Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

MGMT 211 Swim > Chapter 7 > Flashcards

Chapter 7 Flashcards

1
Q

Do individual firms like competition?

A

No

  • expensive to compete with one another
  • competition can force costly changes
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is the Smithian Model and who created it?

A

created by Adam Smith

  • said capitalism motivates entreprenuers
    • because of self-interest
    • because of profits

-self-corrective forces take care of need for government

  • said government had no place in business
  • UNLESS competition is NOT present
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

How do you know when you have anticompetition?

A
  • better products not produced

- more efficient production methods not being created

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

True or False:

The means of competition is just as important as the “ends” or products that comptetition creates

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Why was Antitrust Law created in first place?

A

John D. Rockefeller created Standard Oil Trust

-creates monopoly

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What did the Ohio Supreme Court do in response to John D. Rockefeller’s monopoly with the Standard Oil Trust?

A

Broke company up into two sections

  • Standard Oil of New Jersey
  • Standard Oil of California
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Railroad Trusts 1880s?

A
  • Railroad Company Monopolies
  • raise prices making consumers made
  • leads to Interstate Commerce Act
    • preserves competitive railroad market
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Sherman Antitrust Act of 1890s

A
  • Only broke up Trusts in U.S.
  • didn’t prevent anticompetitive behavior
  • public gets made
  • major factor in 1912 presidential debate
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Because of the shortcomings of the Sherman Anti-Trust Act of 1890, it led to the creation of these two things.

A

Clayton Antitrust Act of 1914

Federal Trade Commission Act of 1914

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What have the Standard Oil of New Jersey and Standard Oil of California turned into today

A

Standard Oil of New Jersey - Exxon-Mobil

Standard Oil of California - Chevron

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

How did the Clayton Antitrust Act of 1914 differ from the Sherman Antitrust Act of 1890s?

A

Sherman Antitrust Act of 1890

  • dealt with both before and after outcomes
  • the trusts and monopolies themselves
  • broad

Clayton Antitrust Act of 1914

  • dealt with “anticompetitive behavior” that would later lead to trusts and monopolies
  • specific
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Federal Trade Commission Act of 1914

A
  • Deals with deceptive and anticompetitive behavior
  • unfair methods of competition
  • “catch all law” that Sherman and Clayton don’t cover
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What does Section 1 of the Sherman Antitrust Act say?

A
  • declares every combination in the form of trust(trust means monopoly) to be illegal
  • criminal charges
  • says rival firms must compete
  • can’t enter into agreement to eliminate competition
  • DOES not cover unilateral contracts
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

How did the Courts Interpret Section 1 of Sherman Antitrust Act?

A
  • Per Se
  • very narrowly
  • if you broke the law, guilty

-but hesitant to destroy pre-exisitng contracts that violated Sherman because weren’t harming society

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is the Rule of Reason party of Section 1 of Sherman Antitrust Act

A
  • opposite of Per Se
  • allows violater to justify actions
  • courts weigh evidence
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What does Section 2 of Sherman Antitrust Act say?

A
  • says ONLY an ANTICOMPETITIVE attempt to monopolize is illegal
  • purpose to punish successful anticompetitive attempts to sustain monopoly
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

2 requirements for proving someone has violated Section 2 of Sherman Antitrust

A
  • prove they have acquired monolistic power
  • prove they willfully tried to gain that monolistic power
  • or prove they willfully tried to maintain that monolistic power
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

In your own words, how is Section 1 and Section 2 of Sherman Antitrust Act different?

A

Section 1
-declares monopolies illegal

Section 2

  • outlaws behavior that monopolies engage in after they have already monopolized
  • outlaws anticompetitve attempts to monopolize
19
Q

What are the 4 areas of Clayton Antitrust Act of 1914?

A

Price Discrimination

Exclusionary practices/Exclusionary Dealing
-only one firm has right to do this certain thing

Tying Arrangements

  • when seller requires buy to buy another thing along with desired product
  • “all or nothing” deals

Mergers

20
Q

What are the 2 ways used to determine if a potential merger should be illegal because it will create a monopoly

A

Firm Concentration

  • how big is company
  • effect on competition?

Barriers to Entry
-ability of new firms to enter into market b/c of merger
EX: Licensing Requirements, Large-Scale plant development, etc.

21
Q

What are the 4 types of Mergers and Explain what they are

A

Horizontal Mergers
EX: merger between competitors

Vertical Mergers
EX: apparel apartment and Department store merger

Market Extension Mergers (2 Types)

  • Geographic Market Extension Merger
  • merger with 2 firms selling same product but in diff geographical locations
  • Product Market Extension Merger
  • two different business of SIMILAR fields begin to sell the same product

Conglomerate or Diversification Mergers
-mergers between businesses that are of UNRELATED fields

22
Q

What is an Interlocking Directorate

A

-same board of directors for competing corporations

23
Q

What are the names of the Agencies that are responsible for the Enforcement of Antitrust

A

Department of Justice (DOJ)

Federal Trade Commission (FTC)

24
Q

Can private entities like businesses sue violators of Sherman and Clayton Antitrusts?

A

Yes

-normal receive treble damages, attorney fees, and court costs

25
Q

U.S. v. Trenton Potteries

A
  • Trenton creates monopoly
  • says it doesn’t hurt consumer
  • Guilty b/c of Per Se
26
Q

Appalachian Coal v. U.S.

A
  • Creates monopoly during Great Depression
  • doesn’t lose single employee and customers get coal
  • case DISMISSED (no precedent) b/c Rule of Reason
27
Q

U.S. v. Socony-Vaccum Oil

A
  • creates monopoly
  • one company set prices and rest followed
  • guilty b/c Per Se
  • sets Precedent
28
Q

CBS v. Broadband Music

A
  • Broadband Music setting fines for stolen music on Intellectual property
  • setting prices so it is monopoly
  • not guilty b/c Rule of Reason
  • prices of fines set on basis of popularity
29
Q

Arizona v. Maricopa County Medical Society

A
  • Maricopa telling doctors what to charge patients
  • price setting so Monopoly
  • guilty b/c Per Se
30
Q

Explain the Leegin case and its significance

A

Made Vertical price fixing under Rule of Reason

  • Kay’s Closet were selling Leegin’s products for 20% off
  • Leegin says they need to sell their products for more
  • Leegin stops selling to Kay’s Closet
  • Kay’s Closet sues for Vertical Price Fixing
31
Q

United States v. Suntar

A

Made Horizontal Market divisions per se illegal

32
Q

What is a horizontal Boycott? Is it under Per Se or Rule of Reason

A
  • competitors agree not to do business with other competitor
  • hurts other competitors business
  • Per Se Illegal
33
Q

Explain Predatory pricing and what law makes it illegal?

A
  • you lower your businesses prices in an area to drive out competiton
  • you higher your prices back up after competition leaves

-illegal by Robinson-Patman of Clayton Section 2

34
Q

4 Defenses to Price Discrimination?

A

Weather
-“my prices changed because weather changed demand for my product”

Meeting the Competition
-“my prices changed because I was matching a competitor stores’s prices”

Volume Discounts

Cost Justification
-“I charge higher prices for those shoes in this area because it costs me more to ship them there in the first place”

35
Q

What are tying arrangements?

A

-sale of one product is conditioned upon the sale of another

36
Q

International Business Machines Corp. (IBM) v. United States

A
  • IBM sold separate cards to run their machines
  • was a Tying Arrangement
  • Court rules Per Se illegal

-“having market power in that product would “Substantially” lessen competition”

illegal under Clayton

37
Q

Norhtern Pacific Railway Company v. United States

A
  • Railroad sold land to people
  • made ppl promise to ship their produced goods using railway if they couldn’t find cheaper way (tying arrangement)
  • Illegal under Sherman Act Section 1
38
Q

Required pre-merger notification?

A
  • applies to mergers over 70M
  • have to notify DOJ and FTC
  • purpose is to give government time to oppose merger if necessary
  • have 30 days to oppose
39
Q

The ___ established the pre-merger notification

A

Hart-Scott-Rodino Antitrust Imporvement Act of 1976

40
Q

3 Defenses when firms are allowed to merge?

A

Failing Firm Defense
Lack of Power in Industry
Power-Buyer Defense

41
Q

How do you determine who has market power (regarding a merger)?

A

Rules to determine are constant being changed
-by the DOJ and FTC

Look at relevant market

  • product market
  • Geographical market

also Determined by Herfindahl-Hirschman Index (HHI)

  • used numbers and squares of relelvant market to calculate
  • under 1000 = merger allowed
  • between 1000-18000 = not allowed
42
Q

United States v. General Dynamics

A

Allowed Merger due to “Lack of Power in Industry”

  • merger would form coal company monopoly
  • coal was failing industry
  • government said it wouldn’t matter then who buyers bought from

-approved merger

43
Q

What are some exceptions to AntiTrust Law?

A 
Labor Unions
Agricultural Cooperative or Associations
State Actions
Foreign Trades
Baseball
Politics

MGMT 211 Swim (17 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions