Question 1

Section 8 of the Clayton Act,as modified by the Antitrust Amendments Act of 1990,prohibits the same individuals from controlling competing corporations when those individuals are:

Accepted Answer

Until 1990,the statute's prohibition against interlocks was limited in scope because it barred only interlocking directorates.Nothing in the original language of Section 8 prohibited a person from serving as an officer of two competing corporations,or as an officer of one firm and a director of its competitor.The Antitrust Amendments Act of 1990,however,expanded the scope of the statute by including senior officers (defined as officers elected or chosen by the board of directors)within its reach.

Question 2

Filene's Basement filed for bankruptcy in May 2009.In November 2009,Filene's Basement started its "going-out-of-business" sale.Is this price discrimination legal?

Accepted Answer

Section 2(a)of the Robinson-Patman Act specifically exempts price discrimination that reflects "changing conditions in the market for or the marketability of the goods." This defense applies to forced judicial sales of the goods (such as during bankruptcy proceedings involving the seller)and to good faith sales by sellers that have decided to cease selling the goods in question.Since Filene's Basement has both filed for bankruptcy and decided to cease selling the goods in question,its "going-out-of-business" sale will fall under the "changing conditions" exemption to Section 2(a)of the Robinson-Patman Act and hence,will be deemed legal.

Question 3

Section 8 of the Clayton Act requires a ________ standard of liability.

Accepted Answer

Section 8 of the Clayton Act establishes a per se standard of liability,in the sense that a violation may be demonstrated without proof that an interlock (same individuals controlling theoretically competing corporations)harmed competition.

Question 4

Section 2(a)of the Robinson-Patman Act does not directly address the legality of:

Accepted Answer

Section 2(a)of the Robinson-Patman Act does not directly address the legality of functional discounts.Such discounts are sometimes granted to buyers at various levels in a product's chain of distribution because of differences in the functions those buyers perform in the distribution system.

Question 5

Big Corp.(BC)operated in all 50 states.In all of the states except Oregon,BC was the dominant firm in its industry.Small Corp.(SC)operated only in Oregon,but was the dominant firm in that state.BC decided it wanted to destroy SC so that it would become dominant in Oregon.BC cut its prices and sold below cost in Oregon,while maintaining regular prices everywhere else.This is an example of:

Accepted Answer

Big Corp.is engaging in local and territorial price discrimination (lower prices only in Oregon)with the aim of driving Small Corp.(the dominant player in Oregon)out of business.This type of price discrimination is classified as primary level or first-line price discrimination.

Question 6

Humongous Corp. ,a conglomerate with interests in various industries,recently acquired Perfect Petrochemicals Co. ,a prominent producer of petroleum products that are used in manufacturing plastic.This acquisition was a complete surprise to Perfect's competitors,who never thought that Humongous had any desire to become involved in the petrochemical production business.Companies A and B,owned by Humongous,used plastic as a raw material.None of the companies under the Humongous umbrella made plastic,therefore A and B bought plastic from outside suppliers who used petrochemical products as raw material to make plastic.Which of the following theories is the most appropriate one for challenging the acquisition of Perfect by Humongous under Section 7 of the Clayton Act?

Accepted Answer

Acquisition of Perfect by Humongous,a conglomerate,has created a risk of potential reciprocity because Perfect produces petrochemical products that are regularly purchased by suppliers of many of Humongous's companies.Such suppliers,who supply plastic to Humongous,may thereafter purchase Humongous's petrochemical products rather than those of its competitors.Such conglomerate mergers are among those sometimes held to be prohibited by Section 7 of the Clayton Act.

Question 7

Which of the following is most likely to violate Section 2(a)of the Robinson-Patman Act?

Accepted Answer

Under Section 2(a)of the Robinson-Patman Act,actual sales at different prices to different purchasers are not treated as discriminatory unless the sales were fairly close in time.

Question 8

Gorgeous is a conglomerate and its major businesses include department store chains and grocery store chains.Gorgeous recently acquired Connect Corp. ,a mobile-network operator.Connect has the third-largest share of the mobile-network market.This is Gorgeous's first venture into the mobile-network business.Which of the following theories is the most appropriate one for challenging Gorgeous's acquisition of Connect under Section 7 of the Clayton Act?

Accepted Answer

Considering that Gorgeous has acquired Connect,which already enjoys a significant market position (has the third-largest share of the mobile-network market),Connect may gain an unfair advantage over its competitors through its ability to draw on the greater resources and expertise of its new owner.This unfair advantage may deter existing competitors from actively competing with it for market share and cause other potential competitors to be reluctant to enter the market.Therefore,Gorgeous's acquisition of Connect may be challenged on the "unfair advantage to acquired firm" ground under Section 7 of the Clayton Act.

Question 9

In reference to Section 8 of the Clayton Act,what does the term interlock mean?

Accepted Answer

Section 8 of the Clayton Act references the term interlock to mean the same officers serving in competing corporations.

Question 10

Big Corp.(BC)is in the business of making and selling plastic products.Dominant and Micro both buy plastic products of similar grade and quality regularly from BC.Dominant is the biggest customer of BC while Micro usually buys very small quantities.Due to an unexpected shortfall of raw materials,BC anticipates significant reduction in plastic production at its plants.To maintain supply of plastic products to Dominant,BC quotes a 40 percent higher price for its products to Micro.Will this amount to a violation of Section 2(a)of the Robinson-Patman Act?

Accepted Answer

To violate Section 2(a)of the Robinson-Patman Act,a seller must have made two or more sales to different purchasers at different prices.Merely quoting a discriminatory price or refusing to sell except at a discriminatory price does not violate the statute,because no actual purchase is involved.Therefore,by quoting higher prices for its products to Micro,BC will not be in violation of Section 2(a)of the Robinson-Patman Act.

Question 11

Predatory Co. ,a large company entering a new geographic market,decided to eliminate its smaller rivals in the new market by selling below cost in that market (but not elsewhere)until the rivals were forced out of business.This type of price discrimination is classified as:

Accepted Answer

Predatory is engaging in local and territorial price discrimination with the aim of driving smaller rivals out of business.This type of price discrimination is classified as primary level or first-line price discrimination.

Question 12

Proof of ________ is often offered as evidence of a seller's anticompetitive intent when proving a primary level violation of the Robinson-Patman Act.

Accepted Answer

Proof of predatory pricing is often offered as evidence of a seller's anticompetitive intent when proving a primary level violation of the Robinson-Patman Act.

Question 13

Bob is on the board of directors of both Acme Corporation and Beta Corporation.Acme recently acquired Teen Co. ,a retailer of teen girls' clothing.Beta Corporation previously acquired Limitless Co. ,another retailer of teen girls' clothing.Except the teen girls' clothing business,Acme and Beta do not have any other competing businesses.Under the Antitrust Amendments of 1990:

Accepted Answer

The Antitrust Amendments Act of 1990 specified that individuals may serve as officers or directors of competing corporations when the "competitive overlap" between them is an insignificant part of either company's total sales.Therefore,Bob need not resign from the board of directors of either Acme or Beta if the teen girls' clothing business (the "competitive overlap" between Acme and Beta)contributes minimally to either organization's sales.

Question 14

Mel owns Melco,Inc. ,which manufactures toys.She provides a functional discount to Carol,a wholesaler of toys.Carol then passes on her discount to Nina,who owns Funland,a toy store.Nina is then able to offer lower prices to toy purchasers.Under the Robinson-Patman Act,this is:

Accepted Answer

Nina (a customer of toy manufacturer Mel's favored customer Carol)may gain a competitive advantage over her competitors by receiving a functional discount from Carol if Carol passes on all or a portion of her discount to Nina.This form of price discrimination is known as tertiary level (or third line)price discrimination.

Question 15

Initially,Section 8 of the Clayton Act prohibited any person from serving as a director of two or more competing corporations (other than banks or common carriers)if each corporation had capital,surplus,and undivided profits aggregating more than ________.

Accepted Answer

Initially,Section 8 of the Clayton Act prohibited any person from serving as a director of two or more (other than banks or common carriers)if each corporation had "capital,surplus,and undivided profits aggregating more than $1,000,000" and the corporations were,or had been,competitors,"so that elimination of competition by agreement between them" would violate any of the antitrust laws.

Question 16

For ________,cost justification is the primary statutory defense to liability under Section 2(a)of the Robinson-Patman Act.

Accepted Answer

For quantity discounts,cost justification is the primary statutory defense to liability under Section 2(a)of the Robinson-Patman Act.This discount recognizes the reality that sales to buyers purchasing large quantities may in some cases be more cost-effective than small-quantity sales to their competitors.Sellers are allowed to pass on such cost savings to their customers.

Question 17

Stitchwell is an apparel manufacturer.Huge Mart,a wholesale dealer,is its largest customer.Huge Mart also owns Gorgeous,a department store chain that deals in apparels,shoes,and accessories.Stitchwell routinely offers "wholesaler special" discounts to Huge Mart and other wholesalers.Are these discounts illegal?

Accepted Answer

Though Section 2(a)of the Robinson-Patman Act does not directly address the legality of functional discounts (the kind that Stitchwell is giving to wholesaler Huge Mart),the Supreme Court has indicated that the legality of such discounts depends on their competitive effect.If Stitchwell (a seller)charges Huge Mart (a wholesale customer)lower prices than it charges retail customers,the Robinson-Patman Act is not violated unless the lower wholesale prices are somehow passed on to retailers in competition with the seller's retail customers (customers of Gorgeous).

Question 18

Which Section of The Clayton Act originally prohibited local and territorial price discrimination by sellers?

Accepted Answer

Section 2 of the Clayton Act originally prohibited local and territorial price discrimination by sellers,a practice monopolists frequently used to destroy smaller competitors.

Question 19

A large drug company has recently started a promotional deal.This deal involves discounts to pharmacies for buying its drugs.The discounts are linked to the total dollar amount purchased.This deal also provides for restaurant vouchers for representatives of the pharmacies who are among the top ten buyers of the company's drugs.Which of the following laws is this deal most likely to violate?

Accepted Answer

Discriminatory payments (in the form of discounts)and services (in the form of restaurant vouchers)to the drug company's customer (pharmacies)violate the Robinson-Patman Act.

Question 20

Odyssey Corp. ,a wholesaler of children's toys,sells retailers across the country the exceedingly popular Trojan Horse toy at a price of $14 per item.Odyssey has learned that one of its competitors,Iliad Co. ,is selling the Trojan Horse toy at a price of $12 per item to all retailers in the State of Utah.Odyssey would like to respond appropriately to Iliad's actions.Which of the following statements accurately sets forth how Odyssey may respond without risking a violation of the Robinson-Patman Act?

Accepted Answer

To counter competition from Iliad in Utah,Odyssey will have to reduce the price of Trojan Horse toys.Nevertheless,if it starts charging less than what Iliad charges in Utah (less than $12 that is)then it will run the risk of primary level price discrimination and might end up violating the Robinson-Patman Act.But if Odyssey starts selling the Trojan Horse toy at a price of $12 per item to Utah retailers,while keeping the price at $14 per item for retailers elsewhere in the country,then it will not face any risk of violating the Robinson-Patman Act.

Quiz 50: The Clayton Act, the Robinsonpatman Act, and Antitrust Exemptions and Immunities

Section 8 of the Clayton Act,as modified by the Antitrust Amendments Act of 1990,prohibits the same individuals from controlling competing corporations when those individuals are:

Filene's Basement filed for bankruptcy in May 2009.In November 2009,Filene's Basement started its "going-out-of-business" sale.Is this price discrimination legal?

Section 8 of the Clayton Act requires a ________ standard of liability.

Section 2(a) of the Robinson-Patman Act does not directly address the legality of:

Which of the following is most likely to violate Section 2(a) of the Robinson-Patman Act?

In reference to Section 8 of the Clayton Act,what does the term interlock mean?

Predatory Co. ,a large company entering a new geographic market,decided to eliminate its smaller rivals in the new market by selling below cost in that market (but not elsewhere) until the rivals were forced out of business.This type of price discrimination is classified as:

Proof of ________ is often offered as evidence of a seller's anticompetitive intent when proving a primary level violation of the Robinson-Patman Act.

Mel owns Melco,Inc. ,which manufactures toys.She provides a functional discount to Carol,a wholesaler of toys.Carol then passes on her discount to Nina,who owns Funland,a toy store.Nina is then able to offer lower prices to toy purchasers.Under the Robinson-Patman Act,this is:

Initially,Section 8 of the Clayton Act prohibited any person from serving as a director of two or more competing corporations (other than banks or common carriers) if each corporation had capital,surplus,and undivided profits aggregating more than ________.

For ________,cost justification is the primary statutory defense to liability under Section 2(a) of the Robinson-Patman Act.

Which Section of The Clayton Act originally prohibited local and territorial price discrimination by sellers?