Question 1

When two parties at different levels in the manufacturing and distribution process make an agreement that restrains trade, they have made a ________ restraint against trade.

Accepted Answer

When two parties at different levels in the manufacturing and distribution process (for example, a manufacturer and a retailer) make an agreement that restrains trade, they have made a vertical restraint against trade. Horizontal restraints, by contrast, occur between competitors operating at the same level of the market.

Question 2

Which of the following is not an example of a horizontal restraint of trade?

Accepted Answer

Resale-price maintenance agreements are typically considered a vertical restraint of trade, as they involve agreements between different levels of the supply chain, such as manufacturers and retailers.

Question 3

Phillipo's Distribution sells the exact same gadget to two different buyers; however one buyer gets a very discounted price. This is considered:

Accepted Answer

Price discrimination occurs when a seller charges different prices to different buyers for the same product, which is what Phillipo's Distribution is doing.

Question 4

Which of the following is false regarding groups and activities that are exempt from antitrust law?

Accepted Answer

The answer of Which of the following is false regarding...

Question 5

Is it a valid defense for a seller to engage in price discrimination in order to compete in good faith with another seller's low price?

Accepted Answer

The meeting-the-competition defense allows a seller to engage in price discrimination if the purpose is to match a competitor's price in good faith. This is recognized under the Robinson-Patman Act, an amendment to the Clayton Act, as a valid defense against price discrimination claims.

Question 6

Which analysis, if any, is applied to territorial and customer restrictions imposed by a manufacturer on a retailer?

Accepted Answer

Territorial and customer restrictions imposed by a manufacturer on a retailer are generally analyzed under the rule-of-reason test. This approach evaluates the reasonableness of the restrictions based on their actual impact on competition, rather than deeming them inherently legal or illegal.

Question 7

Through which clause was Congress able to pass the Sherman Act?

Accepted Answer

The Sherman Act, which prohibits monopolistic business practices, was passed under the authority of the Interstate Commerce Clause. This clause gives Congress the power to regulate commerce among the states, which was deemed necessary to address anti-competitive actions that affected interstate trade.

Question 8

Despite the implementation of antitrust laws, new conglomerate business called ________ have sprung up in Japan.

Accepted Answer

Keiretsu refers to a unique form of conglomerate in Japan, characterized by a network of interlocking business relationships and shareholdings among various companies. This structure has allowed these companies to maintain a significant degree of influence and control over their respective markets, despite antitrust laws aimed at preventing monopolistic and anti-competitive practices.

Question 9

Which entity is responsible for identifying specific behaviors were prohibited under the Sherman Act?

Accepted Answer

The courts are responsible for interpreting the Sherman Act and determining which specific behaviors violate the act. Congress enacted the Sherman Act, but it is the judiciary that has the role of applying the law to specific cases and defining prohibited behaviors.

Question 10

Under the Clayton Act, who would most likely challenge horizontal mergers?

Accepted Answer

The Department of Justice, along with the Federal Trade Commission, is responsible for enforcing federal antitrust laws and would most likely challenge horizontal mergers that may reduce competition.

Question 11

Certain business practices always hurt consumers and are known as what?

Accepted Answer

Per se violations are business practices that are deemed inherently harmful to consumers, without the need for further examination of their effects or the intentions behind them. These practices are automatically considered to violate antitrust laws.

Question 12

In the U.S. Supreme Court case Continental T.V. Inc., v. GTE Sylvania Inc., Continental argued that Sylvania violated the Sherman Act by restricting the location of retailers that could sell its product. Which of the following was the result?

Accepted Answer

The Supreme Court decided that the rule-of-reason standard should be applied in cases involving vertical restrictions unless there is a demonstrable economic effect that justifies a departure from this rule.

Question 13

Which of the following practices are not covered under the Sherman Act, but are identified by the Clayton Act?

Accepted Answer

The Clayton Act specifically addresses practices like mergers and acquisitions that may substantially lessen competition, which are not directly covered by the Sherman Act.

Question 14

An inquiry into the competitive effects of a company's behavior to determine whether the benefits of the behavior outweigh the harm of the anticompetitive behavior is known as which of the following?

Accepted Answer

The rule-of-reason analysis is used to evaluate the competitive effects of a company's behavior by weighing the benefits against the harm of the anticompetitive behavior. This approach is more comprehensive and nuanced than the per se test, which deems certain behaviors as inherently anticompetitive without considering their potential benefits.

Question 15

Which of the following prohibits anticompetitive mergers or acquisitions?

Accepted Answer

Section 7 of the Clayton Act specifically prohibits mergers and acquisitions where the effect may be substantially to lessen competition, or to tend to create a monopoly.

Question 16

BigWheels, Inc. put all of their premium tires on sale at a severely discounted price. This put both competing tire companies out of business. BigWheels then sharply increased their prices. This is considered ________.

Accepted Answer

Predatory pricing is a strategy where a company sets very low prices with the intent to eliminate competition, and then raises prices once competitors have been driven out of the market. This is what BigWheels, Inc. did by severely discounting their premium tires to put competitors out of business, and then increasing their prices sharply afterwards.

Question 17

Which of the following is false regarding enforcement of the Sherman Act?

Accepted Answer

Treble damages, which are triple the amount of the actual/compensatory damages, are indeed available under the Sherman Act for parties harmed by anticompetitive behavior. This provision is designed to deter antitrust violations and compensate victims.

Question 18

When a court defines a relevant market for purposes of determining if a company has a monopoly, what does the court consider?

Accepted Answer

Courts consider both the product and geographic markets to determine the boundaries within which competition occurs and to assess if a company holds monopoly power.

Question 19

Sea Turtles, Inc. sells its sea turtle bracelets to a local vendor for $7.50. It sells the exact same sea turtle bracelet to an out-of-state vendor for $15.00. This violates which of the following?

Accepted Answer

This situation could potentially violate Section 2 of the Clayton Act, which addresses price discrimination between different purchasers if it lessens competition or creates a monopoly.

Question 20

Which of the following, under the Sherman Act, permits a defendant to offer justification for their per se violation?

Accepted Answer

The "quick-look" analysis under the Sherman Act allows a court to consider justifications for conduct that might otherwise be considered a per se violation of antitrust laws. This approach is less rigorous than a full rule of reason analysis but more involved than the per se rule, allowing defendants to offer justifications for their actions.

Quiz 47: Antitrust Law