Anti-Trust Regulations Flashcards
Martha Smith of First National Bank is attempting to close a large commercial loan to a manufacturing equipment company. In negotiating the interest rate on the loan Martha states that if the company will move some of its demand accounts to the bank, it could get a lower interest rate. Is this wrong?
a. Yes. It violates the anti-tying provisions.
b. Yes. It is a restraint of trade.
c. No, unless moving the accounts is a condition of the loan.
d. No. The bank may condition the loan on the customer placing a deposit in the bank
d. No. The bank may condition the loan on the customer placing a deposit in the bank
The bank may condition the extension of a loan on the customer placing a deposit in the bank. Anti-tying provisions stipulate that banks may not extend credit, lease or sell property, furnish services, fix, or vary consideration conditioned on the customer obtaining additional credit or service from the bank other than a loan, discount, deposit, or trust service.
First National is developing a consumer checking account that can access a line of credit. This is the first time the bank has ever had such a product, although this type of credit facility has been popular with other banks in town. To determine what interest rate to charge on this account, an officer of First National called some of his friends at other local banks offering this type of credit and asked several questions, including the interest rate charged on this type of account and what internal factors the banks use to set the rate. After obtaining this information, First National determines that it could charge approximately 2 percent more than it originally planned. Is there anything wrong with this course of action?
a. Yes. Communicating with competitors for purposes of setting prices is wrong.
b. No. Communication itself is never wrong regardless of the subject matter.
c. Yes. The bank should have disguised its identity in calling its competitors.
d. No. The bank could probably have determined the prices eventually without calling the banks directly.
a. Yes. Communicating with competitors for purposes of setting prices is wrong.
This scenario is an antitrust price-setting problem. The bank is blatantly attempting to lessen competition by setting prices based on the prices of competitors. The whole purpose of the antitrust laws is to prevent this type of price setting.
First National Bank owns a data processing company that sells financially related data processing services to various businesses in the community. Daniel Tyler, a loan officer, is negotiating a loan to a local CPA firm. He would like to make the loan conditional on the CPA firm’s use of the subsidiary data processing firm. May he do so?
a. Yes, because it is not a bank service.
b. Yes, because it is not related to pricing.
c. No. It is an illegal tie-in.
d. No, unless the company was planning to obtain a new data processing service provider anyway.
c. No. It is an illegal tie-in.
No loan can be conditioned on the borrower obtaining services from a bank subsidiary.
Roger Jameson is the head of the consumer loan department at First National Bank. He is a regular participant in a lending committee of a local finance trade association. The committee meets once a month at a local hotel. After the committee meetings, Roger and several other committee members who are officers at other banks in town go to a hotel restaurant and talk for a couple of hours before leaving. During these informal conversations Roger learned that the other members require the car dealerships in town that sell consumer installment contracts to the banks to refrain from selling them to local savings and loan associations. Roger believes that this is a good idea and would like to implement it at First National. Is there a problem with doing so?
a. No, because interest rates are not involved.
b. No, because this decision would have no effect on the cost to the consumer.
c. Yes, unless there are enough dealerships in town to provide contracts to all of the institutions.
d. Yes. Restricting the dealerships is a restraint of trade.
d. Yes. Restricting the dealerships is a restraint of trade.
This action could be considered both a restraint of trade and a conspiracy to restrain trade.
Mills Company, Inc., is a manufacturing company with a working capital line of credit from First National Bank. The credit agreement governing the loan states that Mills cannot obtain additional unsecured credit without the approval of the bank. Mills believes that such a clause violates the Bank Holding Company Act’s anti-tying clause. Does it?
a. Yes. It is a restraint of trade.
b. Yes, unless the bank will reasonably allow additional credit at Mills’s request.
c. No, since this clause relates to the soundness of the credit
d. No, unless the bank refuses to grant additional credit to Mills itself
c. No, since this clause relates to the soundness of the credit
Banks may not extend credit, lease or sell property, furnish services, fix, or vary consideration conditioned on the customer not obtaining credit or services from a bank competitor unless imposed to assure soundness of the credit.
