Lesson 21: Antitrust Law

Question 1

trusts

Answer 1

The development of antitrust laws began over a century ago.

In the 1800s, a growing number of companies in certain industries began merging into huge corporations called trusts. These trusts dominated their industries so much that smaller businesses couldn’t compete and eventually died out.

Some prime examples of large trusts were Standard Oil and American Tobacco.

Question 2

monopolies

Answer 2

Over time, these trusts grew so powerful that they became monopolies.

A monopoly exists when one seller of goods or provider of services has exclusive control over the market and faces no competition from other sellers or providers.

Since customers have no alternative products to choose from, the company has no incentive to offer reasonable prices or to improve the quality of its product.

Question 3

Cartwright Act

Answer 3

It took California a couple of decades to reach the same conclusion, deciding that its own antitrust law, the Cartwright Act, also applied to services—including services provided by real estate firms.

Question 4

tie-in arrangement

Answer 4

A tie-in arrangement (also called a tying arrangement) occurs when a buyer is required to purchase something additional along with the product or service that he wants.

Question 5

list-back agreement

Answer 5

The developer in the example wants the builder to enter into a list-back agreement with him, which is not an antitrust violation in itself.

But he’s making the list-back agreement a required condition for the sale of the lot, which is an illegal tie-in arrangement.

Note, though, that if two parties freely agree on a list-back agreement (say to save fees or to simplify a transaction), that doesn’t violate the law