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Price fixing is exclusively defined as an agreement between competitors to set a minimum price for their products.
Answer: False
Price fixing encompasses a broader range of anticompetitive agreements beyond merely setting a minimum price, including agreements to buy or sell exclusively at a fixed price, or to control market conditions. The definition is not limited solely to minimum price agreements between competitors.
The primary goal of price fixing is typically to maximize profits for the participating sellers by setting prices higher than the market rate.
Answer: True
As stated in the source material, the principal objective of price fixing agreements is frequently to elevate prices above competitive levels, thereby enhancing the profitability of the involved entities.
Price fixing can occur even without an explicit agreement, as long as competitors' prices are similar.
Answer: False
Price fixing requires a conspiracy or agreement between parties. While similar prices may exist due to market forces, they do not constitute price fixing in the absence of an explicit or implicit agreement.
Which of the following best defines price fixing according to the provided text?
Answer: An anticompetitive agreement between market participants on the same side to fix prices or control market conditions.
The source defines price fixing as an anticompetitive agreement among parties on the same side of the market concerning prices or market conditions, distinguishing it from vertical agreements or unilateral actions.
What is the typical primary intention behind price fixing agreements?
Answer: To push prices as high as possible to increase profits for sellers.
The primary objective of price fixing is generally to elevate prices beyond competitive levels, thereby maximizing profits for the colluding sellers.
Which of the following situations is NOT necessarily indicative of price fixing?
Answer: Similar prices for agricultural products like wheat due to market factors.
While agreements on trade-in allowances or minimum prices can constitute price fixing, similar prices for undifferentiated commodities like wheat may arise naturally from market conditions, not necessarily from collusion.
Which of the following is an example of price fixing listed in the source?
Answer: Competitors agreeing on a uniform method for calculating trade-in allowances.
Agreements between competitors to standardize practices like trade-in allowances are cited as specific examples of price fixing activities.
Neo-classical economics views price fixing as an efficient market mechanism.
Answer: False
Neo-classical economic theory posits that price fixing is inefficient, leading to a transfer of consumer surplus to producers and creating a deadweight loss, thereby reducing overall economic welfare.
Price fixing primarily harms competitors by driving down their prices.
Answer: False
Price fixing typically harms consumers and non-colluding competitors by artificially inflating prices, rather than driving down prices among the colluding parties.
Economic liberals generally advocate for strong government intervention to prevent all forms of price fixing.
Answer: False
Economic liberals often argue against extensive government intervention in pricing, viewing price fixing as a voluntary agreement and suggesting that legislation can sometimes lead to unintended negative consequences like monopolies.
Market power refers to a firm's ability to raise prices above marginal cost, and price fixing is a strategy to exercise this power collectively.
Answer: True
Market power is indeed the capacity to price above marginal cost, and price fixing represents a method by which multiple firms can collectively exert such power to maintain elevated prices.
The 'SSNIP test' helps define relevant markets by assessing consumer response to price increases.
Answer: True
The SSNIP (Small but Significant and Non-transitory Increase in Price) test is a methodology used in competition law to delineate market boundaries based on consumer substitutability in response to hypothetical price changes.
Economic liberals argue that legislation against price fixing can sometimes lead to monopolies.
Answer: True
A perspective within economic liberalism suggests that stringent legislation against price fixing might inadvertently foster monopolies by disadvantaging smaller producers.
According to neo-classical economics, what are the consequences of price fixing?
Answer: A transfer of consumer surplus to producers and a deadweight loss.
Neo-classical economics identifies price fixing as detrimental, leading to a reduction in consumer surplus and an overall deadweight loss, signifying diminished economic efficiency.
How can price fixing negatively impact small businesses?
Answer: By increasing the cost of goods and services they rely on from suppliers.
Small businesses can be adversely affected by price fixing when it leads to artificially inflated costs for essential goods and services procured from suppliers.
What is the economic liberal view on price fixing legislation?
Answer: It can sometimes lead to monopolies by harming smaller producers.
Some economic liberals contend that legislation against price fixing may inadvertently create monopolies by disadvantaging smaller market participants, potentially leading to higher consumer prices.
What is the definition of 'market power' as mentioned in the context of price fixing?
Answer: A firm's ability to profitably raise the market price of a good or service over its marginal cost.
Market power is defined as a firm's capacity to sustain prices above its marginal costs, a condition often leveraged or created through collective action like price fixing.
Horizontal price fixing, where competitors agree on prices, is treated as a per se violation under U.S. antitrust law.
Answer: True
Under the Sherman Act, horizontal price fixing is considered a per se violation, meaning it is automatically deemed illegal without requiring proof of actual harm to competition or consumers.
Vertical price fixing, involving a manufacturer dictating resale prices, is still considered a per se violation in the U.S. following the *State Oil Co. v. Khan* Supreme Court case.
Answer: False
The Supreme Court ruling in *State Oil Co. v. Khan* established that vertical price fixing is no longer a per se violation and is instead subject to the rule of reason, requiring analysis of its actual competitive effects.
Private parties harmed by price fixing in the U.S. can only recover actual damages, not triple damages.
Answer: False
Antitrust laws in the U.S. permit private parties injured by price fixing to seek recovery of not only actual damages but also treble damages (three times the amount of actual damages), potentially along with attorneys' fees.
The exchange of pricing information between competitors is always legal in the U.S. as long as no explicit agreement is made.
Answer: False
The exchange of pricing information among competitors can be illegal under U.S. antitrust laws, particularly if it facilitates price fixing or influences pricing decisions, even without an explicit agreement.
In the 1990s, the U.S. Department of Justice allowed airlines to share pricing data freely to improve market transparency.
Answer: False
During the 1990s, the U.S. Department of Justice actively prevented airlines from sharing pricing data prematurely, aiming to curb potential price-fixing activities and maintain market transparency through independent pricing.
Regulatory agencies like the FTC and DOJ are responsible for enforcing antitrust laws against price fixing.
Answer: True
The U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) are primary federal agencies tasked with investigating and enforcing antitrust laws, including those pertaining to price fixing.
In the U.S., the Federal Trade Commission (FTC) handles criminal prosecutions for price fixing under the Sherman Act.
Answer: False
Criminal prosecutions for price fixing under the Sherman Act in the U.S. are primarily handled by the Department of Justice (DOJ), while the FTC typically handles civil antitrust enforcement.
The U.S. Department of Justice took no action against airlines sharing pricing data in the 1990s.
Answer: False
The U.S. Department of Justice actively intervened in the 1990s to prevent airlines from sharing pricing data, thereby curbing potential price-fixing activities.
In the United States, which agency is responsible for criminal prosecutions of price fixing?
Answer: The Department of Justice (DOJ)
The U.S. Department of Justice (DOJ) is the federal agency primarily responsible for initiating and conducting criminal prosecutions for antitrust violations, including price fixing.
What legal remedy can private parties pursue in the U.S. if they are harmed by price fixing?
Answer: Lawsuits seeking triple damages and potentially attorneys' fees.
Under U.S. antitrust law, private parties harmed by price fixing can file lawsuits to recover treble damages (three times their actual losses) and may also be entitled to recover legal costs.
Which of the following is considered a per se violation of the Sherman Act in the U.S. regarding price fixing?
Answer: Agreements between competitors on prices, discounts, or terms of sale (horizontal price fixing).
Horizontal price fixing, involving agreements among competitors on prices, is classified as a per se violation under the Sherman Act, signifying automatic illegality.
Which of the following actions did the U.S. Department of Justice take regarding airlines in the 1990s?
Answer: Prevented the sharing of pricing data to curb potential price fixing.
In the 1990s, the U.S. Department of Justice prohibited airlines from sharing pricing data prior to public release, aiming to prevent potential price-fixing collusion.
In the context of U.S. antitrust law, what does 'per se violation' mean for horizontal price fixing?
Answer: It is automatically considered illegal, regardless of market effects.
A 'per se violation' signifies that the act itself, such as horizontal price fixing, is inherently illegal under U.S. antitrust law, irrespective of its actual competitive impact or justification.
Price fixing is treated as a civil offense only under Canadian competition law.
Answer: False
Under Canada's Competition Act, price fixing is classified as an indictable criminal offense, not merely a civil one.
Australia prohibits price fixing under its Competition and Consumer Act 2010, administered by the ACCC.
Answer: True
Australia's Competition and Consumer Act 2010 explicitly prohibits price fixing, with enforcement responsibilities assigned to the Australian Competition & Consumer Commission (ACCC).
In the United Kingdom, all forms of price fixing are strictly prohibited without any exceptions.
Answer: False
While most forms of price fixing are prohibited in the UK, certain specific exceptions exist, such as in particular sectors like magazine distribution or motion pictures, where some price-fixing practices might be permissible under specific conditions.
OPEC, as an intergovernmental organization, has been successfully prosecuted under U.S. antitrust law for price fixing.
Answer: False
OPEC, being an intergovernmental organization rather than a private entity, is generally exempt from U.S. antitrust prosecution for its pricing actions.
Price fixing in the international airline industry is permitted due to a specific exemption related to IATA agreements.
Answer: True
Agreements on international airline ticket prices, facilitated through the International Air Transport Association (IATA), benefit from a specific exemption within antitrust law.
The Commerce Act 1986 in New Zealand prohibits price fixing and similar anti-competitive behaviors.
Answer: True
New Zealand's Commerce Act 1986 serves as the primary legislation prohibiting anti-competitive practices, including price fixing.
The Australian Competition & Consumer Commission (ACCC) enforces resale price maintenance provisions under Section 48 of the Competition and Consumer Act 2010.
Answer: True
The Australian Competition & Consumer Commission (ACCC) is indeed responsible for enforcing provisions against resale price maintenance, as outlined in Section 48 of the Competition and Consumer Act 2010.
Price fixing agreements between sovereign nations, like OPEC, are generally exempt from U.S. antitrust prosecution.
Answer: True
Agreements made by sovereign nations, such as those within OPEC, are typically considered outside the jurisdiction of U.S. antitrust laws due to their intergovernmental nature.
What specific practice is explicitly mentioned as a form of price fixing under Canada's Competition Act?
Answer: Bid rigging
Canada's Competition Act explicitly identifies bid rigging as a form of price fixing that is subject to criminal penalties.
How does the European Union encourage companies to report cartel activity, including price fixing?
Answer: Through a leniency program offering reductions or waivers of penalties for cooperation.
The European Union employs a leniency program designed to incentivize companies to report cartel activities by offering potential reductions or waivers of penalties in exchange for cooperation with authorities.
Why has OPEC not been successfully prosecuted under U.S. antitrust law for price fixing?
Answer: It is an intergovernmental organization, not a private entity.
OPEC's status as an organization of sovereign nations, rather than a private commercial entity, generally exempts it from U.S. antitrust jurisdiction.
The Net Book Agreement in the UK aimed to allow booksellers to offer discounts on new books.
Answer: False
The Net Book Agreement stipulated that new books must be sold at the recommended retail price, thereby preventing booksellers from offering discounts, primarily to protect smaller bookshops.
The CD price fixing case involved music companies artificially lowering prices to compete with discounters.
Answer: False
The CD price fixing scheme involved music companies artificially inflating prices, primarily through minimum advertised pricing agreements, to counteract price wars initiated by discounters.
Samsung was fined $300 million for its role in fixing the prices of DRAM chips.
Answer: True
In 2005, Samsung pleaded guilty to conspiring to fix DRAM chip prices and was subsequently fined $300 million by U.S. authorities.
The European Commission fined eight firms, mostly European companies, for operating an illegal price cartel for capacitors in 2018.
Answer: False
In 2018, the European Commission fined eight firms a total of €254 million for a capacitor price cartel, but the majority of these firms were primarily Japanese capacitor producers, not European ones.
In the French perfume collusion case, Sephora was fined €9.4 million.
Answer: True
As part of the 2006 French perfume price collusion settlement, Sephora, owned by LVMH, was indeed fined €9.4 million.
LG Display paid $400 million in criminal fines as part of the LCD panel price fixing settlement in the U.S.
Answer: True
LG Display was a significant participant in the LCD panel price fixing conspiracy and paid $400 million in criminal fines as part of the U.S. settlement.
The air cargo market price fixing schemes involved only a few major airlines and occurred recently.
Answer: False
The air cargo price fixing schemes involved numerous airlines (21 were implicated) and spanned a considerable period, with investigations and revelations occurring around 2005-2006, though the collusion began earlier.
StarKist was fined $100 million for its involvement in price fixing within the tuna industry.
Answer: True
StarKist faced a $100 million fine in 2020 for its participation in price fixing activities within the canned tuna market.
During the COVID-19 pandemic, companies like Pfizer and Moderna were investigated for price fixing their vaccines.
Answer: False
While vaccine pricing was a subject of discussion and concern during the pandemic, the provided information does not indicate that Pfizer and Moderna were investigated specifically for price fixing their vaccines.
Critics worry that RealPage's rent-setting algorithm may facilitate coordinated pricing strategies among landlords, potentially increasing rents.
Answer: True
Concerns have been raised that algorithms like RealPage's, used by landlords to set rents, could enable coordinated pricing strategies and contribute to rent inflation by limiting competition.
The U.S. Department of Justice prosecuted international price fixing conspiracies involving lysine and bulk vitamins.
Answer: True
The U.S. Department of Justice has indeed prosecuted international cartels involved in fixing prices for commodities such as lysine and bulk vitamins.
In the LCD panel price fixing case, Chunghwa Picture Tubes agreed to pay $585 million in criminal fines.
Answer: False
Chunghwa Picture Tubes was part of the LCD panel price fixing settlement, but the total criminal fines paid by it and other defendants (including LG Display and Sharp) amounted to $585 million. Chunghwa's individual fine was not $585 million.
The Net Book Agreement collapsed because major book chains began offering discounts.
Answer: True
The Net Book Agreement ultimately collapsed in 1991 when significant book retailers, such as Waterstones and Dillons, began to deviate from the agreement by offering discounts.
The CD price fixing settlement resulted in a $67.4 million fine and the distribution of $75.7 million worth of CDs.
Answer: True
The settlement for the CD price fixing case included a $67.4 million fine and the distribution of $75.7 million in CDs to public and non-profit organizations.
The European Commission fined Nippon Chemi-Con €98 million for participating in a capacitor price cartel.
Answer: True
Nippon Chemi-Con received the largest individual fine, amounting to €98 million, as part of the European Commission's total €254 million penalty against eight firms for capacitor price fixing.
Bumble Bee Foods was fined $25 million for price fixing in the tuna industry.
Answer: True
In 2017, Bumble Bee Foods was fined $25 million for its involvement in price fixing conspiracies related to the tuna market.
Which of the following is an example of a price fixing conspiracy prosecuted under U.S. antitrust laws?
Answer: Cartels controlling prices of lysine and bulk vitamins.
Conspiracies involving international cartels that fixed prices for commodities such as lysine and bulk vitamins have been prosecuted under U.S. antitrust laws.
What was the purpose of the Net Book Agreement in the UK?
Answer: To stipulate that new books be sold only at the recommended retail price, protecting smaller shops.
The Net Book Agreement was designed to maintain fixed prices for new books, thereby safeguarding the viability of smaller booksellers against price competition from larger retailers.
The CD price fixing scheme between 1995-2000 primarily involved which practice?
Answer: Setting minimum advertised prices to inflate CD prices.
The CD price fixing scheme primarily utilized minimum advertised pricing (MAP) agreements among music companies to artificially elevate compact disc prices.
In the DRAM chip price fixing conspiracy, which company pleaded guilty and was fined $300 million?
Answer: Samsung
Samsung pleaded guilty to conspiring to fix DRAM chip prices and was assessed a $300 million criminal fine by U.S. authorities.
Which group of companies was fined by the European Commission in 2018 for operating an illegal price cartel for capacitors?
Answer: Primarily Japanese capacitor producers.
The European Commission's 2018 fines for the capacitor cartel were primarily levied against Japanese companies, including Nippon Chemi-Con and Hitachi Chemical.
What was the outcome for LG Display in the U.S. LCD panel price fixing case?
Answer: It paid $400 million in criminal fines.
LG Display was a key defendant in the U.S. LCD panel price fixing case and agreed to pay $400 million in criminal fines.
The price fixing activities in the air cargo market led to significant penalties, including:
Answer: A $1.7 billion total fine imposed by the U.S. DOJ and prison terms for executives.
The U.S. Department of Justice imposed substantial penalties, totaling $1.7 billion in fines, and secured prison sentences for executives involved in the air cargo price fixing schemes.
Which former CEO was sentenced to jail time for involvement in price fixing in the tuna industry?
Answer: The CEO of Bumble Bee Foods.
Christopher Lischewski, the former CEO of Bumble Bee Foods, received a jail sentence and a fine for his role in the tuna industry price fixing conspiracy.
What is the concern surrounding RealPage's rent-setting algorithm?
Answer: It may facilitate coordinated pricing strategies, limiting competition among landlords.
Critics express concern that algorithms like RealPage's could enable landlords to coordinate rental pricing, thereby diminishing competition and potentially inflating rents.
What legal action did the French government take against 13 perfume brands and three vendors in 2006?
Answer: They were fined for price collusion between 1997 and 2000.
In 2006, the French government imposed fines on 13 perfume brands and three vendors for engaging in price collusion between 1997 and 2000.
A significantly lower bid from a new supplier compared to established corporate prices can be an indicator of prior collusion among existing suppliers.
Answer: True
A substantially lower bid from a new market entrant, relative to the prices previously offered by established firms, may suggest that the existing suppliers were engaged in collusion.
Resale price maintenance involves agreements between competitors on the same side of the market.
Answer: False
Resale price maintenance (RPM) typically involves agreements between entities at different levels of the supply chain (e.g., a manufacturer and a retailer), whereas price fixing usually refers to agreements between competitors on the same market level.
Bid rigging is a form of price fixing where participants agree to compete fiercely on price.
Answer: False
Bid rigging is a form of price fixing where participants agree *not* to compete or to predetermine who will win contracts, thereby eliminating genuine price competition among bidders.
Tacit collusion involves an explicit, written agreement between competitors on pricing strategies.
Answer: False
Tacit collusion refers to coordinated actions among competitors that occur *without* an explicit agreement, often through observation and independent adjustment of strategies.
High barriers to entry make it more difficult for competitors to engage in price fixing.
Answer: False
High barriers to entry can actually facilitate price fixing by reducing the threat of new competitors entering the market and disrupting collusive pricing arrangements.
Predatory pricing involves competitors agreeing to set prices high to maximize mutual profit.
Answer: False
Predatory pricing is a strategy where a dominant firm sets prices very low to eliminate competition, unlike price fixing which involves agreements to set prices high for mutual benefit.
Market concentration refers to the degree to which a few firms dominate a market, which can facilitate price fixing.
Answer: True
High market concentration, characterized by dominance of a few firms, increases the potential for and effectiveness of price fixing due to easier coordination among market participants.
Which of the following is a potential indicator of price fixing during a bidding process?
Answer: A new supplier's price dropping significantly after bidding, which could suggest they forced previously colluding suppliers to compete.
A substantial decrease in a new supplier's bid after an initial offering might indicate that they are disrupting previously collusive pricing among established competitors.
What distinguishes price fixing from resale price maintenance (RPM)?
Answer: Price fixing is typically horizontal (competitors), while RPM is typically vertical (supplier-reseller).
Price fixing generally refers to horizontal agreements among competitors, whereas resale price maintenance involves vertical agreements between suppliers and resellers regarding the price of goods.
How do high 'barriers to entry' relate to price fixing?
Answer: They make it harder for new companies to enter, thus facilitating collusion among existing firms.
High barriers to entry can foster price fixing by limiting the threat of new competitors entering the market and undermining collusive pricing arrangements.
What is 'tacit collusion'?
Answer: Competitors coordinating actions, like pricing, without a formal agreement.
Tacit collusion describes a situation where firms in a market coordinate their behavior, such as pricing, without entering into an explicit agreement, often through mutual observation and response.
Bid rigging is specifically a form of price fixing where participants agree to:
Answer: Not compete or take turns winning contracts.
Bid rigging involves an agreement among bidders to refrain from genuine competition, often by predetermining contract winners or allocating bids, thereby ensuring inflated prices.