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  1. What does the Clayton Act deal with?
    • price discrimination
    • tying contracts
    • exclusive dealings
    • mergers
  2. Who can enforce the Clayton Act?
    • private parties -- civil suit
    • DoJ and FTC -- civil suit
  3. The Clayton Act only applies to practices involving what?

    (NOT services etc)
  4. What is an exclusive dealing contract?
    • seller prohibits buyer from purchasing products from seller's competition
    • allows seller the sole right to sell the product

    • vertical agreement
    • to be considered illegal, it has to be proven to hurt competition
  5. Which standard is used to dertermine the legality of an exclusive dealing contract?
    rule of reason
  6. What are the 3 kinds of mergers?
    • horizontal -- between firms that compete in the same market
    • vertical -- company acquires one of its sellers
    • conglomerate -- between unrelated firms (eg. foil + tv)
  7. How is the legality of a merger determined?
    rule of reason -- how big is resulting firm's market share?

    horizontal mergers: assumed illegal, but "quick look" rule of reason is applied
  8. What do the FTC and DoJ use to determine the market concentration of an acquiring company?
    Herfindahl-Hirschman Index
  9. How is the Herfindahl-Hirschman Index (HHI) used?
    • if a merger increases the acquiring firm's HHI by 50 to 100 points, the merger should be investigated
    • if a merger increases the acquiring firm's HHI by more than 100 points, the merger is presumed to enhance market power
  10. Which factors are considered when using the rule of reason test to investigate a merger?
    • market share of each firm
    • degree of market concentration
    • number of firms in the industry
    • entry barriers to the industry
    • strength of other competitors
    • character and history of merging firms
    • market trends and demand
  11. What are defenses for the legality of a merger?
    • "failing company" merger
    • "small company" merger
  12. How do vertical and conglomerate mergers increase economic efficiency?
    • transferring assets to most productive use
    • extending retail product lines
    • reducing overhead costs
  13. What are interlocking directorates and are they legal?
    illegal under Clayton Act

    when a director of a public company, that has at least 10 million in capital, is also a director of another public company that has at least 10 million in capital
  14. What is the Robinson-Patman Act?
    • amendment to Clayton Act
    • prohibits buyers from inducing and sellers from granting price discrimination in interstate commerce
    • price discrimination must substantially lessen competition or tend to create a monopoly to violate the act
  15. What is price discrimination?
    seller charges different buyers different prices for the same goods (includes other costs like warranties, insurance, credit terms, delivery charges etc.)
  16. What are the 3 lines of injury in regards to price discrimination?
    • primary line injury (competitor of seller)
    • secondary line injury (non-favored buyers)
    • tertiary line injury (customers of non-favored buyers)
  17. What are the 3 defenses for price discrimination?
    • cost justification -- seller shows cost reduction
    • meeting competition -- "price match"
    • functional discounts -- non-favored buyer did not take advantage of available discount
  18. What is the Federal Trade Commission Act?
    • 5-member FTC is empowered to conduct appropriate investigations and hearings
    • supplement to Sherman and Clayton Act
    • FTC to stop practices before harm to competition becomes too great
    • cease and desist order is primary sanction
    • "catch all" statute
  19. What is the first step to take in antitrust action?
    file complaint with FTC
  20. Which areas are exempt from anti-trust laws?
    • labor
    • agricultural associations and fisheries
    • insurance
    • most foreign trade
    • professional baseball
    • cooperative research and production (if temporary)
    • joint efforts to obtain legislative or executive action (lobbying)
  21. What aspects of foreign trade are subject to US antitrust laws?
    • foreign persons may sue US companies in US courts even if violation occurs outside of the US
    • any conspiracy with substantial effect on US commerce, even if violation occurs outside of the US and a foreign government or person commits it
Card Set
Review questions for Business Law and the Regulation of Business, 10th edition, Mann&Roberts, chapter 43, part 2
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