Exam 20: Antitrust Law

In the case of U.S. v. Baker Hughes, concerning a merger of hardrock hydraulic underground drilling rig makers, the court held that the proposed merger:

Mergers of competitors that would injure competition are attacked under the Clayton Act.

Exclusive dealing is when:

To develop a network of dealers, Hummer vehicles are sold only at one dealership per city. Other dealers want the vehicles to sell, but are refused. The local dealers earn high profit margins due to the lack of local competition. Under antitrust law, this arrangement is likely to be found:

Vertical business relationships:

Fact Pattern 20-2 Vysion produces TVs it sells nationwide. Vysion contracted with Karol's Appliances to make it the exclusive distributor of Vysion TVs in the San Diego area. Karol's received a promise that Vysion would not sell its TVs to any other retailer within 20 miles of Karol's. In its San Diego stores, Karol's has a unique pricing policy. A higher price is charged to customers wearing suits than to customers not wearing suits. Karol's salespeople give non-suit-wearing customers 10% discounts off of the list price, and refuse any discounts to suit-wearing customers. Don's, a rival of Karol's, asked Vysion to allow it to sell its products in San Diego. Vysion refused, pointing to its contract with Karol's. Vysion's distribution policy differs in New York from what it is in California. In New York, Vysion allows every distributor who asks to sell Vysion TVs. However, Vysion requires that New York retailers sign contracts stating that they agree not to sell Vysion products below prices in a monthly "price list" sent by Vysion. In contracts with its distributors nationwide, Vysion insists that sales of its TVs be tied to sales of its VCRs. No consumer is allowed to purchase a Vysion TV without also buying a Vysion VCR. -Refer to Fact Pattern 20-2. If the decision in Leegin Leather were applied to the agreement between Vysion and its New York retailers, the agreement would be:

An example of a vertical arrangement that manufacturers impose on their retailers is:

The Justice Department's merger guidelines place particular importance on the notion of market power.

In Dr. Miles Medical Co. v. John D. Park, the Supreme Court ruled that a supplier cannot control the price at which a product is resold by a retailer.

The Clayton Act restricts which of the following?

In FTC v. Procter and Gamble, the Supreme Court held that Procter and Gamble could not merge with Clorox because Procter and Gamble had too much of a share of the bleach market already.

A key motive behind the Sherman Act was:

When a court considers the net effect of a business practice that is being challenged in an antitrust case, it is:

Vertical restraints of trade are arrangements between:

The Clayton Act does not clearly restrict which of the following?

A firm that violates the antitrust laws could be required to break up and thereby set up another firm to compete with it.

In U.S. v. Trenton Potteries Co., competitors openly fixed prices and restrained sales. The Supreme Court held that:

In Leegin Creative Leather Products v. PSKS, a maker of leather goods would not sell to stores that would not follow its pricing policy (resale price maintenance). The Supreme Court held that:

In Todd v. Exxon Corp. the court held that a group of oil companies may have engaged in an illegal conspiracy to share salary information in an anticompetitive manner.

Fact Pattern 20-1 MicroManage is the fastest growing home-software producer in the country. In 2000, it sold 6% of all home software in the U.S., but in 2011, it sold 55% of all home software. A recent issue of Computer Universe said that MicroManage was "the most dominant and aggressive of all home-software developers." Home software is a small part of the entire software industry. In 2011, MicroManage proposed a merger with Game Master, its main rival. Game Master was responsible for 10% of all home-software sales in 2010. MicroManage's president says that the combination of the firms will allow MicroManage to lower costs and pass the savings on to its customers. The Department of Justice filed suit to stop this merger, claiming the combination would give monopoly power to the merged firm. Justice insists that consumers would lose in the end. -Refer to Fact Pattern 20-1. Assume that a merger does take place. Which legal standard will a court apply that reviews the merger?