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CPA: REG > Chapter 8 Section 6: Antitrust Law > Flashcards

Chapter 8 Section 6: Antitrust Law Flashcards

1
Q

What do antitrust laws do?

A

Prohibit businesses from engaging in conduct that could stifle free competition

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2
Q

What is the Sherman Act?

A

It prohibits restraints of trade and monopolies

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3
Q

What is the Rule of Reason test in Section 1 of the Sherman Act?

A

Balance anticompetitive and competitive effects. Be realistic about what you’re calling anticompetitive by putting it into context

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4
Q

What are Per Se Violations in Section 1 of the Sherman Act?

A

Inherently illegal acts without legal justification

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5
Q

What are horizontal restraints in Section 1 of the Sherman Act?

A

Agreements between competitors

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6
Q

What are vertical restraints in Section 1 of the Sherman Act?

A

Agreements between those at different marketing levels (between a retailer and manufacturer)

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7
Q

What is the concerted action requirement in Section 1 of the Sherman Act?

A

It has to be an action between 2 or more parties. You can’t violate the Sherman Act by yourself.

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8
Q

What is price fixing, according to Section 1 of the Sherman Act?

A

Agreements to set prices for goods or services
Can be horizontal (between competitors) or vertical (manufacturers controlling the resale prices of their products - called resale price maintenance)

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9
Q

What are market allocations, according to Section 1 of the Sherman Act?

A

Agreements not to compete in specific markets.

Horizontal ones are a per se violation

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10
Q

What are boycotts, according to Section 1 of the Sherman Act?

A

Two or more firms agreeing not to deal with a third party

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11
Q

What are tying arrangements, according to Section 1 of the Sherman Act?

A

Where you must buy one product to get another

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12
Q

How do you per se rules and rule of reason apply to horizontal and vertical issues?

A

Most horizontal are per se violations, and most vertical are okay under the rule of reason

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13
Q

What does Section 2 of the Sherman Act regulate?

A

Monopolies and attempts to monopolize

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14
Q

What are the two requirements to establish and illegal monopoly?

A

Monopoly power

Power was achieved unfairly or abused once achieved

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15
Q

When does monopoly power exist?

A

When a firm has sufficient market power (70%) to control prices or exclude competition

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16
Q

How do patents impact monopolies?

A

They grant a limited monopoly, and that is okay.

17
Q

What penalties are available under the Sherman Act?

A

Criminal and civil

18
Q

What does the Clayton Act do?

A

Stops anticompetitive behavior not covered by the Sherman Act.
Stops activities in their incipiency (before they become violations of the Sherman Act)

19
Q

What does Section 7 of the Clayton Act cover?

A

It prohibits the merger or acquisition of a company if the effect is to substantially lessen competition.

20
Q

Which type of merger is judged most stringently under the Clayton Act?

A

Horizontal mergers

21
Q

What is a forward merger?

A

A vertical merger where a firm acquires a customer

22
Q

What is a backward merger?

A

A vertical merger where a firm acquires a supplier

23
Q

What is a conglomerate merger?

A

When firms in different businesses merge

24
Q

What is the failing company exception under Section 7 of the Clayton act?

A

If a company is failing an there is no other buyer, a merger can be lawful even if the effect is to lessen competition.

25
Q

What is the Robinson-Patman Act?

A

It amended and strengthened Section 2 of the Clayton Act that prohibited price discrimination

26
Q

What do Section 2 of the Clayton and Robinson-Patman acts say?

A

They only apply to price discrimination of commodities of like grade and quality.

27
Q

What penalties are available under the Clayton and Robinson-Patman acts?
Who can seek penalties?

A

Civil only

Private parties harmed can sue for treble damages and attorney’s fees

28
Q

What does the Federal Trade Commissions Act prohibit?

A

Illegal and unfair methods of competition and misleading ads

29
Q

How can the Federal Trade Commissions Act be enforced?

A

No private-party suits are allowed - only the gov’t can seek anything
FTC can seek injunctions, issues cease and desist orders, and require advertisers to make affirmative disclosures and corrective advertisements.

30
Q

Who is exempt from the Antitrust laws?

A

Labor unions, agriculture, insurance, American exporters, and cooperative research.
there are also judicial exemptions, which includes the MLB

CPA: REG (35 decks)

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