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BUL 3320 Final CH 43
Antitrust
28
Law
Undergraduate 3
12/11/2012

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Term
The Sherman Antitrust Act of 1890
Definition
a. The first U.S. antitrust law

b. Restraint of Trade
c. Section 1 Tests
d. Section 2
e. Legal Monopolies
Term
The first U.S. antitrust law
(Antitrust Act of 1890)
Definition
It was designed to weaken the grip of monopolistic businesses on the U.S. economy.

i. Section 1
ii. Section 2
Term
Restraint of Trade
(Antitrust Act of 1890)
Definition
i. Horizontal restraints
ii. Vertical restraints
Term
Section 1 Tests
(Antitrust Act of 1890)
Definition
i. Rule of Reason
ii. Per Se Violations
Term
Section 2
(Antitrust Act of 1890)
Definition
prohibits monopolization, attempts to monopolize, and conspiracies to monopolize

i. Monopolization
ii. Attempt to monopolize
iii. Conspiracies to monopolize
Term
Legal Monopolies
(Antitrust Act of 1890)
Definition
i. Regulated industries
ii. Intellectual property
Term
Section 1
(The first U.S. antitrust law )
Definition
regulates contracts that restrain trade.
1. In practice, section 1 only prohibits certain agreements that materially impact the competitiveness of the market.
Term
Section 2
(The first U.S. antitrust law )
Definition
prohibits monopolies.
Term
Horizontal restraints
(Restraint of Trade)
Definition
agreements among competitors at same level in the chain of distribution.
Example: two oil companies collude to keep barriers of market entry high in order to restrict competition and keep profits high.
Term
Vertical restraints
(Restraint of Trade)
Definition
agreements among parties at different levels in the chain of distribution.
Example: a miner of crude oil and an oil refinery agree to only work together so that all steps in the processing of oil may eventually be controlled by one or a few parties, restricting competition.
Term
Rule of Reason
(Section 1 Tests)
Definition
standard that balances the anti-competitive effects against the pro-competitive effects of the restraint.
Term
Per Se Violations
(Section 1 Tests)
Definition
conclusively presumed unreasonable and therefore illegal.
Term
Market allocation
(Per Se Violations)
Definition
division of markets by customer type, geography, or products. Horizontal agreements are per se illegal while vertical agreements are judged by the rule of reason standard.
Term
Price fixing
(Per Se Violations)
Definition
an agreement which inhibits price competition. Horizontal agreements (those agreements between members at the shame level of production) are per se illegal while vertical price fixing (agreements between members at different levels of production) is judged by the rule of reason.
Term
Boycott
(Per Se Violations)
Definition
agreement among competitors not to deal with a supplier or customer.
Term
Tying Arrangement
(Per Se Violations)
Definition
conditioning a sale of a desired product (tying product) on the buyer’s purchasing a second product (tied product). If the seller has considerable power in the production of the tying product or affects a substantial amount of interstate commerce in the tied product, then the arrangement is per se illegal.
Term
Tying Arrangement
Definition
Example: a market leader in the production of cell phones tells you that they will only sell you a cell phone (tying product) if you buy a case for it (tied product). They have considerable power in the production of cell phones since they are the market leader, and so the tying arrangement is per se illegal.
Term
Monopolization
(Section 2)
Definition
requires market power (ability to control price or exclude others from the marketplace) plus either unfair attainment of power or abuse of such power.
Term
Attempt to monopolize
(Section 2)
Definition
specific intent to monopolize, plus a dangerous probability of success.
Term
Conspiracies to monopolize
(Section 2)
Definition
a group of persons or entities who plan to establish a market monopoly.
Term
Regulated industries
(Legal Monopolies)
Definition
government authorizes a single supplier in an area, but controls price and practices to prevent abuse.
Examples: Utilities like power and water, or transportation systems.
Term
Intellectual property
(Legal Monopolies)
Definition
a business may obtain a monopoly in a specific market by virtue of copyright or patent granted by government.
Example: a copyrighted book.
Term
(Clayton Act)
Definition
Mergers
Horizontal merger
Vertical merger
Term
Mergers
(Clayton Act)
Definition
are prohibited if it tends to create a monopoly or may substantially lessen competition.
Term
Horizontal merger
(Clayton Act)
Definition
one company’s acquisition of a competing company. Most of these mergers are carefully reviewed because they are likely to be anticompetitive.
Term
Vertical merger
(Clayton Act)
Definition
a company’s acquisition of one of its supplier of customers.
Example: Wal-Mart acquires its primary supplier of dairy products.
Term
Robinson-Patman Act
Definition
The Act covers price discrimination and prohibits buyers from inducing or sellers from giving different prices to buyers of commodities of similar grade and quality.
Term
Federal Trade Commission Act
Definition
Purpose: to prevent unfair methods of competition and unfair or deceptive practices.
Coverage: the FTC issues many regulations establishing specific standards for purposes of advertising, labeling, and selling.
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