Chapter 24: Antitrust Law and Promoting Competition

Question 1

Antitrust Laws

Answer 1

Protect trade and commerce from unlawful restraints of trade and anticompetitive practices.

Question 2

Restraints of trade

Answer 2

agreements between firms that reduce competitiveness in the marketplace.

Question 3

Sherman Antitrust Act (Sherman Act)

Answer 3

Act to Protect trade and commerce against unlawful restraints on trade and monopolies.

Question 4

Major Provisions of Sherman Act:

Provisions for a Trust (Sec. 1)–
1. Every _______________, combination in the form of a ____________ or otherwise, or _______________, in restraint of _____________ or _____________ among the several States, or with ____________ nations, is hereby declared to be ______________ [and is a _______________ punishable by _____________ and/or ___________________].

Provisions for a Monopoly (Sec. 2)–
2. Every person who shall ______________, or _____________ to ________________, or combine or ________________ with any other person or persons, to ________________ any part of the __________ or _______________ among the several States, or with _____________ nations, shall be deemed guilty of a ______________ [and is similarly punishable].

Answer 4

1. contract; trust; conspiracy; trade; commerce; foreign; illegal; felony; fine; imprisonment
2. monopolize; attempt; monopolize; conspire; monopolize; trade; commerce; foreign; felony

Question 5

Monopoly

Answer 5

Market in which there is a single seller, or a limited number of sellers.

Question 6

Section 1 Violation Requirements:

1) _____________ between ____ or more parties that…

2) ______________ restrains ________________, and…

3) affects ________________ __________________.

Answer 6

Agreement; 2; unreasonably; competition; interstate commerce

Question 7

Section 2 Violation Requirements:

1) The ______________ of _____________ power in the relevant ___________, and…

2) the willful ______________ or ________________ of that power, as distinguished from _____________ or _______________ as a consequence of a _______________ product, business ______________, or historic ____________.

Answer 7

possession; monopoly; market; acquisition; maintenance; growth; development; superior; acumen; accident

Question 8

“per se” Latin Meaning

Answer 8

“on its face”

Question 9

Per Se Violation

Answer 9

restraint on trade that is so blatantly/substantially anticompetitive, that it is inherently (per se) illegal.

Question 10

Rule of Reason (Test)

Answer 10

test whether or not an anticompetitive restraint on trade is a reasonable restraint on trade.

Question 11

Why was the Rule of Reason Developed?

Answer 11

If the test wasn’t made, practically any trade restraint (agreement) between businesses/firms would violate the Sherman Act.

Question 12

Price-Fixing Agreement

Answer 12

• Per se violation of Section 1 of Sherman Act (blatantly/substantially anticompetitive).
• Agreement between firms to fix prices of goods at certain level.

Question 13

Group Boycott

Answer 13

• Per se violation of Section 1 of Sherman Act
• Two or more sellers refuse to work with firm or business

Question 14

Market Divisions

Answer 14

• Per se violation of Sec.1 of the Sherman Act for competitors (firms) in the same market to divide customers and territories.

Question 15

Explain TV Market Divisions Example:

Answer 15

Let’s say you have 3 different firms selling separate Television brands.

They each come together in concerted action and make an agreement for Business 1 to sell his TV’s in x (state), Business 2 sell his TV’s in y (State), and Business 3 in z (state)

This illegal trust makes it so that the tv businesses don’t have to compete against each other (no one has to lower prices, to get greater consumer attention etc…)

Question 16

Trade Associations:

Trade associations may engage in _____________ activities including _____________ information, representing the members’ ____________ interest before govt. bodies, and setting ________________ standards to govern the ________________ the business’s are in.

Using the rule of reason, if a court finds that the _______________ of a trade association ______________ trade, but this restraint _______________ the ___________ and the ________________, then it is considered a _________________ __________________ on trade.

Answer 16

joint; exchanging; business; regulatory; industry; practices; restrains; benefits; public; association; reasonable restraint

Question 17

_____________ restraints on trade and commerce take place on the ____________ (just _______) level of _______________ (production of goods / products). ________________ restraints, however take place at ______________ different levels of __________________.

Answer 17

Horizontal; same; one; operation; Vertical; many; operation

Question 18

Vertical Restraint

Answer 18

A restraint of trade, made by agreement of firms, at different levels of manufacturing and distribution process.

Question 19

Resale Price Maintenance Agreement

Answer 19

agreement between retailer and manufacturer that specifies what the retail price (store price) of a good must be.

Question 20

Predatory Pricing

Answer 20

One firm tries to drive it’s competitors out of the market by pricing their goods at prices SUBSTANTIALLY below the normal costs.

Question 21

Monopolization:

1) The willful _____________ of ____________ __________ of the _____________ _____________…

2) The willful ________________ and ______________ of that ______________, separate from _____________ and ________________, as a consequence of ______________ product, business ________________, and historic ______________.

Answer 21

possession; monopoly power; relevant market; acquisition; maintenance; power; growth; development; superior; acumen; historic accident

Question 22

Clayton Act (1914)

Answer 22

An act is illegal only if it serves to substantially reduce competition or creates a monopoly power.

Question 23

Price Discrimination:

Answer 23

when a seller charges competing prices to different buyers for identical goods/services.

Question 24

Requirements for Price Discrimination:

Answer 24

1) The seller must be engaged in interstate commerce.

2) The goods have to be of similar grade / quality.

3) The good has to have been purchased by two or more purchases.

Question 25

Defenses to Price Discrimination:

1) Cost Justification: If the ____________ proves that a particular ____________’s purchases _________ the ____________ of production to make the product/service, then he won’t be held liable for price discrimination.

2) Meeting Competitor’s Prices: If the ____________ charged ______________ prices in a ___________ ____________ attempt to meet their _______________ lower prices, they won’t be held liable for price discrimination.

3) Changing Market Conditions: If a _______________ lowered their prices in ______________ to changing ______________ affecting the market or _________________ of goods, they won’t be held liable for price discrimination.

Answer 25

seller; buyer’s; reduce; cost

seller; lower; good faith; competitor’s

seller; response; conditions; marketability

Question 26

Exclusive Dealing Contract

Answer 26

Contract wherein seller prohibits buyer from purchasing goods/services from seller’s competitors

Question 27

Tying Agreement

Answer 27

Seller conditions the sale of product on the purchaser’s AGREEMENT to buy ANOTHER product from the seller.

(Seller: “if you want x, you gotta buy y as well.”)

Question 28

1) The _________________ of ________________ (_______) prosecutes all _____________ under the _______________ Act.

2) Violations under the _______________ Act are not a ___________, but may be enforced by the ___________ and ____________ _______________ __________________ (_______) through civil action proceedings.

Answer 28

Department; Justice; DOJ; violations; Sherman

Clayton; crime; DOJ; Federal Trade Commission (FTC)

Question 29

Requirements for Remedies for a Party Injured due to Violations under the Sherman Act:

1) The ________________ violation of the Sherman act either _________________ OR was a _________________ factor in the injury the innocent party suffered.

2) The _______________ actions of party that violated Sherman Act affected the _____________ activities, of the injured party, that were protected by _______________ laws.

Answer 29

antitrust; caused; substantial

unlawful; business; antirust