Antitrust Law

Question 1

Sherman Act

Answer 1

Section 1—Prohibits contracts, combinations, and conspiracies that unreasonably restrain trade. Violation of Section 1 requires action by two or more businesses.

Question 2

Sherman Act - Section 1 Standards

Answer 2

(1) Rule of Reason—Courts consider the nature of the business, the defendant’s position in the industry, how the restraint will affect the industry, and the purported goal of the restraint.
(2) Illegal per Se—Violations that are inherently illegal. The rule of reason is not used.

Question 3

Sherman Act - Section 1

Answer 3

Horizontal restraints (restraints between competitors) are illegal per se.

Question 4

Sherman Act - Section 1

Answer 4

Vertical restraints (agreements between those at different marketing levels) are judged by the rule of reason.

Question 5

Sherman Act

Answer 5

Section 2—Prohibits monopolies and attempts to monopolize.

Question 6

Sherman Act - Section 2

Answer 6

To establish a monopoly courts require monopoly power and achievement of that power unfairly or abuse of power once achieved. Monopoly power exists if a firm can control prices or exclude completion.

Question 7

Sherman Act - Section 2

Answer 7

Firms that control more than 70 percent of a market generally are monopolies, those with less than 40 percent are generally not monopolies, and those in between may or may not be monopolies.

Question 8

Clayton Act

Answer 8

1. The Clayton Act is civil in nature, not criminal.
2. Exclusive dealing arrangements (requiring buyer not to deal with competitor’s goods) violate Clayton if they tend to create a monopoly or substantially lessen competition. 3. Mergers and acquisitions are prohibited if they substantially lessen competition

Question 9

Robinson-Patman Act

Answer 9

1. It applies to price discrimination of commodities of like grade and quality.
2. Prohibits both buyers and sellers from price discrimination if it substantially lessens competition or tends to create a monopoly. Primary-line injuries and tertiary-line injuries are regulated.
3. Cost savings, changing conditions, and meeting competition are possible defenses.

Question 10

Federal Trade Commission Act

Answer 10

1. Prohibits unfair competition and deceptive practices.
2. To be unfair, the method of competition must be substantial, not be outweighed by benefits to consumers, and be unavoidable to consumers.
3. To be deceptive there must be a misrepresentation, omission, or practice likely to deceive a reasonably acting consumer.