Antitrust Final Examination
1998

3 hours

The examination consists of 65 multiple choice questions
worth 1 point each.

INSTRUCTIONS: Write your answers clearly and legibly on the answer sheet provided. There is only one correct answer for each question (a sign of relief crosses the room).

This is a no notes - closed book examination.

Do not begin until you are told to do so.

Stop all writing when the proctor announces that the examination is over.

Good luck and have an enjoyable summer.






I. The U.S. Department of Justice has alleged that Megahard Fixtures, Inc., the largest manufacturer and seller of pre-made windows and doors, is a monopolist. It is seeking divestiture by Megahard Fixtures of a significant portion of its manufacturing facilities. Megahard Fixtures denies it has monopolized the pre-made windows and doors market. Which of the following is correct?

a. The government must prove that Megahard Fixtures is the sole source of a significant portion of the market.

b. In order to establish monopolization, the government must prove that Megahard Fixtures has at least 75% of the market. c. If Megahard Fixtures has the power to control prices or exclude competition it has monopoly power.

d. As long as Megahard Fixtures has not been a party to a contract, combination, or conspiracy in restraint of trade, it cannot be found to be guilty of monopolization .


2. Throughout history, various methods have been used to deal with monopolies and other restraints of trade. Which of the following best describes the current approach in the United States?

a . All restraints of trade are illegal. b . A partial restraint of trade is lawful, but a complete or general restraint is illegal.

c . Some restraints of trade are always illegal and some restraints of trade are illegal only if unreasonable.

d . No restraints of trade are illegal, instead the marketplace should act on its own.


3. The Sexispig Software Company produces software that enables cable television operators to run a semi-interactive game on any unused channel. Ile game, called Death, Destruction & Sex, is a phenomenal hit, particularly among pre-teen boys. Cable operators around the country are besieging Sexispig with requests for a license. Jean Jamison, the marketing vice president of Sexispig Software, has decided that this unbelievable, but probably short-lived demand, can be used to turn a tidy profit for Sexispig. She decides that instead of Sexispig's normal single price policy for a license, she will charge each cable operator whatever they are willing to pay. As a result of this new policy Sexispig is now licensing the software at prices that range from $ 1,000 to $25,000 per month. One of Sexispig's customers discovers this pricing differential and threatens to sue Sexispig for violating the Robinson-Patman Act. Jean calls you, Sexispig's general counsel, and asks for advice. You would be correct if you tell Jean:

a. That Sexispig cannot be liable under the Robinson-Patman Act because licensing transactions are not covered by the Act.

b . That Sexispig cannot be liable under the Robinson-Patman Act because software companies are not covered by the Act.

c . That Sexispig might be liable under the Robinson-Patman Act if the various transactions are reasonable contemporaneous.

d. That Sexispig might be liable under the Robinson-Patman Act if customer can show actual injury.


4. Which of the following is the best statement concerning the policy in the United States behind legislation and enforcement of antitrust laws?

a. The legal theory is that large concentration of economic power or market dominance is illegal.

b. The economic theory is that large size alone is inevitably harmful to the consumer.

c. The economic theory, often characterized as laissez-faire, is that competition is best protected by letting the market take care of itself without government Interference.

d. Various economic and legal theories, sometimes inconsistent, have motivated antitrust policy since the passage of the Sherman Act.

5. Wanton Corporation, its president, and several other officers of the corporation have been found guilty of conspiring with its major competitor to fix prices. Which of the following sanctions would not be applicable under federal antitrust laws?

a. Suspension of corporate right to engage In interstate commerce for not more than one year.

b. Treble damages.

c. Seizure of Wanton's property illegally shipped in interstate commerce.

d. Fines against Wanton and fines and imprisonment of its president and officers.


6. With respect to foreign commerce, the antitrust laws:

a. Apply only if there is an effect on U.S. commerce.

b. Apply only to activity occurring in the United States.

c. Do not apply.

d. Do not apply to activity that completely takes place in foreign countries.


7. All lawyers in the state of Goldbar belonged to the state bar association. The bar association provided a minimum fee schedule for various services which most lawyers followed. One of the minimum fees was for the examination of title to real estate. A large amount of funds for real estate sales in Goldbar came from outside of Goldbar, either from out-of-state purchases or out-of- state lending institutions. The federal antitrust laws:

a. Do not apply because based on the facts presented the fee schedule does not have a significantly impact on interstate commerce.

b. Do not apply because professions are not trade or commerce and are exempt.

c. Do apply only if prices are kept higher than if there were no minimum fee schedule.

d. Do apply.


8. With respect to the federal antitrust laws, regulated industries are:

a. Not expressly or completely exempt.

b. Covered to the same extent as all other industries.

c. Covered to the extent determined by the applicable regulatory agency.

d. Covered to the extent determined by the Department of Justice.

e. Covered to the extent determined by statute and the courts.



Problem Statement: Bargain Bankruptcies Bother Bar
(Questions 7 through 9)

A new private legal clinic opened recently in Discord, a small city in the State of Chaos. It ran a series of ads in The Onion Bleeder, the local newspaper, a portion of which is reproduced below:


Creditors hassling you?

More and more people are finding that bankruptcy is cheap
and less of a stigma than they thought.

We can handle your bankruptcy for the lowest prices in
town. As little as $10 down, $208 complete for an simple
bankruptcy. That's $100 less than any other law firm in the
area. We'll have you back in action, take care of any
problems, and ensure no legal problems.

Don't wait any longer --
call the Pierclin Franks Law Clinic today.



The local bar association petitioned the appropriate state court to commence disciplinary proceedings against lawyers working at the Pierclin Franks Law Clinic citing the ABA Code of Professional Responsibility (which is in force in the State of Chaos) to the effect that information disclosed by a lawyer in any publication or broadcast may not be "false, fraudulent, or misleading," DR 2- 101 (A), and must be "presented in a dignified manner." DR 2- 10 1 (13). The bar noted that the ad (1) improperly and fraudulently understates the seriousness and complexity of bankruptcy proceedings, and (2) implies that all legal services are comparable, regardless of the quality of work done. The Pierclin Franks Law Clinic says the bar is really up in arms because of low prices offered on bankruptcy work, which are 33% below the average in the community. It also claims that bankruptcy work is simple and represents a high profit line of work for many specialty lawyers. Pierclin Franks' cracker-jack lawyers file suit in federal district court under the federal antitrust laws, alleging a price-fixing conspiracy, and seek an order enjoining the local bar from any further disciplinary proceedings, claiming the bar action violates Section 1 of the Sherman Act.


9. If you were counsel to the Pierclin Franks Law Clinic, which of the following arguments would be best for your client?

a . Urging the court to reject the holding in National Society of Professional Engineers v. United States [435 U.S. 679 (1978)] to characterize the actions of the bar as an illegal price fixing scheme rather than as a legitimate control of an ethical concern.

b. Urging the court to rely on Professional Engineers v. United States to characterize the actions of the bar as an illegal price fixing scheme rather than as a legitimate control of an ethical concern.

c . Urging the court to rely on Jefferson Parish Hospital v. Hyde [466 U.S. 2 (1984)] to characterize the actions of the bar as an illegal price fixing scheme rather than as a legitimate control of an ethical concern.

d. Urging the court to reject the holding in Jefferson Parish Hospital to characterize the actions of the bar as an illegal price fixing scheme rather than as a legitimate control of an ethical concern.


10. If you were counsel to the bar association, the discovery of which of the following additional evidence would be best for your client?

a. The disciplinary committee of the bar association that initiated the ethical complaint against the Pierclin Franks Law Clinic is selected by secret ballot of the practicing lawyers in the State of Chaos and all its actions are sent to the Supreme Court of the State of Chaos for comment and approval.

b. The disciplinary committee of the bar association that initiated the ethical complaint against the Pierclin Franks Law Clinic is appointed by the Supreme Court of the State of Chaos.

c. The bar association has taken similar action against 59 others attorneys on identical grounds over the past ten years.

d. A Pierclin Franks Law Clinic memorandum from its senior litigation partner to a new associate the states, in part, "we plan to blow away the competition with our low prices and then raise prices after their gone".


11. The local bar association moves to dismiss the complaint. Using only the facts listed in the problem statement what result is most likely based on your assessment of the antitrust claim?

a. Judgment for the bar association based on the fact that as officers of the court lawyers are subject to different rules and regulations than other occupations and that the actions of the state bar association to promulgate such rules and regulations are immune from antitrust attack under the "state action" doctrine.

b. Judgment for the Pierclin Franks Law Clinic based on the fact that although the Supreme Court of the United States has hinted that professions may be treated differently than other occupations under the antitrust laws the actions described appear to make out a prima facie case for an actionable price fixing conspiracy.

c. Judgment for the bar association based on the fact that the courts have long recognized that professional associations need to regulate the ethical conduct of their peers and eliminate any fraud that may be perpetrated on the public.

d. Judgment for the Pierclin Franks Law Clinic based on the fact the Supreme Court of the United States has held that professions are to be treated no differently than other occupations under the antitrust laws and that the actions described appear to make out a prima facie case for an actionable price fixing conspiracy.


12. Which of the following is not exempt from the antitrust laws?

a. Labor union activity within labor disputes.

b. Professional baseball.

c. Professional football.

d. Lobbying.


13. Section 1 of the Sherman Act makes every contract, combination, or conspiracy in restraint of trade illegal. This has been interpreted to apply:

a. To only one person acting alone.

b. Strictly to every restraint of trade.

c. To only express agreements.

d. To only unreasonable restraints of trade.


14. The term "illegal per se" as it is frequently used in antitrust law:

a. Applies exclusively to illegal price fixing and other related activities by competitors.

b. Must be established by the Justice Department in order to impose criminal sanctions under the Federal Trade Commission Act.

c . Represents conduct or agreements that are inherently and-competitive and are almost always without legal or economic justification.

d . Applies exclusively to illegal and-competitive activities by competitors.


15. Which of the following pricing agreements among competitors has the best chance of not being in violation of the antitrust laws?

a. An agreement aimed at lowering prices.

b. An agreement to establish a new product or market that would not exist absent the price-fixing.

c . An agreement aimed at eliminating cutthroat competition by stabilizing prices.

d . An agreement that seeks to fix prices reasonably and fairly for the consumers' benefit.


16. Section 7 of the Clayton Act is the primary statutory provision used by the Department of Justice and the FTC in controlling anti-competitive mergers and acquisitions. In general, the Clayton Act is invoked because:

a. It provides for harsher criminal penalties than does the Sherman Act.

b. It enables the Department of Justice and the FTC to proscribe mergers and acquisitions in their incipiency.

c. It provides for exclusive jurisdiction over such activities.

d. The Sherman Act applies to asset mergers or acquisitions only, not to stock mergers or acquisitions.


17. The Polissi Company, a New Hampshire corporation, distributes software for use in the aerospace industry. The company has a number of competitors spread throughout the United States and abroad. The general counsel of Polissi Company has become concerned that some employees of the company may have exposed the company to antitrust liability for certain activities undertaken at a recent air show that was held in a foreign country. Which of the following is most correct regarding the application of the Federal antitrust laws?

a. The federal antitrust laws will apply because the activities were committed by a business engaged in interstate commerce.

b. The federal antitrust laws will apply because the activities affect a business engaged in interstate commerce.

c. The federal antitrust laws will apply because the activities adversely affect the price of goods sold in interstate commerce.

d . The federal antitrust laws will apply because the activities have a significant impact on interstate commerce.

e. The federal antitrust laws will not apply because the activities occurred in a foreign country.



Problem Statement: Cable TV Corrupts Small Town (Questions 15 through 18)


In 1996, the Hopsford Cable Co. obtained from the City of Hopsford, New Hampshire, an exclusive ten-year franchise to install and operate a cable TV transmission system in that city. New Hampshire and federal law (and the enabling regulations) left cable TV franchising decisions to the discretion of local authorities and the Hopsford city council recommended, and the mayor approved, grant of the franchise.

While Hopsford Cable Co. was undertaking studies and preparing to subcontract installation work, a regular city election was held, and the incumbent mayor and three of the five incumbent city council members were replaced. Prior to the election, the two principal shareholders of Hopsford's local regular (over-the-air) television station, Huey and Duey, and one of the successful city council candidates, Louey, had formed CATV Hopsford, Inc., with the purpose of securing the exclusive franchise earlier issued to Hopsford Cable Co.. Huey and Duey each made substantial campaign contributions to Louey and other council candidates on the successful ticket. Hopsford Cable Co. alleges that their television station's coverage of the election was biased in favor of the same candidates.

After the election, CATV Hopsford, Inc. and its affiliated local TV station filed an unfair competition complaint in a state court in Hopsford alleging that Hopsford Cable Co. had within the previous year hired several employees from the affiliated local TV station to obtain trade secrets with respect to the Hopsford television advertising market. Plaintiffs claimed damages and sought an injunction prohibiting Hopsford Cable Co. from proceeding with any activity to carry out plans to implement its Hopsford cable TV franchise. Extensive discovery procedures failed to disclose facts sufficient to support the allegations and defendant's motion for summary judgment was eventually granted.

Shortly thereafter, at Louey's behest, the city council invited Huey and Duey to appear before it. They testified that Hopsford Cable Co. was both technically and financially unqualified to implement the franchise. After some discussion, but no public hearing or other opportunity for Hopsford Cable Co. to dispute the charges, the council exercised a revocation clause in the franchise agreement and transferred the exclusive franchise to CATV Hopsford, Inc.

Hopsford Cable Co. charged a conspiracy in restraint of trade among Huey, Duey, Louey, and CATV Hopsford, Inc. under the federal antitrust laws. It alleged, inter alia, that CATV Hopsford's lawsuit was brought in bad faith and for harassment, the statements of Huey and Duey before the council were false and motivated solely by their interest in CATV's obtaining the franchise, and that the decision of the council was tainted as a result of Huey and Baker's campaign contributions.


18. With respect to the unsuccessful unfair competition litigation filed in state court, which of the following is correct?

a. The completion of the state unfair competition litigation now precludes both parties from bringing up issues regarding competition in the antitrust litigation on the principle of res judicata.

b . On the basis of the facts presented in the problem statement the litigation constitutes a "sham litigation" and, as such, is actionable under the antitrust laws.

c . Citizens (both natural and corporate) have a constitutional right of access to the courts and it does not matter in an antitrust action that their sole purpose in bringing litigation is to destroy a competitor by means of unsupported allegations.

d. In Professional Real Estate Investors v. Columbia Pictures [ 113 S. Ct. 1920 (1993)] the Supreme Court put forth a two-part definition of "sham" litigation.


19. CATV Hopsford, Inc. in its defense against the federal antitrust law action claims it is protected by the Noerr/Pennington doctrine. Which of the following is correct regarding this doctrine?

a. Even where group action is involved the Noerr/Pennington doctrine makes it clear that wide latitude is permitted to groups to petition or put pressure on government officials.

b. The Noer/Pennington doctrine does not extend to actions that would amount to actionable fraud or deceit.

c. Policy considerations supporting the Noerr/Pennington doctrine can be found in each citizen's Third Amendment rights of petition.

d . The Noerr/Pennington doctrine applies only to "natural" citizens, and not to corporations since corporations can not vote and are not "politically franchised".


20. Regarding the involvement of Huey, Duey, Louey, and CATV Hopsford, Inc. in the city council campaign, which of the following is correct?

a. Although individuals and organizations can be "politically active", if the political activity is motivated by a desire to subvert the free market process and eliminate competition it is subject to antitrust censure.

b. The use of campaign contributions to obtain a competitively lucrative license is a form of bribery that removes the protection of the Noerr/Pennington doctrine.

c. Since the anti-competitive conspiracy among the participants existed prior to Louey's election to the city council, the conspirators' actions in getting Louey elected can be actionable on antitrust grounds if the main purpose of getting Louey elected was to harm a competitor.

d. To determine the competitive effect of the acts involved would require an examination of the purity of motives underlying the acts of a legislative body, and it is unlikely that a court would do so.


21. The defendants in the antitrust case, Huey, Duey, Louey, and CATV Hopsford, Inc., move to dismiss on the grounds that their conduct was protected under the Noerr/Pennington doctrine. What is the most likely result?

a. The defendant's motion is denied since the plaintiff has made out a prima facie case that the defendants specifically intended to harm a competitor and took steps to implement that harm.

b . The defendant's motion is denied since federal judges are reluctant to dismiss an antitrust suit before trial, especially one that involves local political corruption.

c . The defendant's motion is granted since the two anti-competitive actions alleged (the "sham litigation" and the testimony before the council) alone on the facts presented are unlikely to support an antitrust suit.

d . The defendant's motion is granted because Noerr/Pennington is an absolute defense where the action is a situation where petitioning the government is involved.


22. Klasmatic Inc. has a distribution system composed of distributors and retailers. Each distributor has a defined geographic area in which it has the exclusive right to sell to retailers and to which its sales are restricted. Franchised retailers are authorized to sell Klasmatic's products only within specified locations. Both distributors and retailers are forbidden to sell to non-franchised retailers. Under current antitrust law, this marketing arrangement will must likely be:

a. Judged under the rule of reason, whether or not title passes.

b . Illegal per se if tide passes to the distributor or retailer, but judged under the rule of reason if title does not pass (as under an agency or consignment).

c . Illegal per se, whether or not title passes.

d . Illegal per se if title does not pass, but judged under the rule of reason if title passes.


23. Zenobia Corporation is engaging in a widespread price-fixing arrangement with several of its leading competitors. Which of the following is correct?

1 a. Only the federal government can obtain injunctive relief.

b. The agreement will not be found to be illegal if the parties can show they are merely meeting competition.

c. If one of the parties to the price fixing arrangement sues Zenobia for treble damages for certain breaches of the agreement, relief will be denied.

d. The officers of Zenobia can not be prosecuted and found guilty of violating the antitrust law as long as they are acting solely for and on behalf of the corporation.


24. Aurelian Corporation entered into agreements with its retailers whereby they agreed not to sell Aurelian batteries beneath the minimum prices determined by Aurelian. In exchange for this agreement, Aurelian promised not to sell batteries at retail in the retailers' respective territories. The agreement did not preclude the retailers from selling competing brands of batteries. Which of the following is most correct?

a. The agreement is legal since the retailers are permitted to sell the competing brands at any price they choose so there is no effect on inter-firm competition.

b . The agreement is legal if the batteries are sold under Aurelian's exclusive trademark.

c. The agreement is an exception to the price fixing provision of the Sherman Act because Aurelian has given up the right to sell in the various territories.

d. The agreement is illegal even though the minimum prices are reasonable.


25. Certain members of the New England Railway Construction Association decided that something must be done about the disastrous competition, which, when coupled with the depressed status of the industry in New England, was causing financial chaos for many association members. They met privately after one of the association meetings and decided to allocate construction projects among themselves based upon a historical share of the market. Under the arrangement, a certain designated company would submit the low bid, thereby assuring that the company would obtain the job. Which is most correct?

a. Such an arrangement is illegal per se and a criminal violation of the antitrust law.

b. Such an arrangement is illegal under the rule of reason, but not a criminal violation of the antitrust laws.

c . Such an arrangement is legally justifiable following the logic in BMI v. CBS [441 U.S. 1 (1979)] due to the economic conditions in the marketplace.

d . Such an arrangement is legal under antitrust laws since it does not fix prices.


26. The Internet Software Company is a major player in the internet server business and spends a considerable percentage of its budget on improving its technology. In addition to developing new technology in its own facilities the company actively seeks out promising technology developed by others. Which of the following would be correct legal advice to give to Internet?

a. Internet is immune from the antitrust laws when dealing with the licensing of any patent it owns.

b. Acquisition of patents through original grant (not licensing from others) may subject Internet Software to Sherman 2 liability if the patents were acquired with the intent to obtain monopoly power.

c . Acquisition of patents through purchase may subject Internet Software to Sherman 2 liability if the patents were acquired with the intent to obtain monopoly power.

d. Acquisition of patents by means of fraud on the Patent Office win not subject Internet to Sherman 2 liability even if the patents were acquired with the intent to obtain monopoly power.


27. Which of the following statements is correct regarding market failures?

a. They are the inevitable result of cartel activity.

b . They cannot be caused by positive externalities.

c . They can be caused by inadequate or erroneous information.

d . They have no effect on those not party to the market decision.


28. In the 1993 Supreme Court case Hartford Fire Insurance Co. v. California Justice Souter, writing for the majority, reaffirmed both the "effects" test for extraterritorial antitrust jurisdiction and the principle of international comity. Which of the following is correct regarding that case?

a. The case made no basic changes in the substance of the comity doctrine but clarified when and how comity should be applied.

b . The comity doctrine was first introduced in the post World War II world to ease international trade.

c. The opinion was so well received that Justice Souter was invited to host a show on cable television's Comity Channel.

d . Justice Scalia loved the majority opinion calling it a "vision of clarity that has made me change my way of thinking."


29. The Chuggers Brewery Company is the second largest brewer of strawberry flavored beer in the country. Strawberry flavored beer is a specialty brew that appeals to a select group of individuals who (not surprisingly) do not view any other liquid refreshment as competitive. The management Chuggers has decided that it would like to purchase the SyberSlosh Beer Company, another producer of strawberry flavored beer. According to ATF statistics the following are the market shares for strawberry flavored beer producers:

A House & A Bush Beer Co         40%
Chuggers Brewery Co . 25%
Babs Brews 20%
SyberSlosh Beer Co 10%
Fruity Beer Inc 5%


Based on the ATF statistics what is the HHI for the strawberry flavored beer market prior to merger and how many points will the merger cause the HHI to change?

a. 35% and an increase of 10 percentage points

b. 500 and increase of 100

c. 2750 and increase of 500

d. 3250 and a decrease of 100

30. Expansion Corporation is an aggressive, large conglomerate. It is seeking to obtain control of several additional corporations including Resistance Corporation. Expansion does not currently buy from, sell to, or compete with Resistance. Which of the following statements applies to this proposed takeover?

a. Since Expansion does not buy from, sell to, or compete with Resistance the federal antitrust laws do not apply.

b. If Expansion can consummate the acquisition before there is an objection to it, the acquisition can not subsequently be set aside.

c. The acquisition is likely to be declared illegal if there will be reciprocal buying and there is a likelihood that other entrants into the market would be precluded.

d. The acquisition is legal on its face if cost efficiency will result from combined marketing and advertising.



Problem Statement: Bulgin Biceps Pumps It Up (Questions 28 through 30)


The Bulgin Biceps Co. manufactures vitamin preparations for sale by independent house-to-house distributors. The distributors are recruited by the company, their personnel are given a ten-day training course by the Bulgin Biceps Company, and then join the business of the independent distributor. Each such distributor buys vitamins from the Bulgin Biceps Co. at wholesale prices and resells them to home customers at prices determined by the distributor. The distributorship agreement provides that the distributor shall not sell any vitamin preparations other than Bulgin Biceps's, and the agreement is of indefinite duration. It is, however, terminable on 60 days' notice by Bulgin Biceps; a distributor must give 18 months' notice if it desires to terminate

Bulgin Biceps markets its product through 6,700 distributors, and has 71.5% of the all the sales of vitamin preparations on a house-to-house basis. When all sales of vitamin preparations through all types of outlets are considered, Bulgin Biceps's market share is 9.6%. The physical characteristics of the vitamin preparations marketed on a house-to-house basis are identical to those marketed through other outlets, but house-to-house salespeople generally quote prices 20% lower than drugstores and 5% higher than mailorder houses.


31. Bulgin Biceps has retained you for advice and would like an opinion on whether they may have violated any antitrust law with regard to its distributors. In this regard, 'which of the following is correct?

a. Since Bulgin Biceps is merely a "single player" the exclusivity clauses in its distribution agreements cannot give rise to an antitrust claim under Sherman 1 in accordance with the holding the Copperweld case.

b. Under the Colgate doctrine Bulgin Biceps is free to set the terms it wants to use with its distributors free from antitrust interference.

c. The size of Bulgin Biceps's market share may be decisive in determining the antitrust risk.

d. A prohibition against the distributors handling competitive goods, such as that used by Bulgin Biceps, is illegal under Clayton 3.


32. Bulgin Biceps specifically wants to know it could change any antitrust exposure it may have by deleting the exclusive dealing clause from its distributorship agreement, and after consultation with an offending distributor, simply terminated any distributor that insisted on buying vitamin preparations from any of Bulgin Biceps's competitors?

a. Such an action would reduce Bulgin Biceps's antitrust risk since it would place Bulgin Biceps under protection of the Colgate doctrine.

b. Such an action would increase Bulgin Biceps's antitrust risk since the consultation would constitute an agreement that might be actionable under Sherman 1.

c. Such an action would reduce Bulgin Biceps's antitrust risk if it terminated without consultation.

d. Such an action would not have any meaningful effect on Bulgin Biceps's antitrust risk since the result is the same.


33. Bulgin Biceps also has exclusive agreements with several chemical companies that supply it with Kelcipin, one of the basic ingredients of its vitamins. These agreements bind the chemical companies, which produce 7. 1 % of Kelcipin, not to sell any of their production to other vitamin companies. Bulgin Biceps's three major competitors apparently are not prejudiced, since each of them also has contracts with various chemical companies under which they purchase all of the output of the contracting companies. The three major competitors have contracts that account for 53% of the Kelcipin produced. In addition, some of the twelve relatively small vitamin companies in the field have similar "purchase of output" contracts. Which of the following is incorrect regarding these purchase of output contracts?

a. In determining the effect on competition a court must assess the amount of the market that has been foreclosed by the Bulgin Biceps arrangements.

b. In the Tampa Electric v. Nashville Coal Co. case [365 U.S. 326 (1961)] the

Supreme Court held that requirements contracts of the nature used by Bulgin Biceps are against public policy and are illegal per se.

c . In vertical foreclosure cases the antitrust laws seeks to protect the ultimate consumers by ensuring that they will not be deprived of the protection afforded by alternative sources of supply.

d . In assessing the qualitative substantiality of the alleged foreclosure a court will be receptive to evidence regarding barriers to entry into the manufacture of Kelcipin.


34. Philpot purchased the Left Bank Hair Styling Salon from Golden. The contract contained a promise by Golden that he would not engage in the practice of pharmacy for one year from the date of the sale within one mile of the location of Left Bank Hair Styling Salon. Six months later Golden opened the Parisian Hair Styling Salon within less than a mile of Left Bank Hair Styling Salon. Which of the following is a correct?

a. Golden has not breached the above covenant since he did not use his own name or the name Left Bank in connection with the hair styling salon.

b. The covenant is reasonable and enforceable.

c. The contract is an illegal restraint of trade and is legal under federal antitrust laws.

d. The covenant is contrary to public policy and is illegal and void.


35. The InFocus Corporation has obtained a patent on a revolutionary projection device for classroom use. It is far superior to the existing machines currently in use. Which of the following actions taken by InFocus will not result in a violation of federal antitrust law?

a. Maintaining the resale price for machines it sells to distributors.

b. Obtaining a near-total monopolization of the market as a result of the patent.

c. Requiring the purchasers of the machines to buy from InFocus all -their other commonplace supplies connected with the use of the machine.

d. Joining in a boycott with other appliance manufacturers to eliminate a troublesome discount distributor.


36. Which of the following cases did not deal with the price fixing:

a. Broadcast Music (BMI) v. Columbia Broadcasting System

b. United States v. Aluminum Co. of America (Alcoa)

c. Chicago Board of Trade v. United States

d. United States v. E.I. du Pont de Nemours & Co. (Cellophane Case)


37. In a pure conglomerate merger:

a. The government must establish an actual restraint on competition in the marketplace in order to prevent the merger.

b. The acquiring corporation does not compete with, sell to, or buy from the acquired corporation.

c. The merger is prima facie valid unless the government can prove the acquiring corporation had an intent to monopolize,

d . Some form of additional anti-competitive behavior must be established (such as price fixing) to provide the basis for the government's obtaining of injunctive relief.


38. The Duplex Corporation has been charged by the Justice Department with an "attempt to monopolize" the duplex industry. In defending itself against the charge, Duplex will prevail if it can establish:

a. It had no intent to monopolize the duplex industry.

b. Its percentage share of the relevant market is less than 50%.

c. Its activities are lawful under a rule of reason analysis.

d. It does not have monopoly power.


39. The Gizmo Corporation sold various interrelated products that it manufactured. One of the Items was manufactured almost exclusively by Gizmo and sold throughout the United States. Realizing the importance of this product to its purchasers, Gizmo decided to capitalize on the situation by requiring all purchasers to take at least two other products in order to obtain the item over which it has almost complete market control. At Gizmo's spring sales meeting, its president informed the entire sales force that they were to henceforth sell only to those customers who agreed to take the additional products. As a result of this plan, gross sales of the additional items increased by more than 51 million. Which of the following best describes the legality of the above situation?

a. It is illegal only if both Gizmo's products are patented products.

b . It is an illegal tying arrangement.

c . It is legal as long as the price charged to retailers for the other products is competitive.

d. It is legal if the retailers do not complain about purchasing the other products.


40. In 1985 the Supreme Court set forth the currently accepted list of characteristics that are indicative of a per se illegal boycott in the Northwest Wholesale Stationers case [472 U.S. 284 (1985)]. From the list below which characteristic is not on the Supreme Court's accepted Est?

a. The boycott is not justified by plausible arguments that it enhanced overall efficiency or competition.

b. The boycott cuts off access to a supply, facility, or market necessary for the target firm to compete.

c . The boycott eliminates a vigorous competitor.

d . The boycotting firm(s) possess a dominant market position.


41. What is the difference between exclusive dealing arrangements and reciprocal dealing arrangements?

a. Exclusive dealing is judged under the rule of reason and reciprocal dealing is per se illegal.

b . Exclusive dealing is per se illegal and reciprocal dealing is judged under the rule of reason.

c. In reciprocal dealing a purchaser requires the seller to also buy its product. In exclusive dealing, a seller requires that a buyer not carry products of the seller's competitors.

d . Reciprocal dealing is a violation of the Shen-nan Act but exclusive dealing is only a violation of the Clayton Act.


42. Pratt Company manufactures and sells distinctive clocks. Its best-selling item is a reproduction of a rare antique grandfather clock. Taylor Co. purchased 100 of the clocks from Pratt at $299 each. Much to Taylor's chagrin, it discovered that Stewart, one of its competitors, had purchased the same clock from Pratt at $207 per clock. Taylor has complained and threatened legal action. In the event the issue is litigated which of the following is most likely?

a. Taylor will have to show that it has been harmed by the price discrimination

b. Pratt will prevail if it can show it did not intend to harm Taylor.

c. Pratt will prevail if it can show that it sold the clocks at the lower price only to customers, such as Stewart, who had been doing business with it continuously for ten years or more.

d . Pratt will prevail if it can establish that there were several other clock companies with which Taylor or could deal if Taylor was dissatisfied.


43. POG, a game using 2 inch cardboard disks and heavier slammers has demonstrated unbelievable popularity since its introduction in Hawaii. The North American POG Association (NAPOGA) is composed of 112 Professional POG franchises located throughout the continent. NAPOGA members have agreed to eligibility requirements for all persons who want to participate in a NAPOGA tournament. NAPOGA controls 96% of all "professional" (i.e. cash paid to participants) POG events. "Dynamic" Di Schaefer, a professional POG player, has been ruled ineligible under the NAPOGA developed rules and is prohibited from competing in NAPOGA sponsored tournaments. Although Dynamic Di was afforded a fair hearing under reasonable procedures to contest the NAPOGA decision, she decided to sue NAPOGA and its members on a Sherman I theory based on an alleged illegal group boycott. NAPOGA and its members move for summary judgment.

a. The court should use a per se analysis to assess the arrangement.

b . The court should use a rule of reason analysis to examine NAPOGA's eligibility arrangement.

c . The court should summarily dismiss the case for failure to state a case of action upon which any antitrust relief can be granted.

d . The court should dismiss the case against NAPOGA as a defendant but allow the case to proceed against the individual franchise members as defendants.


44. Which of the following factors would not facilitate an association of companies within an industries in cooperating to eliminate price competition among themselves:

a. Past prices lists published by the government and available to anyone interested.

b . Low cross-elasticity of demand for the product involved.

c . Wide variations in the costs of production among industry members.

d . Base-point and delivered pricing systems.

e . Clauses in customer contracts such as "meet or release" and "most favored nation".


45. The Megadrug Company has been accused of charging Mom-n-Pop Drug Stores a higher price than Wally Mart Stores for its pharmaceutical products. In trying to determine the anti-competitive effects of the price discrimination under the Robinson-Patman Act, which of the following factors would not be relevant and helpful to the court in making its determination?

a. The product was sold to competing buyers in the same market.

b. There was extensive competition among the buyers, as manifested by low profit margins.

c. The alleged price discriminator made substantial use of television advertising.

d. The alleged discrimination resulted in a substantial difference in price.


46. If a case of price discrimination under the Robinson-Patman Act is established by a plaintiff, which of the following is not a defense available to the defendant?

a. The judicially recognized "functional discount" defense.

b . The judicially recognized "necessity" defense.

c. The "cost justification" defense found in the Act

d . The "meeting competition" defense found in the Act.


47. Seventeen multinational mineral extraction companies, two of which are U.S. corporations and competitors, decide to collaborate in their efforts to mine rare-metal nodules from the deep-sea floor. All exploration and extraction will be conducted in international waters. The joint venture is set-up as a Bahamian corporation, formed and operated under the laws of the Bahamas. Which of the following activities poses the greatest risk of antitrust prosecution in the United States?

a. The establishment of a joint venture in the Bahamas among competitors that includes U.S. companies.

b. The operation of collaborative marketing organization that will sell the nodules throughout the world, including the United States.

c. The allocation of exclusive geographic markets to each of the seventeen participants to sell the nodules mined by the joint venture where one of the exclusive territories includes the United States.

d . The development and dissemination of information regarding the potential yields of the mining sites and the expected production figures to each of the joint venture participants but not to anyone else.


48. Consciously parallel pricing:

a. Without more is generally illegal under a rule of reason analysis.

b. Cannot form the basis for a Sherman 1 violation.

c . Without more is legal per se.

d. Alone is enough to infer the necessary agreement to constitute a Sherman 1 violation.


49. Which of following inquiries is irrelevant in trying to determine if a group boycott is illegal?

a. Are the boycotters providing a service or a physical product?

b. Does the action exclude competition at same level as boycotters?

c. Is there truly group action or merely parallel but unilateral behavior of independent actors?

d . Is the group action commercially motivated?


50. The Morrion Corporation is planning to enter into some complex contractual negotiations with Phenom Inc. Which of the following contractual arrangements between Morrion and Phenom is most likely to be considered an unreasonable restraint of trade by a court?

a. Morrion is paid by Phenom to be the exclusive licensee of Morrion's new manufacturing technology.

b. Morrion and Phenom are currently not competitors but Morrion pays Phenom to agree not to enter into competition with Morrion in the future.

c. Morrion agrees to purchase Phenom's entire annual output, thereby excluding Cosmic Corporation, a competitor of Morrion.

d . Morrion pays Phenom to agree not to compete with Morrion as part of the sale of Phenom's business to Morrion.


51. Global Reproductions, inc. makes and sells high-quality, expensive lithographs of the works of famous artists. It sells to Art wholesalers throughout the United States. It requires that Its wholesalers not purchase lithographs of competing companies during the three-year duration of the contract. They may sell all other types of pictures, including oil, watercolor and Charcoal. The Federal Trade Commission has attacked the legality of this exclusive dealing arrangement. Which of the following is correct regarding this exclusive dealing arrangement?

a. It is legal per se since its duration is less than five years.

b. It could be found to be illegal under the Sherman, Clayton, and Federal Trade Commission Acts.

c. It will be tested under the rule of reason. and will be declared illegal only if found to be unreasonable.

d. It is legal since the wholesalers are permitted to sell all other types of pictures.


52. Regarding interaction between the patent and antitrust laws which of the following is a correct statement?

a. The failure to use (or work) an economical important patent is an abuse of monopoly that is illegal under the antitrust laws.

b. Fraud in obtaining a patent from the patent office has the effect of erasing any antitrust exemption accorded to patents.

c. Good faith misrepresentation of facts or technical fraud on the patent office is a defense to an antitrust claim based on patent fraud.

d. The pro-competitive policy underlying the antitrust laws is the dominate policy consideration and will be the controlling factor in any conflict between patent and antitrust laws.


53. With regard to antitrust exemptions and immunities, which of the following is a correct statement?

a. They can exist even where there is not a clear and valid state statute.

b. They are generally broadly construed by the courts.

c. They are no longer available to the healthcare profession.

d . Only a handful of industries have any sort of antitrust exemption or immunity.

54. A contract in "restraint of trade" is:

a. a common law concept no longer applicable since the passage of the Sherman Act.

b. generally illegal per se.

c . one the performance of which would limit competition in any business, or restrict the promisor in the exercise of a gainful occupation .

d. termed "naked" when it is incidental to the sale of a business or other property.


55. Gould Machinery builds bulldozers. Prior to 1986, it sold a substantial amount of equipment to Mace Contractors on credit. Mace went into bankruptcy in 1986. To protect its investment, Gould took over Mace. Erhart Contractors now complains that the acquisition harms its business, alleging that its business would have improved had Gould not entered the market as a competitor. Based an these facts, which of the following is the most correct assessment?

a. Erhart can not recover damages under the federal antitrust laws .

b. Erhart can recover treble damages.

c . Erhart can recover only its actual damages.

d . Erhart can obtain injunctive relief.



56. Regarding interaction between the patent and antitrust laws which of the following are correct:

a. The pro-competitive policy underlying the antitrust laws is the dominate policy consideration and will be the controlling factor in any conflict between patent and antitrust laws.

b. The failure to use (or work) an economical important patent is an abuse of monopoly that is illegal under the antitrust laws.

c. Fraud in obtaining a patent from the patent office has the effect of erasing any antitrust exemption accorded to patents.

d. It is not possible to "cure" a misrepresentation made in connection with obtaining a patent and thereby avoid antitrust attack.


57. Much of our economy is guided by the "invisible hand", which Adam Smith wrote about nearly 200 years ago. What is this "invisible hand"?

a. The third brother of the famous family of jurists.

b. The hidden influence of cartels, a meaning derived from the "hand" logo of the feudal guild societies that were hampering the Industrial Revolution in England.

c. The economic allocation of scarce resources by an impartial governmental regulatory body.

d. The allocation of resources by the operation of voluntarily determined prices.

e . The behind-the-scenes or hidden efforts of the government that facilitate wealth creation and transfer.


58. When economists speak about a truly efficient system of property rights such a system would not have which of the following attributes?

a. Universality

b. Exclusivity

c. Transferability

d. Fungibility


59. Which of the following is incorrect regarding the Herfindahl-Hirschman Index (HHI):

a. HHI is used by the government to indirectly measure the competitiveness of oligopolies.

b. HHI gives greater weight to the market shares of larger firms.

c. HHI is used by FTC and Justice Dept to measure concentration.

d. HHI is less accurate than concentration ratios.


60. Certain features of a market are thought to foster harmful oligopolistic behavior. Which of the following markets would be most conducive to inter-firm price fixing?

a. A market with low concentration.

b. A market with low barriers to entry.

c. A market with high equipment costs.

d. A market with a fungible product.

e. A market with major labor union representation.


6 1. Which of the following is incorrect regarding exclusive dealing and requirement contracts?

a. A showing of substantially lessened competition or a tendency to create a monopoly in any line of commerce is required to establish illegality.

b. They are evaluated under the test of "quantitative substantiality", which predicates its finding of illegality principally upon the percentage of the market foreclosed.

c. They are evaluated under the test of "qualitative substantiality", which de emphasizes market share data and gives more weight to the probable effect of the contract on the relevant area of effective competition.

d. They are specifically prohibited by Clayton 3.


62. In recent antitrust cases the courts have increasingly used a "quick look" inquiry to analyze conduct that had been labeled as per se illegal in past. Which of the following is most correct regarding the "quick look" inquiry?

a. The "quick look" inquiry has not been adopted by the First Circuit.

b. The "quick look" inquiry replaces the rule of reason and the per se rule for analyzing conduct under Section 1 of the Sherman Act.

c. The "quick look" inquiry is used to determine if there is sufficient procompetitive purpose and effect to qualify for the rule of reason or per se analysis.

d. The "quick look" inquiry requires a quick weighing of all the circumstances of each case to determine whether a restraint is legal.


63. Budd is a software game developer for Macintosh computers who operates solely within the State of New Hampshire. Due to an extremely limited demand for Mac games he sells his products through only two outlets, a computer game store in the Steeplegate Mall in Concord and another store located in the Mall of New Hampshire in Manchester. Which of the following is correct?

a. If the Budd agrees to charge the same price for game software with Judd, another software game developer who also operates solely within the State of New Hampshire, their actions cannot be challenged under the federal antitrust laws, although they probably are in violation of the New Hampshire antitrust laws.

b . Budd can avoid many of the risks against resale price maintenance by formulating his relationships with the computer stores as bona fide consignments rather than sales.

c . Both at common law and under the antitrust laws Budd generally has the right to deal or to refuse to deal with whomever he pleases.

d. Budd would prefer, ceteris paribus, to face a high elasticity of demand for his products.


64. Alonso K. Lipomiki is the president of the Bayside Biotechnology Company. Bayside operates its own laboratory that has produced a number of patentable inventions. In addition, Bayside acquires the rights to various patented inventions developed by others. Bayside does not use the technology it owns, but instead Bayside seeks licensees for both its own and acquired patents. Mr. Lipomiki has hired you as general counsel and would like to know which of the following questions requires a negative response?

a. "Is a patent holder such as Bayside exempt from the antitrust laws when dealing with the licensing of the patent it owns?"

b . "Can Bayside's acquisition of patents through purchase subject the firm to Sherman 2 liability if the patents were acquired with the intent to obtain monopoly power?"

c. "Can Bayside's acquisition of patents by means of fraud on the Patent Office can subject a firm to Sherman 2 liability if the patents were acquired with the intent to obtain monopoly power?"

d. "Bayside holds the patent rights to a particularly valuable technology that is critical to the low-cost manufacture of certain medicines. Can Bayside grant an exclusive license to use the technology to Western Corporation that is restricted to the U.S. west of the Mississippi River, and another exclusive license to use the technology to Eastern Corporation that is restricted to the U.S. east of the Mississippi River without running afoul of the antitrust laws?"


65. In response to the clamor for health care reform, the eight doctors serving the isolated, small rural town of Arrow, New Hampshire (pop. 6,542) have decided to join together to collectively address some of what they consider are pressing medical issues facing their community. They are concerned about antitrust exposure and invite you to attend their initial planning meeting to provide legal advice. At the meeting the doctors ask you the following questions. Which of the following inquires requires a negative response?

a. "If we form a peer review committee to evaluate and possibly exclude competitors is there some sort of statutory immunity available."

b. "If we join together to practice as the Arrow Medical Group will we be subject to provisions of the antitrust laws dealing with mergers?"

c . "Can we as a group refuse to deal with one particular insurance company that we consider is unethical in its treatment of patient claims, without significant risk of violating the antitrust laws?"

d. "We have found that health care costs can be significantly lowered if we divide Arrow into eight territories of exclusive primary coverage, with a doctor assigned to each area. Does such an arrangement raise a significant risk of violating the antitrust laws?"