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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
Q

Predatory pricing

A

Pricing product below cost with intent to drive competitors
Out of market

Violets section 2 of Sherman act

25
Q

Monopolization 2 elements

A

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
Q

2 elements of relevant market

A

1 relevant product market

2 relevant geographic market

27
Q

Relevant product market

A

Includes products with identical attributes

Ex. Sugar made by different producers

28
Q

Intent requirement (for monopoly power)

A

Evidence firm intentionally engaged in anticompetitive

behavior

29
Q

Unilateral refusals to deal: 2 conditions for violation of section 2

A

1 firm has monopoly power that refuses to deal

2 refusal to deal has anticompetitive effect on market

30
Q

Attempted monopolization

A

Prohibited by section 2, any actions by firm to eliminate
Competition and gain monopoly power

Ex. Engaging in predatory pricing or predatory bidding

31
Q

Predatory bidding

A

Firm deliberately bids up price of inputs to prevent
competitors from obtaining sufficient supplies to manufacture
Products

32
Q

Clayton Act: Section 2 Price Discrimination

A

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
Q

4 elements required to violate section 2 price discrimination

A

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
Q

3 statutory defenses to price discrimination

A

1 cost justification

2 meeting the price of competition

3 changing market condition

35
Q

Defense: cost justification

A

Seller can justify price reduction by demonstrating particular
Buyer’s purchases saved seller cost in producing goods

36
Q

Defense meeting price of competition

A

If seller charged lower price in good faith to meet equal low
Price competitor, they won’t be liable

37
Q

Defense changing market condition

A

Sellers can readjust prices to meet realities of market

38
Q

Clayton Act Section 3: Exclusive dealing contract

A

Agreement where seller forbids buyer to purchase products
From seller’s competitors

Violation of section 3 of Clayton act when it harms competition

39
Q

Clayton Act Section 3: Tying Arrangement

A

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
Q

Clayton Act: Section 7 Mergers

A

Person or business organization can’t hold stock/assets
Or other entity where effect may be to substantially lessen
Competition

41
Q

Market concentration

A

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
Q

Horizontal mergers

A

Merger between 2 firms that are competing in same
marketplace

If creates entity with large percentage market share it’s
Illegal

43
Q

3 other factors in considering legality of horizontal merger

A

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
Q

Vertical merger

A

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
Q

Interlocking directorates

A

Practice of having individuals serve as directors on boards

Of 2 or more companies simultaneously

46
Q

How does section 8 of Clayton act deal with interlocking directorates?

A

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
Q

What 2 federal agencies enforce federal antitrust laws

A

US department of Justice (DOJ)

Federal Trade Commission (FTC)

48
Q

Section 5 of Federal Trade Commission Act

A

Covers all anticompetitive behavior including conduct that
Doesn’t violate Sherman Act or Clayton Act

Therefore broader in scope than other antitrust laws

49
Q

what laws can the DOJ and FTC prosecute

A

DOJ can prosecute violations of Sherman Act

FTC and DOJ can both enforce Clayton Act

50
Q

Divestiture

A

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
Q

FTC has sole authority to enforce violations of

A

Section 5 of Federal Trade Commission Act

52
Q

Treble damages

A

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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