Chapter 8 Section 6: Antitrust Law Flashcards Preview

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Flashcards in Chapter 8 Section 6: Antitrust Law Deck (30):
1

What do antitrust laws do?

Prohibit businesses from engaging in conduct that could stifle free competition

2

What is the Sherman Act?

It prohibits restraints of trade and monopolies

3

What is the Rule of Reason test in Section 1 of the Sherman Act?

Balance anticompetitive and competitive effects. Be realistic about what you're calling anticompetitive by putting it into context

4

What are Per Se Violations in Section 1 of the Sherman Act?

Inherently illegal acts without legal justification

5

What are horizontal restraints in Section 1 of the Sherman Act?

Agreements between competitors

6

What are vertical restraints in Section 1 of the Sherman Act?

Agreements between those at different marketing levels (between a retailer and manufacturer)

7

What is the concerted action requirement in Section 1 of the Sherman Act?

It has to be an action between 2 or more parties. You can't violate the Sherman Act by yourself.

8

What is price fixing, according to Section 1 of the Sherman Act?

Agreements to set prices for goods or services
Can be horizontal (between competitors) or vertical (manufacturers controlling the resale prices of their products - called resale price maintenance)

9

What are market allocations, according to Section 1 of the Sherman Act?

Agreements not to compete in specific markets.
Horizontal ones are a per se violation

10

What are boycotts, according to Section 1 of the Sherman Act?

Two or more firms agreeing not to deal with a third party

11

What are tying arrangements, according to Section 1 of the Sherman Act?

Where you must buy one product to get another

12

How do you per se rules and rule of reason apply to horizontal and vertical issues?

Most horizontal are per se violations, and most vertical are okay under the rule of reason

13

What does Section 2 of the Sherman Act regulate?

Monopolies and attempts to monopolize

14

What are the two requirements to establish and illegal monopoly?

Monopoly power
Power was achieved unfairly or abused once achieved

15

When does monopoly power exist?

When a firm has sufficient market power (70%) to control prices or exclude competition

16

How do patents impact monopolies?

They grant a limited monopoly, and that is okay.

17

What penalties are available under the Sherman Act?

Criminal and civil

18

What does the Clayton Act do?

Stops anticompetitive behavior not covered by the Sherman Act.
Stops activities in their incipiency (before they become violations of the Sherman Act)

19

What does Section 7 of the Clayton Act cover?

It prohibits the merger or acquisition of a company if the effect is to substantially lessen competition.

20

Which type of merger is judged most stringently under the Clayton Act?

Horizontal mergers

21

What is a forward merger?

A vertical merger where a firm acquires a customer

22

What is a backward merger?

A vertical merger where a firm acquires a supplier

23

What is a conglomerate merger?

When firms in different businesses merge

24

What is the failing company exception under Section 7 of the Clayton act?

If a company is failing an there is no other buyer, a merger can be lawful even if the effect is to lessen competition.

25

What is the Robinson-Patman Act?

It amended and strengthened Section 2 of the Clayton Act that prohibited price discrimination

26

What do Section 2 of the Clayton and Robinson-Patman acts say?

They only apply to price discrimination of commodities of like grade and quality.

27

What penalties are available under the Clayton and Robinson-Patman acts?
Who can seek penalties?

Civil only
Private parties harmed can sue for treble damages and attorney's fees

28

What does the Federal Trade Commissions Act prohibit?

Illegal and unfair methods of competition and misleading ads

29

How can the Federal Trade Commissions Act be enforced?

No private-party suits are allowed - only the gov't can seek anything
FTC can seek injunctions, issues cease and desist orders, and require advertisers to make affirmative disclosures and corrective advertisements.

30

Who is exempt from the Antitrust laws?

Labor unions, agriculture, insurance, American exporters, and cooperative research.
there are also judicial exemptions, which includes the MLB

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