competition.

c

The difference between exclusive dealing arrangements and reciprocal dealing arrangements is that a. Exclusive dealing and reciprocal dealing are per se illegal. b. Exclusive dealing is per se illegal, and reciprocal dealing is judged under the rule of reason. c. Reciprocal dealing is only a violation of the Sherman Act, and exclusive dealing is only a violation of the Clayton Act. d. In reciprocal dealing, a purchaser requires the seller to buy its product also; in exclusive dealing, a seller requires that a buyer not carry products of the seller's competitors.

d

The U.S. Department of Justice has alleged that Variable Resources, Inc., the largest manufacturer and seller of variable-speed drive motors, is a monopolist. It is seeking an injunction ordering divestiture by Variable of a significant portion of its manufacturing facilities. Variable denies it has monopolized the variable-speed drive motor market. Which of the following is true? a. The government must prove that Variable is the sole source of a significant portion of the market. b. To establish monopolization, the government must prove that Variable has at least 70% of the market. c. If Variable has the power to control prices or exclude competition, it has a monopoly. d. Unless Variable has been a party to a contract, combination, or conspiracy in restraint of trade, it is not guilty of monopolization.

c

The term "illegal per se" as it is frequently used in antitrust law a. Applies exclusively to illegal price fixing and other related activities by competitors. b. Must be established by the Justice Department to impose criminal sanctions under the Federal Trade Commission Act. c. Represents anticompetitive conduct or agreements that are inherently illegal and without legal justification. d. Applies exclusively to illegal anticompetitive activities by competitors.

c

The two major functions of the Federal Trade Commission are a. Antitrust actions and the regulation of foreign trade. b. Import quality inspections and anti-dumping measures. c. Antitrust actions and consumer protection. d. Price discrimination and unfair trade practices.

c