Antitrust Final Examination

Transcription

1 Antitrust Final Examination hours The examination is worth 980 total points. The examination has two parts. The first part consists of an essay question worth 700 points. The second part consists of 56 true/false questions worth 5 points each for a total of 280 points. INSTRUCTIONS : For the essay write your answers clearly and legibly in the blue book(s) provided. Be sure to answer the questions or inquiries posed at the end of the fact situation. Make sure your examination number is on all materials you turn in for grading. Clear, readable answers are required. The true/false questions should be answered on the Scantron sheet provided. You will not be given credit for ambiguous or unreadable 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. "Antitrust law" refers to the U.S. Federal antitrust laws unless otherwise indicated. Good luck and have an enjoyable summer. Antitmst Final Examination page I of 6

2 PART I - Essay Question FTC Takes On Maplelite Maplelite Corporation is a Canadian company headquartered in Montreal that manufactures specialized optical telecommunications switching equipment. In an effort to promote broadband access the three northern New England states, Vermont, Maine and New Hampshire, have decided to collaboratively support the development of optical networks in their region in an effort to better compete with the high-tech growth corridors of Boston and Silicon Valley. The three states have pooled their resources and have decided to encourage the installation of telecommunications infrastructure using highspeed optical switching equipment through coordinated regulations. In order to promote the necessary investment, the three states decided to standardize the telecommunications infrastructure in their respective states for the delivery of internet access. To this end the Public Utilities Commissions in the three states held a series of highly unusual combined public hearings in 2005 on what standards should be adopted so that various telecommunications equipment could seamlessly be added to the network in each state. Maplelite Corporation did not appear at the hearings but the Canadian Ambassador to the United States did appear and submitted a positive written technical report at the hearings regarding a new and very innovative system architecture developed in Canada known as YU-82. The report was written by technical experts at Maplelite in Montreal, with some minor modifications added by Canadian embassy officials in Washington, D.C. prior to delivery. The innovative YU-82 architecture was subsequently adopted by the three states in 2005 and made part of their telecommunications regulations. Early this year, after many companies had made substantial investments based on the YU-82 standard, Maplelite disclosed that a critical patent covering the YU-82 architecture had been issued to it by the United States Patent and Trademark Office (USPTO). Apparently, Maplelite already had) at the time of the hearings a Canadian patent on the technology issued by the Canadian Intellectual Property Office (CIPO, but it seems that no one involved knew this fact or asked. There is some dispute whether or not Maplelite or the Canadian government misrepresented, either accidentally or fraudulently, information regarding the then pending United States patent application. Maplelite's standard licensing agreement requires companies wanting to use YU-82 technology to take out a 25 year license that has significantly higher royalties for use in the United States than in Canada. The Federal Trade Commission has brought a suit against Maplelite claiming that its actions regarding the YU-82 patent amounted to a violation of 5 of the FTC Act. Discuss both the merits and demerits of the FTC's case, and suggest enforcement guidelines for future cases involving similar situations. Antitrust Final Examination page 2 of 6

3 PART II -56 True/False Questions (5 points each) Mark your answers on the Scantron sheets provided. The first three questions are based on the fact situation in Part I. 1. The FTC does not have subject matter jurisdiction over the YU-82 matter because Maplelite is a Canadian company and the FTC Act, unlike the Sherman Act, is limited to domestic activities. 2. Maplelite Corporation is allowed to set whatever terms it decides are commercially advantageous regarding the YU-82 patent. 3. Maplelite's charging of significantly higher royalties for use in the United States than in Canada is a potential violation of the Robinson-Patman Act. 4. Under the Capper-Volstead Act, a group of cattle ranchers can form a cooperative sales association without violating the antitrust laws. 5. A New Jersey insurance company doing mail order business in New Hamsphire could be subject to the federal antitrust laws. 6. It is illegal for a group of horizontal competitors to agree to product or operational standards. 7. Resale price maintenance can have both pro-competitive and anti-competitive effects. 8. Companies prefer, ceterus parabus, to face a high elasticity of demand. Price fixing is legal if it occurs in a market that is unconcentrated and has low barriers to entry. 10. Any bad conduct that supports the offense of monopolization will also support the offense of attempt to monopolize. 1t. Any bad conduct that supports the offense of attempted monopolization will also support the offense of monopolization. 12. It is illegal under Sherman 2 to have monopoly power in a relevant market. 13. In the Jefferson Parish Hospital v. Hyde case (doctors denied access to a New Orleans area hospital) a slim majority held that tying arrangements can continue to be judged under the per se role. 14. A manufacturer can avoid many of the risks of the per se rule against resale price maintenance by formulating its dealer relationships as bona fide consignments rather than sales. 15. Both at common law and under the antitrust laws a firm generally has the right to deal or to refuse to deal with whomever it pleases. Antitrust Final Examination page 3 of 6

4 16. Although often characterized as per se illegal, most group boycotts or concerted refusals to deal are evaluated under the rule of reason. 17. Group boycotts are legal if they are undertaken in order to prevent free riding 18. A refusal to deal by the monopolist is usually illegal under Sherman All mergers require that notification be made to the appropriate antitrust agencies of the federal government. 20. Asset acquisitions are not covered by 7 of the Clayton Act. 21. A horizontal merger involves two firms that either manufacture the same product, or which sell their products in the same geographic area. 22. The absence of any price discrimination in a market may suggest a rigid price structure resulting from tacit or express collusion. 23. The Robinson-Patman Act covers the services of lawyers and doctors. 24. A merger between two actual competitors in a market that has eight potential entrants is more likely to be condemned than the same merger occuring in a market that has only two potential entrants. 25. 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. 26. Budd and Judd are competitive software game developers for Macintosh computers who operate solely within the State of New Hampshire. If the two agree to charge the same price for their game software, their actions cannot be challenged under the federal antitrust laws. 27. Post-acquisition evidence that is subject to manipulation by the party seeking to use it is entitled to little or no weight in an antitrust proceeding. 28. The Hart-Scott-Rodino Antitrust Improvements Act requires that certain proposed acquisitions of voting stock, but not acquisitions of assets, be reported to the Federal Trade Commission and the Department of Justice prior to consummation. 29. 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. 30. A violation of 7 of Clayton Act can result in criminal sanctions. 31. In order to establish a violation of section 2, the defendant must be shown to have acquired or maintained its monopoly power by predatory or coercive conduct. Antitrust Final Examination page 4 of 6

5 32. Although the wording of Sherman Act I would seem to prohibit every combination in restraint of trade, the courts have read the statute as condemning only unreasonable restraints. 33. A manufacturers' trade association of that circulates among its members a monthly "sales sheet" that details price data on sales by each member during the preceding month as well as the identiy of the customers is likely to lose a Sherman l lawsuit challenging the practice. 34. Although a manufacturer is prohibited from setting minimum retail prices for its product, it can legally establish maximum prices in order to limit a retailer's power to charge consumers too much for the product. 35 If No-Name Dairy sells chocolate ice cream under the "No-Name" brand for 750 per quart and the same ice cream under the "Premier" brand for $1.05 per quart there will possibly be a Robinson-Patman violation. 36. 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. 37. A manufacturer's termination of a discount retailer, in air effort to stabilize resale prices, is illegal per se. 38. If a manufacturer sells its products below average variable costs the burden is on a challenging plaintiff to prove with clear and convincing evidence that the manufacturer's pricing was predatory. 39. Established manufacturers may use non-price vertical restrictions to induce retailers to engage in promotional activities or to provide service and repair facilities. 40. In order to successfully challenge a group boycott there needs to be an absolute refusal to deal with the target company or individual, and that refusal has to have caused harm to competition. 41. A prima facie case for the requisite anti-competitive effect is established when a merger results in a firm that controls an undue percentage share of the relevant market, and causes a significant increase in concentration in that market. 42. Companies can freely exchange information about production without antitrust consequences, so long as no price information is involved. 43. The Colgate doctrine permits a company to set terms it wants to use with its distributors that would violate the antitrust laws if taken collectively. 44. The U.S. antitrust laws apply only to activity that occurs in the United States. Antitmst Final Examination page 5 of 6

6 45. In assessing a tying arrangement federal antitrust enforcement agencies will presume that a patent, copyright, or trade secret necessarily confers market power upon its owner. 46. A merger in an industry that has high barriers to entry is of less competitive concern than a similar merger in an industry with low barriers to entry. 47. The Supreme Court has recently decided that per se analysis is inappropriate for group boycott cases. 48. Acquisition of an exclusive license in intellectual property could trigger antitrust scrutiny under Clayton 7 if the transaction limits are met. 49. Possession of monopoly power in relevant market and use of that power to foreclose competition, to gain a competitive advantage or to destroy a competitor is required for monopolization violation under Sherman Not-for-profit organizations are exempt from the antitrust laws. 51. In assessing a tying arrangement federal antitrust enforcement agencies will presume that a patent, copyright, or trade secret necessarily confers market power upon its owner. 52. The "cellophane fallacy" refers to the misidentification of the relevant market and incorrect use of the theory of cross-elasticity of demand. 53. The Federal Trade Commission has jurisdiction to handle criminal violations of the antitrust laws. 54. Companies can freely exchange information about production without antitrust consequences, so long as no price information is involved. 55. Proof of market power is required as a predicate to a successful challenge to a price fixing scheme under Sherman The Capillary Company manufactures small tubing that is used in certain medical devices. The general counsel of Capillary Company has become concerned that certain employees of the company may have exposed the company to antitrust liability for certain activities undertaken at a recent trade show. For the federal antitrust laws to apply the potentially illegal activity must adversely affect the price of goods sold in interstate commerce. Antitrust Final Examination 2006-page 6 of 6