Chapter 28a If an agreement is a per se violation of antitrust laws

Document Type
Test Prep
Book Title
The Legal Environment of Business: Text and Cases: Ethical-- Regulatory-- Global-- and Corporate Issues 8th Edition
Authors
Frank B. Cross, Roger LeRoy Miller
1. If an agreement is a per se violation of antitrust laws, there must be
further inquiry into its reasonableness.
1. Under the rule of reason, a court will consider the effect or the
potential effect of a business agreement on competition.
1. Any agreement among competitors to fix prices constitutes a per se
violation of antitrust law.
1. A price fixing agreement is analyzed under the rule of reason.
1. Most group boycotts are legal.
1. Agreements among members of trade or professional organizations are
exempt from antitrust laws.
1. In a concentrated industry, antitrust laws do not apply.
1. An agreement between firms operating at different levels in the manu-
facturing and distribution process does not affect competition.
1. Territorial and customer restrictions are currently considered per se
violations of antitrust law.
1. A horizontal restraint of trade results from an agreement between
firms at different levels in the manufacturing and distribution process.
1. Maximum resale price maintenance agreements are per se violations of
antitrust law.
1. Minimum resale price maintenance agreements are subject to analysis
under the rule of reason.
1. For purposes of price discrimination, identical products sold under different
labels are deemed to be of like quality.
1. Charging different prices to different buyers for identical goods is price
discrimination.
1. A unilateral refusal to deal with a particular person or firm never vio-
lates antitrust law.
1. Under an exclusive-dealing contract, a seller promises a buyer a certain
territory in which the buyer will have no direct competition.
1. A tying arrangement occurs when competitors agree to fix, or “tie,” their
prices at the same level.
1. Mergers between firms that compete in the same market are vertical
mergers.
1. Market share and market concentration are the only factors for analyz-
ing the anticompetitive effects of a merger.
1. A merger between firms that compete with each other in the same
market is a vertical merger.
1. Crop Yield Corporation, Dextros Harvest Company, and Equip Enterprises,
Inc., are farm-equipment distributors that control 90 percent of the market
for their products in a certain geographic area. The firms agree to sell their
products for the same prices. This is
a. a group boycott.
b. a merger.
c. a price-fixing agreement.
d. a tying arrangement.
1. Health Resources Corporation makes and sells Intake, the most pre-
scribed name-brand cholesterol-lowering medication. Jerichol Company
has the potential to make a generic version of the same drug. Health
Resources pays Jerichol not to sell its product. This is
a. a customer restriction.
b. a group boycott.
c. an exclusive-dealing contract.
d. a price-fixing agreement.
1. Cardio, Inc., makes and sells Drawdown, the most prescribed name-
brand heart medication. Emitate Corporation has the potential to make
a generic version of the same drug. Cardio pays Emitate not to sell its
product. This is most likely
a. a deal that neither restrains trade or harms competition.
b. a legal restraint of trade.
c. a per se violation of the Sherman Act.
d. subject to analysis under the rule of reason.
1. Engine Components, Inc., a manufacturer of vehicle parts, refuses to
sell to Fix-It, Inc., a national vehicle service firm. Engine Components
convinces Greasy Motor Parts Company, a competitor, to do the same.
This is
a. a group boycott.
b. an exclusive-dealing contract.
c. a price-fixing agreement.
d. a tying arrangement.
1. Indigo Packaging, Inc., a manufacturer of packaging papers and boxes,
refuses to sell to Jiffy Quik, Inc., a delivery service firm. Indigo
convinces Knotty Box Company, a competitor, to do the same. This is
a. a group boycott.
b. an exclusive-dealing contract.
c. a price-fixing agreement.
d. a tying arrangement.
1. Delta Services, Inc., is the major wholesale distributor of software in
the state of Florida. Its closest competitor is Efficient Systems
Company, another Florida firm. The two firms agree that Delta will
operate in south Florida and Efficient will operate in north Florida. This
is
a. a group boycott.
b. a market division.
c. a price-fixing agreement.
d. a tying arrangement.
1. Energy Power, Inc., joins with other businesses in its industry to ex-
change information, represent members’ interests before Congress, and
lobby for certain regulatory standards. These joint activities are
a. not subject to antitrust law.
b. per se violations of the Sherman Act.
c. subject to evaluation under the rule of reason.
d. violations of the Clayton Act.
1. Lightning Cycles, Inc., makes Lightning-brand motorcycles and accesso-
ries, which are distributed to authorized dealers, including Macho
Motors, Inc. Macho operates dealerships in several locations. Lightning
imposes territorial restrictions on Macho to insulate other dealers from
direct competition. This is
a. a situation that neither restrains trade or harms competition.
b. a legal restraint of trade.
c. a per se violation of antitrust law.
d. subject to analysis under the rule of reason.
1. Zippy Moto-Bikes, Inc., wants to prevent discount dealers that carry its
products without providing warranty services from cutting into the
business of full-service dealers. Zippy’s decision to restrict discount
dealers to one type of customer and full-service dealers to another is
a. not subject to antitrust law.
b. per se violations of the Sherman Act.
c. subject to evaluation under the rule of reason.
d. violations of the Clayton Act.
1. USA Cellphone Corporation requires all distributors of its products to
sell the products at specified minimum prices. This resale price mainte-
nance agreement is
a. a per se violation of antitrust law.
b. a legal restraint of trade.
c. subject to evaluation under the rule of reason.
d. not subject to antitrust law.
1. Smooth Sailing, Inc., conditions future shipments of its products to dis-
tributors on their agreement to charge the prices set by Smooth. This
is
a. a barrier to entry.
b. a horizontal restraint.
c. a merger.
d. a vertical restraint.
1. Smoothwater Driftboat Corporation refuses to sell its products to Sportsters
Weekend, Inc., a recreational products dealership. This is
a. price discrimination.
b. a horizontal market division.
c. an exclusive-dealing contract.
d. a unilateral refusal to deal.
1. Grande Zot, Inc., an electronics manufacturer, sells its DVD players to
Hi-Lo Retail Stores for $50 but charges It’s Less! Storewhich is
located just down the street from Hi-Lo$75 for the same players. This
may be
a. a violation of antitrust law.
b. exempt from antitrust enforcement.
c. not subject to antitrust law.
d. subject only to antitrust common law.
1. Perfecto Appliance Company, Qualité Kitchens Corporation, and Royale
Products, Inc., control 90 percent of the market for appliances in a cer-
tain geographic area. Perfecto, Qualité, and Royale agree to sell their
appliances for the same prices, and to exclude Superia Appliances,
Inc., which controls the other 10 percent of the market. This is
a. an anticompetitive practice in violation of the Clayton Act.
b. a per se violation of the Sherman Act.
c. a violation of the Sherman Act under the rule of reason.
d. not a violation of antitrust law.
1. Seaside Cannery, Inc., is one of many producers of canned seafood.
Seaside refuses to sell its products to Troll Harbor Restaurant
Corporation. This refusal is most likely
a. an anticompetitive practice in violation of the Clayton Act.
b. a per se violation of the Sherman Act.
c. a violation of the Sherman Act under the rule of reason.
d. not a violation of antitrust law.
1. By contract, Quality Metals Corporation forbids Resource Refining, Inc.,
a wholesale buyer of Quality’s products, from purchasing the products
of Quality’s competitors. This exclusive-dealing contract is allowed
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. Electroplate Dishware Corporation conditions shipments of its products
to Flo-Thru Stores, Inc., on Flo-Thru’s agreement not to buy products
from Glassy Ware Company, Electroplate’s competitor. This is
a. an exclusive-dealing contract.
b. a smart business deal.
c. a trade association.
d. a tying arrangement.
1. Nano Software, Inc., conditions the sale of its OfficeBooks product on
Payroll Personnel Company’s agreeing to buy QuikReVu, Nano’s photo-
editing product. This deal is
a. legal, depending on its purpose and the effect on competition.
b. legal, depending on production and transportation costs.
c. legal under any circumstances.
d. not legal under any circumstances.
1. Greeting Cards, Inc. (GCI), requires that the buyers of its line of
greeting cards also agree to buy GCI t-shirts, balloons, and other
products. This is
a. a group boycott.
b. an exclusive-dealing contract.
c. a price-fixing agreement.
d. a tying arrangement.
1. XtraOrdinaire Inc. competes with Yowza! Company in the same market.
Their merger would be
a. a horizontal merger.
b. an interlocking directorate.
c. a tying arrangement.
d. a vertical merger.
1. Finely Engineered Parts Corporation (FEPC) and Great Gears &
Gauges, Inc. (3G), are competitors selling certain machine parts that
are otherwise generally unattainable in their geographic market. This
market includes the states of California, Oregon, Washington, and
Idaho. FEPC and 3G agree that FEPC will no longer sell in California
and that 3G will no longer sell in Oregon, Washington, and Idaho.
Have FEPC and 3G violated any antitrust law? If so, which one?
Explain. If they had divided their market by type of customer rather
than geographic are, would the result be the same? Why or why not?
1. Java Bean Company imports coffee beans and sells them under two-
year contracts to Mellow Roast, Inc., and other coffeemakers. The
contracts require that during the two-year term a coffeemaker not buy
beans from Java Bean’s competitors. The contracts do not limit the
coffeemakers’ purchase of tea or other beverage ingredients from other
suppliers, however. In the second year of the contract, Mellow Roast
protests that this arrangement violates antitrust law. Is Mellow Roast
correct? If not, why not? If so, under which antitrust statute, or statutes,
could these contracts be held illegal?
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