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BUS 404 EXAM WITH COMPLETE SOLUTION GRADED A+
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BUS 404 EXAM WITH COMPLETE SOLUTION GRADED A+Clayton Act - Section 7 - Answer
Prohibits mergers which may substantially lessen competition. Policed mostly by FTC
and Justice Dept.
Applies to horizontal, vertical and conglomerate mergers.
Hart-Scott-Rodino Act - Answer
1976- AKA The Clayton Act, Section 7A.
Mergers or acquisitions involving large entities are subject to a waiting period before
the transaction may be consummated. It provides antitrust agencies sufficient info and
time to stop it.
Large companies must file notice with the FTC and the Justice Department 30 days
before a merger or 15 days before a cash tender offer, and file substantial amounts of
industry and economic data as well. Gives the FTC authority, through rulemaking, to
exempt classes of transactions that are not likely to violate the antitrust laws.
Pre-Merger Notification - Answer Hart-Scott-Rodino Act (1976)
To not incur cost of "unscrambling" already consummated merger
Filings required if transaction value and party size exceed thresholds.
Filing to FTC and Justice Dept.
Either agency may file suit for injunctive relief to block merger, if necessary.
Horizontal Mergers - Acquisition Between Competitors
Most Likely to be deemed harmful
Market share analysis
-Product market
-Includes close substitutes
-Geographic market
, -How far will customer travel to get product or service.
U.S. V. Philadelphia National Bank - Answer Merger creates firm of "undue size"
30% is definitely undue.
Merger significantly increases concentration of firms in concentrated market
Based on four-firm (or two-firm) concentration ratio
Herfindahl-Herschman Index (HHI) - Answer A statistic based on the market shares of all
competitors in the relevant market. Calculated by squaring the market shares of all
relevant firms and summing those squares.
-Postmerger HHI of under 100 are unlikely to be challenged
-Post merger HHI of 1000-1800 are not likely to be challenged when the post merger HHI
exceeds pre merger HHI by less the 100 points.
- If increase exceeds 100 points then it will be examined closely
- If post merger HHI exceeds 1800, the increase only needs to be 50 points to be
analyzed.
Sherman Act - Answer Provides the foundation for antitrust policy and prohibits
contracts, combinations, and conspiracies in restraint of trade. Further, it provides that
monopolizing is illegal.
Clayton Act - Answer Addresses several practices including price discrimination, but its
major thrust is in its merger clause prohibiting mergers that may substantially lessen
competition.
FTC Act-Answer Empowers the Federal Trade Commission to prohibit unfair methods of
competition.
Small Business Philosophy to Anti-Trust - Answer -Antitrust arose to protect small farms
and businesses from the powerful industrial enterprises. Would Ensure a vital system of
small producers and sellers.
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