3.Price-Fixing and Bid-Rigging Are Per Se Violations of the Sherman Act

Chapter Review

1.There are two categories of antitrust violations: per se and rule of reason. Per se violations are automatic; courts do not consider mitigating circumstances. Rule of reason violations, on the other hand, are illegal only if they have an anticompetitive impact.

2.Any effort by a group of competitors to divide their market is a per se violation of the Sherman Act. Illegal arrangements include agreements to allocate customers, territory, or products.

3.Price-fixing and bid-rigging are per se violations of the Sherman Act.

4.Every company generally has the right to decide with whom it will do business. However, the Sherman Act prohibits competitors from joining together in an agreement to exclude a particular supplier, buyer, or even another competitor, if the agreement would hurt competition.

5.Under a reciprocal dealing agreement, a buyer refuses to purchase goods from a supplier unless the supplier also purchases items from the buyer. Reciprocal dealing agreements violate the Sherman Act if they foreclose competitors from a significant part of the market.

6.The Robinson-Patman Act prohibits companies from selling the same item at different prices if the sale lessens competition. However, a seller may charge different prices if these prices reflect different costs.

7.Under the Clayton Act, the federal government has the authority to prohibit anticompetitive mergers and joint ventures.

8.Possessing a monopoly need not be illegal; acquiring or maintaining it through “bad acts” is.

9.To determine if a company is guilty of monopolization, ask three questions:

•What is the market?

•Does the company control the market?

•How did the company acquire its control?

10.To win a predatory pricing case, a plaintiff must prove three elements:

•The defendant is selling its products below cost.

•The defendant intends that the plaintiff go out of business.

•If the plaintiff does go out of business, the defendant will be able to earn sufficient profit to recoup its prior losses.

11.A tying arrangement is illegal if:

•The two products are clearly separate

•The seller requires that the buyer purchase the two products together

•The seller has significant power in the market for the tying product, and

•The seller is shutting out a significant part of the market for the tied product.

12.Efforts by a manufacturer to allocate customers or territory among its distributors are subject to a rule of reason. These allocations are illegal only if they adversely affect competition in the market.

13.An exclusive dealing contract is one in which a distributor or retailer agrees with a supplier not to carry the products of any other supplier. Exclusive dealing contracts are subject to a rule of reason and are prohibited only if they have an anticompetitive effect.

14.When a manufacturer enters into an agreement with distributors or retailers to fix minimum prices, this arrangement is called resale price maintenance. RPM is a per se violation of the law.

15.Vertical maximum price-fixing is a rule of reason violation of the Sherman Act. It is illegal only if it has an adverse impact on competition.