Chapter 27b Antitrust law prohibits anticompetitive practices

Document Type
Test Prep
Book Title
The Legal Environment of Business: Text and Cases: Ethical-- Regulatory-- Global-- and Corporate Issues 8th Edition
Frank B. Cross, Roger LeRoy Miller
1. Antitrust law prohibits anticompetitive practices.
1. Monopoly power is an extreme amount of market power.
1. Using market power to drive competitors out of business is illegal.
1. Restraints that have a significant impact on interstate commerce do not
violate antitrust law.
1. Market power is the economic power to buy what you want in a given
1. A tying arrangement exists when two competitors agree to tie, or fix,
their prices at the same level.
1. Price discrimination is not always a violation of antitrust law.
1. An act must have a substantial impact on interstate commerce to
violate antitrust law.
1. No person may be a director for two or more competing corporations at
the same time.
1. Only the Federal Trade Commission can prosecute violations of all of
the antitrust laws.
1. U.S. antitrust law may protect foreign consumers and competitors from
violations by U.S. firms.
1. Professional sports are exempt from antitrust regulation.
1. A joint effort by businesspersons to obtain legislative action is not
exempt from the antitrust laws.
1. Most other nations’ antitrust laws do not apply extraterritorially.
1. Predatory pricing is above-cost pricing.
1. The possession of monopoly power is only one element of the offense
of monopolization.
1. A firm cannot be a monopolist unless it is the sole seller in a market.
1. One component of the relevant market is the geographic boundaries
of the market in which the firm and its competitors sell the product or
1. Attempted monopolization is not a violation of antitrust law.
1. Only serious threats of monopolization are condemned as violations of
antitrust law.
1. Congress enacts a statute to outlaw a specific type of anticompetitive
business agreement. Like other laws that regulate economic
competition, this law is referred to as
a. a federal trade commission act.
b. an antitrust law.
c. an interstate commerce act.
d. a suppressive restraint on trade.
1. Dairy Products, Inc., a wholesaler of milk and other dairy goods,
decides not to enter the market for soy products. Such business
decisions are usually based on
a. a greater return that can be realized in other accessible markets.
b. the corporate image that a product will project.
c. the difficulty of marketing a product.
d. the directors’ personal preferences.
1. Machine Parts Corporation (MPC), a manufacturer of machine parts,
wants to maximize its profits. The drawback to a decision to raise
prices significantly is that MPC
a. may lose its reputation as a price discounter.
b. may lose sales to its competitors.
c. will complicate its bookkeeping procedures.
d. will have to pay additional income taxes.
1. CompTech Company sells its computer-chip division to Delta Chips
Corporation and promises not to reenter the chip market for three
years. At common law, this is
a. a restraint of trade and reasonable.
b. a restraint of trade and unreasonable.
c. not a restraint of trade and reasonable.
d. not a restraint of trade and unreasonable.
1. Seven Ivy League colleges and universities conspire to fix tuition prices
and financial aid packages. Under the Sherman Act, this is
a. a per se violation.
b. a violation only if their competitors also lower prices.
c. a violation only if they thereby acquire monopoly power.
d. not a violation.
1. Enterprising Business Corporation may be engaging in conduct that vio-
lates the Sherman Act. To bring an action against the firm requires that
its conduct have a significant impact on
a. international commerce.
b. Internet commerce.
c. interstate commerce.
d. intrastate commerce.
1. Coast-to-Coast Sales Company charges different buyers
different prices for identical goods. This is
a. price discrimination.
b. a market division.
c. a price-fixing agreement.
d. a tying arrangement.
1. Press Now Corporation, a disk manufacturer, sells its product in certain
quantities to Quik 2U, a retailer, for $275 but charges Rite Here, a
competitive retailer, $350. Under the Clayton Act, this is legal
a. under any circumstances.
b. unless its effect is to cause a competitor a loss of any business.
c. unless its effect is to substantially lessen competition.
d. unless there is no effect on a competitor.
1. Excel Corporation conditions shipments of its products to Federated
Stores, Inc., on Federated’s agreement not to buy products from Gnarly
Goods Company, Excel’s competitor. This is
a. an exclusive-dealing contract.
b. a tying arrangement.
c. price discrimination.
d. price fixing.
1. Eagle Corporation and First Manufacturing Company are competitors.
An interlocking directorate would occur if
a. Eagle acquires a controlling interest in First to reduce
b. individuals serve on the boards of Eagle and First simultaneously.
c. the boards of Eagle and First deadlock over the same issue.
d. the directors of Eagle and First intermarry to facilitate price fixing.
1. Energy Services Corporation engages in trade practices that may
violate antitrust law. The Federal Trade Commission has the power to
act against anticompetitive behavior under
a. the Clayton Act.
b. the Federal Trade Commission Act.
c. the Interstate Commerce Act.
d. the Sherman Act.
1. Natural Spices, Inc., and Oriental Import Company, two condiment com-
panies, form a joint venture to fund research into producing spices
more cost effectively. This is
a. a violation of the Clayton Act.
b. a violation of the Federal Trade Commission Act.
c. a violation of the Sherman Act.
d. exempt from antitrust enforcement.
1. Pipeline Digital, Inc., sells equipment to link businesses via the
Internet. Pipeline will be considered to have monopoly power if its share of
the relevant market is equal to or exceeds
a. 50 percent.
b. 60 percent.
c. 70 percent.
d. 80 percent.
1. Master Fabrication Corporation has exclusive control over the market for
its product. Under the Sherman Act, this is
a. a per se violation.
b. a violation if it acquired this power through “business acumen.”
c. a violation if it acquired this power through “anticompetitive
d. not a violation.
1. Spa Serena LLC makes and sells beauty salon supplies. By selling its
product at prices substantially below the normal cost of production, Spa
Serena hopes to drive its competitors from the market. This is
a. market power.
b. predatory pricing.
c. price discrimination.
d. price-fixing.
1. Granite Golfballs, Inc., has the power to control the market for its prod-
uct. Antitrust law regulates
a. how Granite acquired its power and what it does with it.
b. how Granite makes its product and who buys it.
c. the degree of trust Granite has with its customers and suppliers.
d. the size of Granite’s market.
1. A suit is filed against Fashionista Goods, Inc. (FGI), alleging that FGI
committed the offense of monopolization. FGI’s intent
a. is irrelevant.
b. may be inferred from proof of monopoly power and
anticompetitive conduct.
c. must be proved beyond a reasonable doubt.
d. must be proved by clear and convincing evidence.
1. Listen Up! Corporation books and promotes concerts and other
entertainment events, for which Listen Up! also sells tickets. In weighing
a challenge to Listen Up!’s “monopolistic” ticket prices, a court looks at
the relevant geographic market. This encompasses
a. only areas in which Listen Up! does not have monopoly power.
b. only areas in which Listen Up! has monopoly power.
c. the area in which Listen Up! and its competitors sell, and their
customers buy, the tickets.
d. the entire United States in all cases.
1. To prevent its competitors from obtaining sufficient supplies to
make their products, Molded Plastics, Inc., uses its market power to increase
the prices of those supplies. This is
a. a refusal to deal.
b. business acumen.
c. predatory bidding.
d. predatory pricing.
1. Fresh Veggies, Inc., a wholesaler, refuses to sell its produce to Grocery
Mart Stores, Inc., a retailer. Under antitrust law, this is
a. “an unfair or deceptive act or practice.”
b. a per se violation.
c. not a violation.
d. subject to analysis under the rule of reason.
1. 3D, Inc., develops a series of video games that project images in three
dimensions, allowing players to interact in real space with the elements
of the game. The games are wildly successful. Other game makers find
themselves nearly out of business until 3D is practically the only seller
in the video game market. Does 3D have a monopoly? Does 3D’s
situation violate the antitrust laws? Explain.
1. Under what circumstances would Mom’s Tools & Hardware, a small
store in the middle of Nowhere, a small, isolated town, be considered a
monopoly? If Mom’s is a monopoly, is it in violation of antitrust law?

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