Question 1

MetaRay, Inc., and Nucleo Corporation are the only suppliers in their market.They agree to coordinate their production so as to limit output and charge a higher price.Under the Sherman Antitrust Act of 1890, this is

A)a permissible restraint of trade.
B)a prohibited restraint of trade.
C)not a restraint of trade and permitted.
D)not a restraint of trade but prohibited.

B

Accepted Answer

The agreement between MetaRay, Inc., and Nucleo Corporation to coordinate their production and limit output in order to charge a higher price is an example of collusion, which is a form of illegal anticompetitive behavior prohibited by the Sherman Antitrust Act of 1890 in the United States. The act is designed to prevent any contracts, agreements, or conspiracies that restrain trade and limit competition. Therefore, such an agreement is a prohibited restraint of trade.

Question 2

At Global Holdings Inc., the shareholders cast a vote on executive compensaiton for senior executives.Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, this vote is binding on&#10;A)Global's board of directors only.&#10;B)Global's senior executives only.&#10;C)Global's board of directors, senior executives, and shareholders.&#10;D)none of the choices.

Accepted Answer

Under the Dodd-Frank Act, the shareholder vote on executive compensation is advisory and not binding on the board of directors or the company.

Question 3

Haruo commits a civil violation of federal securities laws.An enforcement action against Haruo can be brought by&#10;A)the National Securities Markets Agency.&#10;B)the Securities and Exchange Commission.&#10;C)the Securities Enforcement Remedies Administration.&#10;D)the U.S.Department of Justice.

Accepted Answer

The Securities and Exchange Commission (SEC) is responsible for the enforcement of federal securities laws. The National Securities Markets Agency and the Securities Enforcement Remedies Administration are not actual entities, and although the U.S. Department of Justice may also bring enforcement actions, the SEC is the primary authority in this area.

Question 4

Deutsche Werke, GmbH., a German firm, is harmed by a price-fixing scheme engineered by Collider Industries, S.A., an international cartel.The European Union is most likely to&#10;A)do nothing.&#10;B)actively pursue Collider and impose criminal penalties.&#10;C)actively pursue Collider and impose civil penalties.&#10;D)contact Collider and issue a reprimand but impose no penalties.

Accepted Answer

The European Union is likely to actively pursue Collider and impose civil penalties. The EU has a history of taking strong action against antitrust violations, and price-fixing is considered a serious offense under EU law. The imposition of civil penalties is a common enforcement measure used by the EU in such cases, and it is likely that this will be the course of action taken in this scenario. Doing nothing (A) or issuing a reprimand without penalties (D) would be unlikely, given the seriousness of the offense and the EU's commitment to enforcing its antitrust laws. While criminal penalties (B) are also a possibility, civil penalties are more common in cases like this.

Question 5

Penquin Ltd.agrees with Apple Corporation to use the &#34;agency&#34; model of setting prices and paying commissions on the sales of e-books for iPads.Under this model, publishers&#10;A)agree to sell e-books exclusively through certain &#34;agents.&#34;&#10;B)match Amazon.com's e-book prices.&#10;C)price e-books below cost to sell more e-book readers.&#10;D)set their own prices.

Accepted Answer

Under the agency model, publishers are able to set their own prices for e-books. Apple Corporation serves as the "agent" and takes a commission on each sale. This is different from the wholesale model, where the retailer sets the price and purchases the e-book from the publisher at a discount.

Question 6

The U.S.Department of Justice files a suit against Random House, Inc., and other major book publishers, charging that they conspired to fix the prices of e-books.One result of limiting e-book price competition is that consumers

A)pay more for e-books than they otherwise would have paid.
B)pay less for e-books than they otherwise would have paid.
C)have fewer choices of books to buy.
D)have more choices of books to buy.

Accepted Answer

The suit against Random House, Inc. and other major book publishers charges that they conspired to fix the prices of e-books, which resulted in limiting e-book price competition. This means that consumers would pay more for e-books than they otherwise would have paid.

Question 7

Wiley trades in securities on a regional securities exchange.These trades are subject to regulation by&#10;A)the National Securities Markets Agency.&#10;B)the Securities and Exchange Commission.&#10;C)the Securities Enforcement Remedies Administration.&#10;D)the U.S.Department of Justice.

Accepted Answer

The Securities and Exchange Commission (SEC) is responsible for regulating securities trading in the United States, including regional securities exchanges. The other entities listed do not have regulatory authority over securities trading.

Question 8

Raoul is a senior executive at Securities Investment Corporation, a U.S.company.Teo is a Securities Investment shareholder.Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, shareholders have the right to vote on executive compensaiton for senior executives at

A)every public U.S.company.
B)every public and private U.S.company.
C)every U.S.company that grants shareholders the right.
D)no U.S.company.

Accepted Answer

Under the Dodd-Frank Act, shareholders of every public U.S. company have the right to a "say on pay" vote, which allows them to vote on executive compensation.

Question 9

Banners, Inc., has the power to control the market for its product.Crest Corporation and Delphic Shield Industries, Inc., agree to limit their competitiveness to increase their profits.The Sherman Antitrust Act of 1890 prohibits restraints on trade and commerce that originate from

A)any lack of balance in the nation's economy.
B)business combinations and conspiracies, and certain monopolistic practices.
C)business combinations and conspiracies only.
D)certain monopolistic practices only.

Accepted Answer

The Sherman Antitrust Act of 1890 specifically prohibits restraints on trade and commerce that originate from business combinations and conspiracies, and certain monopolistic practices. The actions of Crest Corporation and Delphic Shield Industries, Inc., in limiting their competitiveness to increase their profits, would be considered a violation of this act. Additionally, since Banners, Inc., has the power to control the market for its product, it may also be in violation of the act.

Question 10

Etoile Metrics, S.A., a French software firm, is harmed by an exclusive-dealing scheme engineered by Flash Search, Inc., a U.S.software firm.Compared to U.S.laws, the European Union's laws&#10;A)define less conduct as anticompetitive.&#10;B)define more conduct as anticompetitive.&#10;C)declare the same conduct-not more or less-to be anticompetitive.&#10;D)include less detailed provisions on monopolization.

Accepted Answer

The European Union's laws define more conduct as anticompetitive compared to U.S. laws. The EU has a stricter approach to exclusive dealing schemes and considers them as anticompetitive in most cases. Therefore, Flash Search's exclusive dealing scheme would likely be considered anticompetitive under EU law and harm Etoile Metrics.

Deck 28: Answers to the Issue Spotters