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Legal Business II > Ch 18 > Flashcards

Ch 18 Flashcards

0
Q

Antitrust laws

A

Laws protecting commerce from unlawful restraints

Objective is to foster competitiom

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1
Q

Business trust

A

Corporations tied themselves together in business trusts
To thwart competition

Form of business organization where trustees hold title
To property for benefit of others

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2
Q

Sherman Act: section 1

A

Every contract, combination in form of trust or otherwise,
Or conspiracy in restraint of trade or commerce among
Several states/foreign nations is illegal

Felony punishable by fine or imprisonment

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3
Q

Sherman Act: section 2

A

Every person who shall monopolize, or attempt to, or
Combine or conspire with others to monopolize any
Part of trade/commerce

among states/foreign countries is deemed guilty of felony

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4
Q

Main ways section 1 of Sherman Act differs from section 2

A

Section 1 requires 2 or more persons

Section 2 can be unilateral conduct

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5
Q

Section 1 cases of Sherman act involve?

Section 2 cases?

A

Section 1: Finding written/oral agreement that leads to a
restraint Of trade

Section 2: cases deal with structure of monopoly that
Already exists in marketplace (misuse of monopoly power)

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6
Q

Monopoly

A

Market in which there is single seller or very limited # of

Sellers

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7
Q

Monopoly power

A

Ability of monopoly to dictate what takes place in a given

Market

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8
Q

Market power

A

Power of firm to control market price of its product

Monopoly has greatest degree of market power

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9
Q

Jurisdictional requirements of Sherman Act

A

Restraints that apply to interstate commerce

US nationals abroad that engage in activities that affect
US foreign commerce

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10
Q

Per se violation

A

Type of anticompetitive agreement that is considered injurious
To public

No need to determine whether it injures market competition
Naturally considered violation of Sherman Act

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11
Q

Rule of reason

A

Test where court balances positive effects (ex. Economic
Efficiency) of agreement against anticompetitive effects

In antitrust litigation, many practices are analyzed under
Rule of reason

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12
Q

Horizontal restraint

A

Any agreement that restrains competition between rival

Firms competing in same market

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13
Q

Horizontal restraint: Price-fixing agreement

A

Agreement btw competitors to fix prices of products and
Services at certain levels

Per se violation of section 1

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14
Q

Horizontal restraint: group boycott

A

Refusal by group of competitors to deal with person or
Firm

Prohibited by the Sherman act, per se violation of section 1

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15
Q

Horizontal restraint: Horizontal market division

A

When competitors divide up territories or customers

Per se violation of section 1 of Sherman act

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16
Q

Trade associations

A

Organized to pursue common interests

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17
Q

4 Joint activities of trade associations

A

1 exchange info
2 representation of business interest in front of governmental bodies
3 advertising campaigns
4setting regulatory standards to govern profession/industry

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18
Q

Concentrated industry

A

Industry where large percentage of market sales is controlled
By single firm or small number of firms

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19
Q

Vertical restraint

A

Any restraint on trade created by agreements btw firms at

Different levels in manufacturing and distribution process

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20
Q

How are vertical restraints different from horizontal restraints

A

Vertical restrains encompass entire chain of production

While horizontal restraints occur at same level of operation

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21
Q

Vertically integrated firm

A

Firm that carries out 2 or more functional phases of chain
Of production

(Ex. Manufacture, Distribution and retailing)

22
Q

Vertical restraint: territorial or customer restrictions

A

Manufacturing firm institutes territorial restrictions

Prevents wholesalers or retailers from reselling product to
Certain classes of buyers (competing retailers)

23
Q

Resale price maintenance agreement

A

Agreement btw manufacturer and retailer where manufacturer
Specifies what retail prices of its product must be

Judged under rule of reason whether they violate Sherman
Act

24
Predatory pricing
Pricing product below cost with intent to drive competitors Out of market Violets section 2 of Sherman act
25
Monopolization 2 elements
1 possession of monopoly power in relevant market 2 willful acquisition or maintenance of power as distinguished From growth or development as consequence of superior Product, business acumen, historic accident
26
2 elements of relevant market
1 relevant product market 2 relevant geographic market
27
Relevant product market
Includes products with identical attributes Ex. Sugar made by different producers
28
Intent requirement (for monopoly power)
Evidence firm intentionally engaged in anticompetitive | behavior
29
Unilateral refusals to deal: 2 conditions for violation of section 2
1 firm has monopoly power that refuses to deal 2 refusal to deal has anticompetitive effect on market
30
Attempted monopolization
Prohibited by section 2, any actions by firm to eliminate Competition and gain monopoly power Ex. Engaging in predatory pricing or predatory bidding
31
Predatory bidding
Firm deliberately bids up price of inputs to prevent competitors from obtaining sufficient supplies to manufacture Products
32
Clayton Act: Section 2 Price Discrimination
Setting prices in such a way that 2 competing buyers pay 2 different prices for identical product or service Ex. Arise from favorable credit terms, discounts, rebates, offsets, allowances, freight charges
33
4 elements required to violate section 2 price discrimination
1 seller engaged in interstate commerce 2 goods = same quality 3 sold to 2 or more purchasers 4 effect of price discrimination decreases competition
34
3 statutory defenses to price discrimination
1 cost justification 2 meeting the price of competition 3 changing market condition
35
Defense: cost justification
Seller can justify price reduction by demonstrating particular Buyer's purchases saved seller cost in producing goods
36
Defense meeting price of competition
If seller charged lower price in good faith to meet equal low Price competitor, they won't be liable
37
Defense changing market condition
Sellers can readjust prices to meet realities of market
38
Clayton Act Section 3: Exclusive dealing contract
Agreement where seller forbids buyer to purchase products From seller's competitors Violation of section 3 of Clayton act when it harms competition
39
Clayton Act Section 3: Tying Arrangement
Agreement btw buyer and seller where buyer of specific Product/service becomes obligated to purchase additional Products or services from seller Violation of section 3 of Clayton act if it decreases competition
40
Clayton Act: Section 7 Mergers
Person or business organization can't hold stock/assets Or other entity where effect may be to substantially lessen Competition
41
Market concentration
Degree in which small number of firms control large % Share of relevant market Determined by calculating percentages held by largest firms In that market
42
Horizontal mergers
Merger between 2 firms that are competing in same marketplace If creates entity with large percentage market share it's Illegal
43
3 other factors in considering legality of horizontal merger
1 overall concentration of relevant product market 2 relevant market's history in trending toward concentration 3 whether design of merger is to establish market power Or restrict competition
44
Vertical merger
Acquisition by a company at 1 level in marketing chain Of company at higher or lower level in chain Ex. Company merging with one of its suppliers or retailers
45
Interlocking directorates
Practice of having individuals serve as directors on boards | Of 2 or more companies simultaneously
46
How does section 8 of Clayton act deal with interlocking directorates?
No person may be director in 2 or more competing corporations at same time If corporation has capital, surplus or undivided profits aggregating more than $26,161,000 or competitive sales Of over $2,616,100 (2009 amounts) federal trade commission Adjusts amounts each year
47
What 2 federal agencies enforce federal antitrust laws
US department of Justice (DOJ) Federal Trade Commission (FTC)
48
Section 5 of Federal Trade Commission Act
Covers all anticompetitive behavior including conduct that Doesn't violate Sherman Act or Clayton Act Therefore broader in scope than other antitrust laws
49
what laws can the DOJ and FTC prosecute
DOJ can prosecute violations of Sherman Act FTC and DOJ can both enforce Clayton Act
50
Divestiture
Act of selling 1 or more of company's divisions or parts (Such as subsidiary or plant) Often mandated by courts in merger or monopolization Cases as a remedy
51
FTC has sole authority to enforce violations of
Section 5 of Federal Trade Commission Act
52
Treble damages
Damages by statute are 3 times amount of what fact finder Determines is owed Can be recovered by private plaintiffs in antitrust suits

Legal Business II (13 decks)

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