LWC1 Chapt 39 Flashcards.txt

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LizM
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LWC1 Chapt 39 Flashcards.txt
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2012-09-24 17:04:09
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LWCA Chapt 39
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  1. Antitrust Laws
    Laws protecting commerce from unlawful restraints
  2. Sherman Act
    • 1.Prevent extreme concentrations of economic power (monopolies)
    • 2.Regulate unfair trade agreements
    • 3.Prohibit price fixing
    • Designed to regulate competition
  3. Section 1 of the Sherman Act
    Prohibits all agreements "in restraint of Trade" (anything that impedes trade, transport and related activities.
  4. Examples of restraint of trade
    Monopolies, price fixing, other tactics used to inhibit competition.
  5. Section 2 of the Sherman Act
    Bans monopolization, the wrongful acquisition of a monopoly.
  6. Section 5 of the Sherman Act
    Prohibits unfair methods competition
  7. Clayton Act
    Put in place because the provisions of the Sherman Act were not being enforced. clarified Sherman Act.
  8. What are the provisions of the Clayton Act
    Prohibits anti-competitive mergers, tying agreements, and exclusive dealing arrangements
  9. Robinson-Putnam Act RPA
    Bans price discrimination that reduces competition. permits price variation if due to costs.
  10. Per Se Violation-category of antitrust violations
    An automatic breach. Courts will generally not consider mitigating factors.
  11. Rule of Reason Violation-category of antitrust violations
    Only Illegal if they have a anti-competitive impact
  12. Cooperative Strategies
    strategies that allow companies to work together to their mutual advantage
  13. What are the 3 potentially illegal cooperative strategies?
    • 1. Horizontal Agreements
    • 2. Vertical Agreements
    • 3. Mergers and Joint ventures
  14. Horizontal cooperative strategies
    Agreements among competitors
  15. Types of Horizontal Cooperative Strategies
    • 1. Market Division
    • 2. Price fixing and bid rigging
    • 3. Refusal to deal
  16. Market division an
    effort by a group to divide its market. An arrangement to allocate customers, territories, or products. This is a Per Se violation of S1 of the Sherman Act.
  17. Price fixing and bid rigging
    price fixing-when competitors agree on the prices at which it will buy or sell products or services. bid rigging-competitors eliminate price competition by agreeing on who will submit the lowest bid. Per Se violation
  18. Refusal to deal
    A group of competitors boycotts a buyer, supplier, or even another competitor. Rule of reason violation if it harms competition.
  19. Vertical Cooperative Strategies
    Agreement among participants at different stages of production process.
  20. Types of Vertical Cooperative Strategies
    • 1. Reciprocal dealing
    • 2. Price discrimination
  21. Reciprocal Dealing
    Buyer refuses to purchase goods from a supplier unless the supplier agrees to purchase items from the buyer. Rule of Reason violation
  22. Price discrimination
    charging different prices to different purchasers if the items are the same or to lessen competition. RPA
  23. Mergers and Joint ventures
    The Clayton Act prohibits mergers that are anti competitive. Companies with substantial assets must notify the FTC before consummating a merger.
  24. Horizontal Mergers
    Companies that compete in the same market. Government has aggressively sought to prevent horizontal mergers that could lead to a monopoly or even a highly concentrated industry.
  25. Vertical Mergers
    Merger of companies at different levels of the production process. These are challenged only if they are likely to increase entry barriers in a concentrated market.
  26. Joint Ventures
    A partnership for a limited purpose. Companies don't combine permanently only on a specific project, Government will usually permit.
  27. Aggressive Strategies
    The goal of an aggressive strategy is to gain an unfair advantage over competitors.
  28. Aggressive business actions that are illegal as a violation of antitrust regulations
    • Monopolization
    • Predatory Pricing
    • Tying arrangements
    • Controlling distributors and Retailers
    • Resale price Maintenance
  29. Monopolization
    To monopolize means to acquire a monopoly in the wrong way. Having a monopoly is legal unless it is gained or maintained by using wrongful tactics. Illegal under S2 of the Sherman Act
  30. 3 questions to ask to determine if a company is guilty of monopolization.
    • 1.What is the Market?
    • 2.Does the company control the market?
    • 3.How did the company acquire its control?
  31. Predatory pricing
    occurs when a company lowers its prices below cost to drive competitors out of business. the goal of a predatory pricing scheme is either to win control of a market or to maintain it. A ban on these schemes prevents monopolization and attempts to monopolize.
  32. What 3 things must a plaintiff prove to win a predatory pricing case?
    • 1.The defendant is selling the products below cost
    • 2.The defendant intends that the plaintiff go out of business.
    • 3.if the plaintiff goes out of business the defendant will be able to earn sufficient profit to recoup its prior losses.
  33. Tying Agreement
    A tying arrangement is an agreement to sell a product on the condition that the buyer also purchases a different (or tied) product.
  34. When is a tying agreement illegal
    If the two products are clearly separate. If the seller requires the buyer to purchase the two products together. if the seller has significant power in the market for the tying product. If the seller is shutting out a part of the market for the tied product.
  35. Controlling distributors and retailers
    A method for excluding competitors thru allocating customers and territory and exclusive dealing agreements.
  36. Allocating customers and territory
    An by manufacturers to assign customers and territories. subject to rule of reason, only illegal if they adversely affect competition in the market.
  37. Exclusive dealing contract One in which a distributor or retailer agrees with a supplier not to carry the products of any other supplier. rule of reason
  38. Resale price maintenance (RPM)
    The manufacturer sets minimum prices that retailers may charge. In other words, it prevents retailers from discounting.

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