Franklin Pierce Law Center's

Final Antitrust Examination of the 21st Century

Three hours

The examination consists of thirty multiple choice questions worth 15 points each (450 points), ten true/ false questions worth 5 points each (50 points) and one directed essay with three parts worth 50 points for each part (150 points), for a grand total of 650 points.

Use the Scantron sheet for the multiple choice and true/ false questions.

Use no more than two blue books (write on one side only) for the essay portion of the exam. You should have plenty of time to complete this exam. As a consequence, the essay portion will be graded with extra consideration paid to organization, completeness, conciseness and clarity of argument. Plan, make notes and prepare outlines before you write the essay portion.

Some questions have been used in prior exams but may have slight changes that may significantly effect the correct answer. Please read all questions and answers carefully even if you feel that you recognize the question and answers.

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.



PART ONE - 30 Multiple Choice Questions


INSTRUCTIONS: Write your answers clearly and legibly on the Scantron sheet provided. Make sure your examination number is on all materials you turn in.

Problem Statement: DOJ tries to clean up Garganto (Questions 1 through 3)

The U.S. Department of Justice has alleged that Garganto, Inc., the largest manufacturer and seller of home automobile cleaning supplies in the world, is a monopolist. The government further alleges that Garganto has used anti-competitive terms in its contracts with various distributors, such as Wal- Mart, KMart and Ames, to help it achieve and maintain the monopoly. It is seeking divestiture by Garganto of a significant portion of its manufacturing facilities. Garganto denies the charges.

1. Which of the following best describes the current state of the law in the United States to deal with monopolies and other restraints of trade such as those alleged by the Department of Justice against Garganto?

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.


2. With regard to the government's case against Garganto which of the following is correct?

a. The government must prove that Garganto is the sole source of a significant portion of the market.
b . In order to establish monopolization, the government must prove that Garganto has at least 75% of the market.
c. If Garganto has the power to control prices or exclude competition it has monopoly power.
d. As long as Garganto has not been a party to a contract, combination, or conspiracy in restraint of trade, it cannot be found to be guilty of monopolization.


3. If the Justice Department decides to charge Garganto with an "attempt to monopolize" the home automobile cleaning supplies market, Garganto will prevail if it can establish:

a. It had no intent to monopolize the relevant market.
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.


Antitrust Final Examination 1999- page 2 of 14

4. The VegPack Corporation sells various interrelated products that it produces to the food processing industry. One of the items is manufactured almost exclusively by VegPack and is sold throughout the United States. Realizing the importance of this product to its customers, VegPack has decided to require all purchasers to take at least two other VegPack products in order to obtain the item over which VegPack has almost complete market control. VegPack's vice president for marketing has informed the entire sales force that they are to henceforth sell only to those customers who have agreed to take the additional products. Which of the following best describes the legality of this situation?

a. It is illegal only if both VegPack'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.


5. Which of the following factors would be least likely to facilitate an association of companies within an industries in cooperating to eliminate price competition among themselves:

a. Low cross-elasticity of demand for the product involved.
b . Wide variations in the costs of production among industry members.
c . Base-point and delivered pricing systems.
d . Clauses in customer contracts such as "meet or release" and "most favored nation".


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

a. illegal per se.
b . one the performance of which would limit competition in any business, or restrict the promisor in the exercise of a gainful occupation .
c . an old common law concept no longer applicable since the passage of the Sherman Act.
d. termed "naked" when it is incidental to the sale of a business or other property.


7. Legalco Inc. is a large law book distributor who controls 55 percent of the national market for law school text books. The rest of the market is divided among ten other distributors. Four of them, Snoozer, Booreen, Peedantik, an ' d Myndlis, have market shares of 15%, 10%, 8%, and 5%, respectively. Legalco decides to raise the price on its first year law texts by 20% because it feels that its competitors will also raise their price by 20% upon hearing of Legalco's action since law students have little choice but to purchase the books assigned to them (in other words, inelastic demand).

a. Legalco is probably guilty of monopolization.
b. Legalco is probably guilty of price fixing.
c. Legalco is probably guilty of predatory pricing. Antitrust Final Examination 1999- page 3 of 14
d. Legalco is probably not guilty of anything.


8. Antitrust has political, moral and economic objectives. Which of the following is not among the economic objectives:

a. Impartiality
b. Stability
c. Efficiency
d. Equality


Problem Statement: Cheap Divorces Under Fire (Questions 9 through 11)

A new private legal clinic opened recently in Coalchester, a large 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:

Marriage getting you down? More and more people are finding that divorce is cheaper and less of a hassle than they thought.

We can handle your divorce for the lowest prices in town. As little as $50 down, $300 complete for an uncontested divorce That's $100 less than any other clinic or firm in the area. We'll have you back in action, take care of any problems presented if there are children, and ensure no legal problems.

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


The local bar association petitioned the appropriate state court to commence disciplinary proceedings against lawyers working at the Pierce 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 (B). The bar noted that the ad (1) improperly and fraudulently understates the seriousness and complexity of divorce proceedings, and (2) implies that all legal services are comparable, regardless of the quality of work done. The Pierce Law Clinic says the bar is really up in arms because of low prices offered on divorces, which are 33% below the average in the community. It also claims that divorce work is simple and represents a high profit line of work for many specialty lawyers. Pierce's 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.

Antitrust Final Examination 1999- page 4 of 14

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

a. A Pierce 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".
b. The disciplinary committee of the bar association that initiated the ethical complaint against the Pierce 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.
c. The disciplinary committee of the bar association that initiated the ethical complaint against the Pierce Law Clinic is appointed by the Supreme Court of the State of Chaos.
d. The bar association has taken similar action against at least 20 others attorneys on identical grounds over the past ten years.


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

a. 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.
b . 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.
c. Urging the court to rely on 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.
d. Urging the court to reject the holding in Professional Engineers to characterize the actions of the bar as an illegal price fixing scheme rather than as a legitimate control of an ethical concern.


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 Pierce 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.
b. Judgment for the Pierce 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. that the actions of the state bar association to promulgate such rules and regulations are immune from antitrust attack under the "state action" doctrine.


12. Regarding interaction between the patent and antitrust laws which of the following is most 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. Intentional 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 total defense to any antitrust claim based on patent fraud.
d. It is possible under some circumstances to "cure" a misrepresentation made in connection with obtaining a patent and thereby avoid antitrust attack.


Problem Statement: Baer Buttons Up the Gap (Questions 13 and 14)

The Baer Button Corporation manufactures and sells buttons to the New York textile industry. The company is famous for its distinctive designs that are often used by the top fashion designers. Baer has two lines of buttons. One is very expensive and aimed at upscale design houses such as Dior. The other is more reasonably priced for everyday clothing that is sold in stores such as the Gap and Marshall's. The buyer for the Gap has discovered that one of its competitors is getting a cheaper price on Baer buttons than they are. The general counsel for the Gap has decided to file a lawsuit against Baer Button Corporation claiming that Baer has violated the Robinson-Patman Act.

13. In making out a case against Baer Button, which of the following is not a prerequisite for liability under the Robinson-Patman Act:

a. the seller is engaged in commerce and the price discrimination occurred in the course of such commerce.
b. there is at least one sale and one offer to sell to at least two different purchasers.
c. the sale transactions are reasonably contemporaneously
d. the challenged discrimination involves commodities.


14. In responding to the charges, which of the following would not be recognized as defense for Baer Buttons?

a. The "cost justification" defense.
b. The "meeting competition" defense.
c. The "counter-vailing power" defense.
d. The judicially recognized "functional discount" defense.


15. The Concord Company has developed a franchise system to distribute its trademarked Jungle Jim brand exercise equipment. The company 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 Jungle Jim 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 most likely be:

a. illegal per se if title passes to the distributor or retailer, but judged under the rule of reason if title does not pass (as under an agency or consignment arrangement).
b. illegal per se, whether or not title passes.
c. illegal per se if title does not pass, butj udged under the rule of reason if title passes.
d. judged under the rule of reason, whether or not title passes.


16. Ace Appliance Stores and Bobbi's Basement Bargains, two national chains of retail home entertainment equipment would like to merge. Expensive and famous outside counsel is consulted regarding Section 7 of the Clayton Act and Section 1 of the Sherman Act.. Which of the following advice would a knowledgeable antitrust lawyer give:

a. The Clayton Act is used by the government in controlling anticompetitive mergers and acquisitions because it enables the government to proscribe mergers and acquisitions in their incipiency.
b. The Clayton Act is used by the government in controlling anticompetitive mergers and acquisitions because it provides for harsher criminal penalties than does the Sherman Act.
c. The Clayton Act is used by the government in controlling anticompetitive mergers and acquisitions because it provides for exclusive jurisdiction over such activities.
d. The Clayton Act is used by the government in controlling anticompetitive mergers and acquisitions because the Sherman Act applies to asset mergers or acquisitions only, not to stock mergers or acquisitions.


e. The Clayton Act is used by the government in controlling anticompetitive mergers and acquisitions because the statute of limitations under Clayton 7 is longer than that under Sherman 1.

Problem Statement: Clear Skin and Rock 'n Roll (Questions 17 through 19)

The Marilyn Manson Co., founded by a former rock star who became disgusted with his life of debauchery, manufactures cosmetics for sale by independent house-to-house distributors. Distributors are recruited by the company and are given a two week training course by the Manson Company,. Afterwards they join the business of the independent distributor. Each distributor buys cosmetic products from the Marilyn Manson Co. at wholesale prices and resells them to home customers (mainly teenagers with skin problems) at prices determined by the distributor. The distributorship agreement provides that the distributor shall not sell any cosmetic products other than Manson's, and the agreement is of indefinite duration. It is, however, terminable on 30 days' notice by Manson; a distributor must give 12 months' notice if it desires to terminate.

Antitrust Final Examination 1999- page 7 of 14

problems) at prices determined by the distributor. The distributorship agreement provides that the distributor shall not sell any cosmetic products other than Manson's, and the agreement is of indefinite duration. It is, however, terminable on 30 days' notice by Manson; a distributor must give 12 months' notice if it desires to terminate.

Manson markets its product through 1000 distributors, and has 73% of the all the sales of teenage skin problem cosmetics sold on a house-to-house basis. When all sales of cosmetic products through all types of outlets are considered, Manson's market share is less than 10%. The physical characteristics of the cosmetic products marketed on a houseto-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. The internet has become a new source of competition, but as yet internet transactions account for less than 2% of all sales.

17. Manson 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 Manson 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.
b. Under the Colgate doctrine Manson is free to set the terms it wants to use with its distributors free from antitrust interference.
c. The size of Manson'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 Manson, is illegal under Clayton 3.


18. Manson specifically wants to know if it could change the company's antitrust exposure if the company deleted the exclusive dealing clause from its distributorship agreement, and after consultation with an offending distributor, simply terminated any distributor that insisted on buying cosmetic products from any of Manson's competitors?

a. Such an action would reduce Manson's antitrust risk since it would place Manson under protection of the Colgate doctrine.
b . Such an action would increase Manson's antitrust risk since the consultation could constitute an agreement that might be actionable under Sherman 2.
c . Such an action would reduce Manson's antitrust risk if the company terminated without consultation.
d . Such an action would not have any meaningful effect on Manson's antitrust risk since the result is the same.


19. Manson also has exclusive agreements with several companies that supply it with aloe, one of the basic ingredients of its cosmetics. These agreements bind the companies, which produce 15% of cosmetic grade aloe, not to sell any of their production to other cosmetic companies. Manson's three major competitors apparently are not prejudiced, since each of them also has contracts with various 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 cosmetic grade aloe produced.

Antitrust Final Examination 1999- page 8 of 14

In addition, some of the dozens of relatively small cosmetic 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 Manson arrangements.
b . In the Tampa Electric v. Nashville Coal Co. case the Supreme Court held that requirements contracts of the nature used by Manson 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 cosmetic grade aloe.


20. 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 35%
Chuggers Brewery Co 25%
Babs Brews 20%
SyberSlosh Beer Co . 10%
Fruity Beer Inc 10%


Based on the ATF statistics provided 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. 2450 and and increase of 500
c . 2750 and increase of 100
d. 3250 and a decrease of 100


2 1. The Runner Shoe Company is a major player in the athletic show business and spends a considerable percentage of its budget on improving its technology. In addition to developing new technology in its own laboratories the company actively seeks out promising technology developed by others. Which of the following would be correct legal advice to give to Runner?

a. Runner 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 Runner to Sherman 2 liability if the patents were acquired with the intent to obtain monopoly power.
c. Acquisition of patents through purchase may subject Runner 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 will not subject Runner to Sherman 2 liability even if the patents were acquired with the intent to obtain monopoly power.


22. 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)


23. 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 major labor union representation.
d. A market with a fungible product.


24. A majority of integrated circuit board manufacturers has formed an association "to promote mutual interests." Which of the following factors would be least likely to facilitate cooperation among the association's members to eliminate price competition among themselves:

a. Wide variations in the costs of production among industry members.
b. Base-point and delivered pricing systems.
c. "Meet or release" and "most favored nation" clauses in customer contracts.
d. Low cross-elasticity of demand for the product involved.


Problem Statement: Boycott effort is all thumbs (Questions 25 through 27)

The US Professional Thumb Wrestling Association (USTWA) is composed of 90 Professional Thumb Wrestling franchisees located throughout the country. The USTWA members have agreed to eligiblity requirements for all persons who want to participate in a USTWA tournament. The USTWA controls 94% of all professional thumb wrestling events. Alice Axil, a professional thumb wrestler, has been find ineligible under the USTWA developed rules and is prohibited from competing in an USTWA sponsored tournaments. Although Alice was afforded a fair hearing under reasonable procedures to contest the USTWA decision, Alice decides to sue the USTWA and its members on a Sherman I theory based on illegal group boycott. The USTWA and its members move for summary judgment.

25. In assessing the case the court should:

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 the USTWA eligibility arrangement can occur.
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 USTWA as a defendant but allow the case to proceed with the individual members as defendants.


26. 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. From the list below which characteristics is not on the Supreme Court's accepted list:

a. the boycotting firm(s) possess a dominant market position.
b. the boycott eliminates a vigorous competitor.
C. the boycott cuts off access to a supply, facility, or market necessary for the target firm to compete.
d. the boycott is not justified by plausible arguments that it enhanced overall efficiency or competition.


27. Which of following inquiries would be least relevant in trying to determine if the 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 the group action commercially motivated?
d. Is the action directed at fixing or restraining prices?


28. Which of the following would most likely be considered an unreasonable restraint of trade:

a. A agrees to purchase B's entire annual output, thereby excluding C, a competitor of A.
b. A is paid by B to be the exclusive licensee of A's new manufacturing technology.
c. A pays B to agree not to compete with A as part -of the sale of B's business to A.
d. A and B are currently not competitors and A pays B to agree not to enter into competition with A in the future.


29. The Slash-n-Death Software Company produces software that enables cable television operators to run a violent, semi-interactive game on any unused channel. The game, called Death, Destruction & Sex, is a phenomenal hit, particularly among pre-teens. Cable operators around the country are besieging Slash-n-Death with requests for a license. Alice Avarice, the marketing vice president of Slash-n-Death Software, has decided that this unbelievable, but probably short-lived demand, can be used to turn a tidy profit for Slash-n-Death. She decides that instead of Slash-n- Death'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 Slash-n-Death is now licensing the software at prices that range from $1000 to $25,000 per month. One of Slash-n-Death's customers discovers this pricing differential and threatens to sue Slash-n-Death for violating the Robinson-Patman Act. Alice calls you, Slash-n-Death's general counsel, and asks for legal advice. You would be correct if you tell Alice:

a. that Slash-n-Death cannot be liable under the Robinson-Patman Act because software companies are not covered by the Act.
b. that Slash-n-Death might be liable under the Robinson-Patman Act if the various transactions are reasonable contemporaneous.
c . that Slash-n-Death cannot be liable under the Robinson-Patman Act because licensing transactions are not covered by the Act.
d. that Slash-n-Death might be liable under the Robinson-Patman Act if customers can show actual injury.


30. 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. I 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."



PART TWO - 10 True/False Questions


INSTRUCTIONS: Write your answers clearly and legibly on the Scantron sheet provided. Make sure your examination number is on all materials you turn in.

3 1. The "quick look" inquiry is used in antitrust cases to determine if there is sufficient pro- competitive purpose and effect to qualify for the rule of reason or per se analysis.

32. Consciously parallel pricing without more is generally illegal under a rule of reason analysis.

33. Market failures can be caused by externalities.

34. Both at common law and under the antitrust laws a fin-n generally has the right to deal or to refuse to deal with whomever it pleases.

35. In that the Sherman Act uses common law terms such as "restraint of trade," the courts are bound by judicial interpretations of such terms made prior to the Act's passage.

36. TransAm Company, a US company that does a significant amount of business outside the United States and is required by government authorities in Country X to meet with its competitors and allocate territories, will likely escape condemnation under US antitrust laws for the anticompetitive actions in Country X.

37. A violation of 7 of Clayton Act can result in criminal sanctions.

38. SuperSlik Corporation develops and patents a new mechanical pencil that costs much less and lasts much longer than any other pencil on the market. If sales of SuperSlik's new product subsequently force all other competitors out of the pencil market and a monopoly of the pencil market results SuperSlik will be guilty of a Sherman 2 violation.

39. It is illegal under the federal antitrust laws for a group of horizontal competitors to agree to product or operational standards that exclude a potential competitor from the market.

40. A manufacturer's termination of a discount retailer, in an effort to stabilize resale prices, is illegal per se.



PART THREE - I Three-part Essay Question


INSTRUCTIONS: This is a directed essay. Answer the three questions that follow the facts in no more than two blue books. Write on one side of the blue book only. Clearly indicate what question you are addressing. Have mercy and please write clearly and legibly. Follow the instructions on the first page of the exam. Make sure your examination number is on all materials you turn in.

You are general counsel to the Fuzzy Dice Association (FDA), a trade association consisting of nearly 90% of all fuzzy dice manufacturers in the U.S. The members of FDA are concerned that sales of domestically produced fuzzy dice are declining due to increasing competition from a cheap imports from developing countries. At its monthly meeting the executive committee of FDA decides to engage in an aggressive campaign to put an end to competition from cheap imports. Although imported fuzzy dice are virtually indistinguishable from domestically produced ones, the FDA began a particularly vicious smear campaign that falsely claimed that the imported fuzzy dice were made from cancercausing ingredients and were produced by child labor. Both claims are false. The smear campaign had little affect on the consumers of fuzzy dice, but the false claims became the focus of Congressional hearings sponsored by Senator "Jumbo Jim" Jones. Senator Jones, who is the major Recipient of campaign contributions from the FDA's PAC (political action committee), held hearings on the issue at the bequest of the FDA's executive director. At the Congressional hearings Senator Jones showed a bogus video of children assembling fuzzy dice in an unidentified foreign country under appalling conditions. The bogus video was produced by the FDA and supplied to the Senator's staff by the executive director of the FDA, with whom the Senator plays golf every Sunday. As a result of the hearings, Senator Jones was able to get a federal statute passed that requires a dire warning label to be attached to all imported fuzzy dice and mandates special handling requirements for imported fuzzy dice. The new law has effectively eliminated any competition from imported fuzzy dice by making the product unattractive and prohibitively expensive to consumers.

1. What, if any, are the potential antitrust consequences of the actions taken by the FDA?


2. What effect does Senator Jones' statute have on an antitrust attack mounted by a foreign company that manufacture the imported fuzzy dice against the FDA?


3. Discuss the standing of FuzEx, GmbH, a German manufacturer of fuzzy dice to bring an antitrust action against the FDA? FuzEx only sells to a distributor in Thailand. FuzEx does not attach the warning label or use the handling procedures specified in Senator Jones' statute since all its sales are to Thailand. The Thai distributor then exports some the fuzzy dice to the United States and follows the requirements of Senator Jones' labeling and handling law for those dice.


Answers