Question 1

The Medical Device Makers Association does not include all manufacturers of medical and surgical instruments. The association refuses to deal with any parties who do not carry the products of its members. This is

Accepted Answer

The behavior of Medical Device Makers Association is considered as a per se violation of antitrust law as it involves an agreement among companies to refuse to do business with parties that do not carry the products of its members, which harms competition in the market.

Question 2

Best View Corporation offers to sell LED screens to Computer & Video, Inc., only if the buyer also agrees to buy the seller's servicing of its products. This is

Accepted Answer

This is a tying arrangement, as the seller is conditioning the sale of their LED screens on the buyer also agreeing to purchase their servicing of products.

Question 3

Four grocery stores account for 80 percent of the retail food sales in Metro City. Two of the stores want to merge. In determining whether the merger violates the Clayton Act, the most crucial factor is

Accepted Answer

The most crucial factor in determining whether the merger violates the Clayton Act is the market shares of the firms in their market. The Clayton Act prohibits mergers that may substantially lessen competition or tend to create a monopoly in any line of commerce, and market share is a key factor in determining the level of competition in a given market.

Question 4

Dairy Cream Inc. makes and sells ice cream. Dairy Cream wants to merge with EZ Freeze Inc., its main competitor and a maker of ice cream and other frozen desserts. In a challenge to the deal on a charge of monopolization, the relevant product market includes ice cream and

Accepted Answer

The answer of Dairy Cream Inc. makes and sells ice...

Question 5

Cosmétique Inc. makes and sells cosmetics and related products. By selling its goods at prices substantially below the normal cost of production, the firm hopes to drive its competitors from the market. This is

Accepted Answer

The scenario describes predatory pricing, which is when a firm sets very low prices with the intention of driving competitors out of the market. This is generally considered an anticompetitive practice and is often illegal.

Question 6

Bio Med Corporation makes and sells Curative, the most prescribed name-brand pain-relief medication. Drugs Inc. has the potential to make a generic version of the same drug. Bio Med agrees to pay Drugs not to make or sell the generic. This agreement is most likely

Accepted Answer

The agreement between Bio Med Corporation and Drugs Inc. to pay the latter for not making or selling the generic version of their pain-relief medication is a per se violation of the Sherman Act. This is because it involves an agreement between competitors to restrain trade, which is considered inherently anticompetitive and illegal under the Sherman Act. There are no pro-competitive justifications that can justify such an agreement.

Question 7

An antitrust action is brought against Carrier Freight Company, alleging that a certain act constitutes the offense of attempted monopolization. To qualify, the act must

Accepted Answer

To qualify as attempted monopolization under antitrust law, the act must be likely to succeed in creating a monopoly.

Question 8

Fish Purveyors Corporation and Gill Netters Inc. are the principal suppliers of crustaceans in their market. They agree that Fish Purveyors will sell exclusively to retailers and Gill Netters will sell exclusively to wholesalers. This is most likely

Accepted Answer

The agreement between the two suppliers to allocate customers and territories through exclusive dealing is a per se violation of antitrust law. This means that the agreement is considered inherently anticompetitive and illegal without any further analysis needed. Such agreements are presumed to harm competition and consumers, and therefore not allowed under the antitrust laws.

Question 9

When applying the rule of reason to an activity that allegedly violates the antitrust laws, a court will not consider

Accepted Answer

When applying the rule of reason, the court will consider the purpose of the agreement, parties' market ability to implement the agreement, and the potential effect of the agreement on competition. However, the court will not consider whether the agreement is a per se violation because the per se violation standard applies to certain types of agreements that are deemed so inherently anti-competitive that they are presumed to be illegal without further inquiry.

Question 10

Mountain Crest Inc. makes and distributes its branded products to authorized dealers. To prevent price-cutting by dealers in direct competition, the firm imposes limits on where each dealer can sell the products. This is

Accepted Answer

The restriction on where each dealer can sell the products is referred to as a territorial restriction. This is a common practice used by manufacturers to prevent price-cutting and maintain control over the distribution of their products. Trade associations are groups of businesses that come together to promote common interests, and smart marketing refers to strategic marketing tactics used to promote products. Price-fixing agreements are illegal and involve businesses colluding to set prices unfairly.

Question 11

Snowboards Inc. refuses to sell its products to Timber Winter Sports Stores, Inc., a retail snowboard dealership. This violates Section 2 of the Sherman Act if Snowboards has monopoly power and

Accepted Answer

Refusing to sell to a retailer can violate Section 2 of the Sherman Act if it has an anticompetitive effect on the market, meaning it harms competition. However, this only applies if Snowboards has monopoly power, which means it has the ability to control prices and exclude competitors in the market. Option A is incorrect as it does not apply to the situation. Option B is irrelevant as it pertains to Timber, not Snowboards. Option C is also incorrect as a unilateral refusal to deal may still violate the Sherman Act if it has anticompetitive effects.

Question 12

Dig Inc. is the major wholesale distributor of heavy equipment in six states. Dig's closest competitor is Excavator Company. The two firms agree that Dig will operate in four of the states and Excavator in the other two. This is

Accepted Answer

This is a clear example of market division, as Dig and Excavator have agreed to divide the market by operating in different states.

Question 13

To drive its competitors out of a certain geographic segment of its market, Drones, Inc., sets the prices of its products below cost for the buyers in that area. This is

Accepted Answer

The answer of To drive its competitors out of a...

Question 14

Fertile Acres Inc., Growers Farm Co-op, and Harvest Orchards agree to exchange information, conduct an advertising campaign, and set certain regulatory standards to govern their operations. This association is

Accepted Answer

This association between the three companies involves an exchange of information, advertising campaign, and setting regulatory standards, which may have pro-competitive effects but also may potentially harm competition. Therefore, it requires an analysis under the rule of reason to determine whether it violates antitrust laws or not.

Question 15

Road Tires Inc. conditions the sale of its products to Service Stores on the buyer's agreement to buy Road's tire-repair kits. Under the Clayton Act, this deal is

Accepted Answer

This deal may be a violation of the Clayton Act depending on its purpose and effect on competition. The act prohibits tying arrangements that may substantially lessen competition or tend to create a monopoly.

Question 16

Edibles Inc. and Food Stuff Corporation are competitors. Each firm has capital, surplus, and undivided profits in excess of $40 million and competitive sales of more than $5 million. Gina and Hal serve as directors on both firms' boards. Under the Clayton Act's restriction concerning interlocking directorates, Gina and Hal are

Accepted Answer

The Clayton Act prohibits individuals from serving as directors of competing corporations if both corporations have capital, surplus, and undivided profits in excess of $40 million and competitive sales of over $5 million. Gina and Hal serve as directors on both Edibles Inc. and Food Stuff Corporation's boards, both of which meet the requirements under the Clayton Act. Therefore, Gina and Hal are liable for failing to comply with this restriction.

Question 17

Battery Corporation's production, distribution, and marketing methods are unique. Its capital value and size are greater than its competitors. A suit is filed against the firm, alleging the offense of monopolization. To determine whether Battery has monopoly power requires looking at

Accepted Answer

To determine whether a firm has monopoly power, it is necessary to assess the relevant market in which it operates. This involves analyzing the market structure, competition, and barriers to entry. It is not sufficient to assess only the firm's size or production methods. The price of the firm's stock is also not a relevant factor in determining whether it has monopoly power.

Question 18

Components Inc., a maker of vehicle parts, refuses to sell to DIY Repair Inc., a national vehicle service firm. The maker convinces Engine Parts Company, a competitor, to do the same. This is

Accepted Answer

This is a group boycott, where two or more companies conspire to refuse to do business with another company in order to harm their competition or gain an advantage in the market.

Question 19

Under a contract, Oil Shale Corporation forbids Petro Inc., a wholesale buyer of Oil Shale's products, to purchase products from the seller's competitors. This is prohibited

Accepted Answer

This type of provision, called an exclusive dealing arrangement, can potentially limit competition and give the seller a substantial amount of control over the buyer's purchasing decisions. Such provisions may be prohibited under antitrust laws if their effect is to substantially lessen competition.

Question 20

Pump Makers Inc. makes pumps for fire trucks and conditions shipments of its products to Quality Motors Corporation-a maker of fire trucks-on Quality's agreement to buy additional pumps only from Pump Makers. This is

Accepted Answer

This is an exclusive-dealing contract where Pump Makers is agreeing to only supply its products to Quality Motors Corporation if Quality agrees to buy additional pumps exclusively from Pump Makers.

Quiz 38: Antitrust Law and Promoting Competition