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Exam 43: Antitrust Law

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Question 1

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Any agreement among competitors to artificially fix prices or restrict output is a per se violation of Section 1 of the Sherman Act.

A) True
B) False

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Question 2

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Under what circumstances would Quality Market, a small store in Rustic, an isolated town, be considered a monopoly? If Quality Market is a monopoly, is it in violation of antitrust law?

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The elements of the offense of monopolization under the Sherman Act include monopoly power and its willful acquisition. Market domination that results from legitimate competitive behavior (such as foresight, innovation, skill, good management, or, as in this problem, isolation)is not a violation. Also, size alone does not determine whether a firm is a monopoly-size in relation to the market is what matters. A small store like Quality Market in an isolated town like Rustic has a monopoly if it is the only store serving that market. Monopoly involves the power to affect prices and output. If a firm has sufficient market power to control prices and exclude competition, that firm has monopoly power. Monopoly power in itself is not a violation of the Sherman Act. The offense also requires an intent to acquire or maintain that power through anticompetitive means.

Question 3

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The power to control the market price of a product is market power.

The legality of a tying arrangement depends in part on the agreement's likely effect on competition in the relevant markets.

With respect to antitrust violations, the Federal Trade Commission does not enforce

Pump Makers Inc. makes pumps for fire trucks and conditions shipments of its products to Quality Motors Corporation-a maker of fire trucks-on Quality's agreement to buy additional pumps only from Pump Makers. This is

Even if a firm possesses monopoly power and engaged in anticompetitive conduct, it cannot be inferred that the firm acted with the intent to monopolize.

Requiring users of a social media site to agree to certain terms and conditions to use the site is most likely an antitrust violation.

Any conspiracy that has a substantial effect on U.S. commerce is within the scope of the Sherman Act, unless it occurs outside the United States.

Ranch Supplies Company believes that its chief competitor Stock & Equipment Inc. engages in anticompetitive behavior in an attempt to drive Ranch Supplies out of the market. Under the Clayton Act, Ranch Supplies can sue Stock & Equipment for a violation of

Because commerce operates more efficiently when competitors cooperate, Section 1 of the Sherman Act permits rivals to consolidate market power.

If the legitimate benefits outweigh the anticompetitive effects of a resale price maintenance agreement, the agreement may be held lawful.

Linking Cogs Corporation and Meshed Gears Inc. are competitors selling certain machine parts that are otherwise generally unattainable in their geographic market. This market includes the states of Minnesota, North Dakota, and South Dakota. Linking Cogs and Meshed Gears agree that Linking Cogs will no longer sell in Minnesota and that Meshed Gears will no longer sell in North and South Dakota. Have Linking Cogs and Meshed Gears violated any antitrust law? If so, which one? Explain. If they had divided their market by type of customer rather than geographic are, would the result be the same? Why or why not?

Antitrust legislation is based on a belief that competition leads to lower prices, better products, a wider selection of goods, and more product information.

Predatory pricing is not an antitrust violation because the tactic can eliminate a firm's competitors, enabling it to increase prices and earn higher profits to benefit its owners and employees.

Because a single seller is free to deal with whomever it wishes, the seller's unilateral refusal to deal cannot violate Section 2 of the Sherman Act.

The chief executive officers of the major U.S. steel makers would most likely be prosecuted under the antitrust laws if they

Under the Clayton Act, a seller can condition the sale of a product on the buyer's promise not to deal in the goods of the seller's competitors.

To reduce marketing costs and raise prices, competitors can divide up marketing territories or customers without violating antirust law.

Expressly exempt from antitrust laws because it is not interstate commerce, according to the United Supreme Court, is