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1. Under the rule of reason, a court will consider the purpose of an
agreement between competitors.
1. A vertical restraint is any agreement that in some way restrains
competition between rival firms competing in the same market.
1. The reasonableness of a price-fixing agreement is never a defense.
1. A concentrated industry is one in which many firms concentrate on
competing with each other.
1. Agreements among members of trade or professional organizations are
exempt from antitrust laws.
1. A group boycott is always considered a per se violation of the
Sherman Act.
1. A market division by class of customer between competitors is
evaluated under a rule of reason.
1. A firm may have a legitimate reason for imposing a territorial or
customer restriction.
1. Resale price maintenance agreements are no longer considered
violations of antitrust law.
1. A joint refusal to deal with a particular person or firm always violates
antitrust law.
1. A unilateral refusal to deal with a particular person or firm never vio-
lates antitrust law.
1. A seller is not prohibited from charging a lower price to one buyer
than is charged to that buyer’s competitors.
1. Price discrimination always violates antitrust law.
1. A seller is prohibited from making an exclusive-dealing contract if the
effect is to substantially lessen competition.
1. An exclusive-dealing agreement is a per se violation of antitrust law.
1. In an exclusive-dealing contract, a seller conditions the sale of a
product on the buyer’s agreement to buy another product produced by
the same seller.
1. In determining the legality of a tying arrangement, there is only one
relevant market to consider.
1. A tying arrangement is a per se violation of the Sherman Act.
1. In determining the legality of a merger, a crucial consideration is market
concentration.
1. A horizontal merger occurs when a company at one stage of
production acquires a company at a higher or lower stage of
production.
1. MetaRay, Inc., Nucleo Company, and OneSys Corporation control 95
percent of the market for lasers in a certain geographic area. They
agree to sell their products at the same prices, and exclude a fourth
firm, Perfex Company (which controls the rest of the market). This is
a. a group boycott.
b. an exclusive-dealing contract.
c. a price-fixing agreement.
d. a tying arrangement.
1. Thermo Gas, Inc., and Uno Oil Corporation refine and sell gasoline and
other petroleum products. To limit the supply of gas on the market and
thereby raise prices, Thermo Gas and Uno Oil agree to buy “excess”
supplies from dealers and “dispose” of it.Refer to Fact Pattern 28-1B.
The agreement between Thermo Gas and Uno Oil to buy “excess”
supplies from dealers and “dispose” of it is
a. a horizontal restraint.
b. a refusal to deal.
c. a resale price maintenance agreement.
d. a vertical restraint.
1. Thermo Gas, Inc., and Uno Oil Corporation refine and sell gasoline and
other petroleum products. To limit the supply of gas on the market and
thereby raise prices, Thermo Gas and Uno Oil agree to buy “excess”
supplies from dealers and “dispose” of it.Refer to Fact Pattern 28-1B.
The deal between Thermo Gas and Uno Oil is
a. a deal 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. 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. Pacific Bicycle, Inc., is the major distributor of bikes in the state of
California. Pacific’s closest competitor is Quanto Bike Company, another
California firm. They agree that Quanto will distribute bikes in northern
California and Pacific will distribute bikes in southern California. This is
a. a group boycott.
b. a market division.
c. a price-fixing agreement.
d. a tying arrangement.
1. Red’s Sport Equipment Inc. and Sienna Athletic Company are the chief
competitors in their market. They agree that Red’s will operate only
north of the Mason-Dixon line and Sienna will operate only south of the
same line. Under antitrust law, this is most likely
a. a per se violation.
b. a violation only if their competitors make similar deals.
c. a violation only if their customers agree to honor the deal.
d. not a violation.
1. Quotient Corporation and Precision Products, Inc., are the principal sup-
pliers of their product in their market. They agree that Quotient will sell
exclusively to retailers and Precision will sell exclusively to wholesalers.
Under antitrust law, this is most likely
a. a per se violation.
b. a violation only if their competitors make similar deals.
c. a violation only if their customers agree to honor the deal.
d. not a violation.
1. The United Association of Video Game Designers, which does not
include all video game makers, refuses to deal with any parties who do
not carry the products of its members. This group boycott 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. International Vehicle Corporation, a maker of motor vehicles, acquires
all of the car and truck rental agencies in the eastern United States.
This is
a. a backward vertical integration.
b. a forward vertical integration.
c. a horizontal downward integration.
d. a horizontal upward integration.
1. USA Goods Corporation requires all distributors of its products to sell
them at specified minimum prices. This resale price maintenance
agreement is
a. a per se violation of the Sherman Act.
b. a violation of the Clayton Act.
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. Gourmet Foods, Inc., requires all distributors of its products to sell them
at a specified minimum price. Under the Sherman Act, this is a
violation
a. if the anticompetitive effects outweigh the competitive benefits.
b. if the competitive benefits outweigh the anticompetitive effects.
c. under any circumstances.
d. under no circumstances.
1. Fastener Products, Inc., a maker of nuts and bolts, sells its
products to retail establishments. It charges one price to small family-owned
hardware stores and a lower price to national chains. Under the Clayton Act,
these price differences are
a. illegal.
b. not illegal if they are based on production or transportation costs.
c. not illegal if they are intended to eliminate competition.
d. not illegal if they are intended to prevent entry into a given
market.
1. Repair Prepare Parts Company charges different buyers different prices
for identical goods. This is
a. market power.
b. predatory pricing.
c. price discrimination.
d. price-fixing.
1. Fresh Vegetables, Inc., a wholesaler, refuses to sell its produce to
Grocery Mart Stores, Inc., a retailer. Under the Sherman Act, this is
a. “an unfair or deceptive act or practice.”
b. a per se violation.
c. not a violation.
d. subject to the rule of reason.
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. Greeting Cards, Inc. (GCI), is a newcomer to its market. 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. Macro Corporation conditions the sale of its operating software on the
buyer’s agreement to purchase another Macro product, an Internet
browser. This is
a. an exclusive-dealing contract.
b. an interlocking directorate.
c. price discrimination.
d. a tying arrangement.
1. Good Nite Hotel Company acquires Happy Sleep Motel
Corporation. This is
a. a merger.
b. an exclusive-dealing contract.
c. an interlocking directorate.
d. a tying arrangement.
1. Greasy Spoon Corporation merges with Hot Fork, Inc. This merger
between firms that compete with each other in the same market is
a. a horizontal merger.
b. an interlocking directorate.
c. a trade association.
d. a vertical merger.
1. Mickey’s Appliance Store was a new retail seller of appliances in
Sunwest City. Mickey’s innovative sales techniques and financing
caused the appliance department of Luckluster Department Store to
lose a great many sales. Luckluster was a large department store and
part of a large chain with substantial buying power. Luckluster told a
number of appliance manufacturers that if they continued to sell to
Mickey’s, Luckluster would stop purchasing from them. The
manufacturers immediately stopped selling appliances to Mickey’s.
Mickey’s filed suit against Luckluster and the manufacturers, claiming
their actions constituted an antitrust violation. Luckluster and the
manufacturers could prove that Mickey’s was a small retailer with a
small portion of the market. Because the relevant market was not
substantially affected, they claimed they were not guilty of restraint of
trade. Discuss fully whether there was an antitrust violation.
1. Bubbly Bottling Company is engaged in the soft-drink bottling and
distribution industry in the states of New York and New Jersey. The
firm currently has about 40 percent of the market for these products
and related services. Carbonate Distribution Corporation competes with
Bubbly in the same states. Carbonate has about 35 percent of the
market. If Bubbly were to acquire the stock and assets of Carbonate,
would Bubbly be in violation of any of the antitrust laws? If so, which
one? Discuss fully.
