Chapter 46

Question 1

Antitrust Laws

Answer 1

A series of laws enacted to limit anti competitive behavior in almost all industries, businesses, and professions operating in the United States.

Question 2

Section 1 of the Sherman Act

Answer 2

A section that prohibits contracts, combinations, and conspiracies in restraint of trade.

Question 3

Rule of Reason

Answer 3

A rule which holds that only unreasonable restraints of trade violate Section 1 of the Sherman Act. The court must examine the pro- and anticompetitive effects of a challenged restraint.

Question 4

Per Se Rule

Answer 4

A rule that is applicable to restraints of trade considered inherently anticompetitive. Once this determination is made about a restraint of trade, the court will not permit any defenses or justifications to save it.

Question 5

Horizontal Restraint of Trade

Answer 5

A restraint of trade that occurs when two or more competitors at the same level of distribution enter into a contract, combination, or conspiracy to restrain trade.

Question 6

Price-Fixing

Answer 6

A restraint of trade that occurs when competitors in the same line of business agree to set the price of the goods or services they sell, raising, depressing, fixing, pegging, or stabilizing the price of a commodity or service.

Question 7

Division of Markets

Answer 7

A restraint of trade in which competitors agree that each will serve only a designated portion of the market.

Question 8

Group Boycott

Answer 8

A restraint of trade in which two or more competitors at one level of distribution agree not to deal with others at another level of distribution. Also known as refusal to deal.

Question 9

Vertical Restraint of Trade

Answer 9

A restraint of trade that occurs when two or more parties on different levels of distribution enter into a contract, combination, or conspiracy to restrain trade.

Question 10

Resale Price Maintenance

Answer 10

A per se violation of Section 1 of the Sherman Act that occurs when a party at one level of distribution enters into an agreement with a party at another level to adhere to a price schedule that either sets or stabilizes prices. Also called vertical price-fixing.

Question 11

Non-Price Vertical Restraints

Answer 11

Restraints of trade that are unlawful under Section 1 of the Sherman Act if their anticompetitive effects outweigh their precompetitive effects.

Question 12

Unilateral Refusal to Deal

Answer 12

A unilateral choice by one party not to deal with another party. This does not violate Section 1 of the Sherman Act because there is not concerted action.

Question 13

Conscious Parallelism

Answer 13

A doctrine which states that if two or more firms act the same but no concerted action is shown, there is no violation of Section 1 of the Sherman Act.

Question 14

Noerr Doctrine

Answer 14

A doctrine which says that two or more persons can petition the executive, legislative, or judicial branch of the government or administrative agencies to enact laws or take other action without violating antitrust laws.

Question 15

Section 2 of the Sherman Act

Answer 15

A section that prohibits monopolization and attempts or conspiracies to monopolize trade.

Question 16

Relevant Product or Service Market

Answer 16

A relevant market that includes substitute products or services that are reasonably interchangeable with the defendant’s products or services.

Question 17

Relevant Geographical Market

Answer 17

A relevant market that is defined as the area in which the defendant and its competitors sell the product or service.

Question 18

Monopoly Power

Answer 18

The power to control prices or exclude competition, measured by the market share the defendant possesses in the relevant market.

Question 19

Act of Monopolizing

Answer 19

An act that is required for there to be a violation of Section 2 of the Sherman Act. Possession of the Sherman Act. Possession of monopoly power without such act does not violate Section 2.

Question 20

Section 7 of the Clayton Act

Answer 20

A section which provides that it is unlawful for a person or business to acquire the stocks or assets of another “where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may by substantially to lessen competition, or to tend to create a monopoly.”

Question 21

Line of Commerce

Answer 21

The products or services that will be affected by a merger, including those that consumers use as substitutes. If an increase in the price of one product or service leads consumers to purchase another product or service, the two products are substitutes for each other.

Question 22

Section of the Country

Answer 22

A division of the country that is based on the relevant geographical market; the geographical area that will feel the direct and immediate effects of a merger.

Question 23

Probability of a Substantial Lessening of Competition

Answer 23

The probability that a merger will substantially lessen competition or create a monopoly, in which case the court may prevent the merger under Section 7 of the Clayton Act.

Question 24

Horizontal Merger

Answer 24

A merger between two or more companies that compete in the same business and geographical market.

Question 25

Vertical Merger

Answer 25

A merger that integrates the operations of a supplier and a customer.

Question 26

Backward Vertical Merger

Answer 26

A vertical merger in which the customer acquires the supplier.

Question 27

Forward Vertical Merger

Answer 27

A vertical merger in which the supplier acquires the customer.

Question 28

Market Extension Merger

Answer 28

A merger between two companies in similar fields whose sales do not overlap.

Question 29

Conglomerate Merger

Answer 29

A merger that does not fit into any other category; a merger between firms in totally unrelated businesses.

Question 30

Hart-Scott-Rodino Antitrust Improvement Act

Answer 30

An act that requires certain firms to notify the FTC and the Justice Department in advance of a proposed merger. Unless the government challenges a proposed merger within 30 days, the merger may proceed.

Question 31

Section 3 of the Clayton Act

Answer 31

An act that prohibits trying arrangements involving sales and leases of goods.

Question 32

Tying Arrangement

Answer 32

A restraint of trade in which a seller refuses to sell one product to a customer unless the customer agrees to purchase a second product from the seller.

Question 33

Section 2(a) of the Robinson Patman Act

Answer 33

A section that prohibits direct and indirect price discrimination by sellers of a commodity of a like grade and quality, where the effect of such discrimination may be to substantially lessen competition or to tend to create a monopoly in any line of commerce.

Question 34

Direct Price Discrimination

Answer 34

Price discrimination in which (1) the defendant sold commodities of like grade and quality, (2) to two or more purchasers at different prices at approximately the same time, and (3) the plaintiff suffered injury because of the price discrimination.

Question 35

Indirect Price Discrimination

Answer 35

A form of price discrimination (e.g., favorable credit terms) that is less readily apparent than direct forms of price discrimination.

Question 36

Cost Justification Defense

Answer 36

A defense in section 2(a) action which provides that a seller’s price discrimination is not unlawful if the price differentials is due to “difference in the cost of manufactur, sale, or delivery” of the product.

Question 37

Changing Conditions Defense

Answer 37

A price discrimination defense that claims prices are lowered in response to changing conditions in the market for or the marketability of the goods.

Question 38

Meeting the Competition Defense

Answer 38

A defense provided in Section 2(b) that says a seller may lawfully engage in price discrimination to meet a competitor’s price.

Question 39

Section 5 of the Federal Trade Commission Act

Answer 39

A section that prohibits unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce.

Question 40

Statutory Exemptions

Answer 40

Exemptions from antitrust laws that are expressed provided in statutes enacted by Congress.

Question 41

Implied Exemptions

Answer 41

Exemptions from antitrust laws that are implied by the federal courts.

Question 42

State Action Exemptions

Answer 42

Business activities that are mandated by state law and are therefore exempt from federal antitrust laws.