LEB Study Guide 3

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Wayne State College *

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MISC

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Law

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Jan 9, 2024

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Uploaded by JacksonRR2000

Legal Environment of Business Study Guide 3 Identify the types of horizontal restraints and vertical restraints under Sec. 1 of the Sherman Act. Prohibits agreements in restraint to trade. Horizontal: Agreements between competitors at the same level (retailer- retailer) Vertical: Agreements between parties at a different level (retailer- manufacturer) What is the difference between a per se rule and the rule of reason? Action is presumed anti-competitive while subject to the rule of reason is only illegal if the result is more ant-competitive tan pro-competitive What violations are subject to the per se analysis? To the rule of reason analysis? Horizontal price-fixing, horizontal market allocation, group boycotts are per se violations while an exchange of non-price information is subject to the rule of reason. When are tying arrangements illegal? Tying arrangements are when the buyer must buy another product to get the desired product (if the seller has a domination in the market, a unique product, or most buyers accept their tying arrangements it is subject to the per se rule. What are the elements of monopolizing under Sec. 2 of the Sherman Act? Defendant possesses monopoly power in the relevant market and the defendant acted wrongfully to acquire or maintain the power What market share is conclusive to be monopoly power? What market share is conclusive of no monopoly power? Greater than 70 percent market share What is conscious parallelism? What is the Noerr doctrine? Competitors may act together to influence the government What does the Robinson-Patman Act prohibit? What are the elements of price discrimination? Prohibits price discrimination A seller sells to two or more buyers At approximately the same time The goods are approximately the same The prices are different The affect is to lessen competition What are the differences between primary line, secondary line and tertiary line injury? What are the defenses to price discrimination? Primary line is an injury to a competitor Secondary is injury to a customer Tertiary line is injury to an indirect customer through a wholesaler

Defenses include volume discounts, changing conditions, and meeting the competition. What are the different types of mergers? Horizontal Mergers- Merger between competitors Vertical Mergers - Backward vertical (customer acquires a supplier) - Forward vertical (supplier acquires a customer) What is the Hart-Scott-Rodino Antitrust Improvement Act? Requires pre-merger notification to Justice Department if one party has more than 100 million dollars in assets or sales and the other party has more than 10 million dollars in assets or sales. What is the Herfindahl-Hirschman Index? How does it apply to horizontal mergers? Justice department guidelines Method to analyze the effects of a proposed merger and predicts whether the Justice Department will challenge the merger. Not binding in courts What are the theories used by the Justice Department to challenge proposed mergers? Merged company has too great a market share Challenge to vertical merger (merger closes out a market for a customer or supplier (foreclosure theory) Unfair Advantage Theory- Merger will give an unfair advantage over competitors Potential Competition Theory- Create a new product rather than acquire a product through a merger Potential Reciprocity Theory- Merger will trap another company between a customer and a supplier When will a court approve an anti-competitive merger ? Courts will approve some mergers under Failing Company- Merger is only way to save a company Smaller Company- Merger will actually increase the competition What is the Clayton Act's provision on interlocking directorates? No interlocking directorates- A director cannot serve on boards of competitors What is the Federal Trade Commission's role in regulating competition? What are trade practice rules? Promotes competition by insuring it is fair Protects consumer from unfair competition The agency issues trade practice rules What is bait and switch advertising? The action of advertising goods which are an apparent bargain, with the intention of substituting inferior or more expensive goods What are the exemptions to the antitrust laws? What areas are regulated by the FDA?

Regulates the testing, manufacturing, and sale of Food Drugs (medicines) Medical devices Cosmetics Tobacco Products What is the Kefauver Amendment? Seller of drug must show Safety Efficacy (does what it reports to do) Proper instructions for use What are the duties of the Consumer Product Safety Commission? Must disclose ingredients Must provide warnings of hazard What products are not regulated by the CPSC? Automobiles, trucks, motorcycles Food and drugs What is product liability? How is defective defined? Consumer product safety commission State tort remedy Imposes strict liability on sellers who Sell a product in a defective condition Which is unreasonably dangerous Injuries to the user Not based upon fault Good quality control and lack of negligence is not a defense What is meant by strict liability? Liability which does not depend on actual negligence or intent to harm What are the common defenses to product liability? Improper use Alteration of the product Assumption of risk Statute of repose What areas are regulated by the Federal Trade Commission? Prohibits unfair and deceptive acts or practices affecting commerce Misrepresentation or omission of fact that is likely to mislead to a reasonable person and is material What are the different types of warranties that are given? Express warranties Written warranties Description of the goods Samples and models Pictures Implied warranties

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Implied warranty of merchantability Implied warranty of fitness for a particular purpose Disclaimer of implied warranties How can an express warranty arise? Written warranties Description of the goods Samples and models Pictures What is the implied warranty of merchantability? The goods are fit for the ordinary purposes for which these goods are used The goods would pass without objection in the trade What is the implied warranty of fitness for a particular purpose? The buyer relied upon the seller to select appropriate goods What is the difference between a full and a limited warranty under the Magnusson-Moss Warranty Act? Full Warranty Must replace after a reasonable repair attempt(s) Cannot disclaim implied warranties Must disclose any limit on consequential damages Limited Warranty Anything that is not a full warranty What are the significant provisions of the Truth in Lending Act? Requires disclosure in consumer lending Regulation Z- standardized lending practices Must disclose finance charge Must disclose annual percentage rate Gives consumers a 3 day cooling off period on debt secured by their home home No unsolicited credit cards may be issued Limits liability to 50 dollars for lost or stolen credit cards Gives consumer the right to withhold payment to credit card issuer if there is a dispute involving a faulty product What types of discrimination are prohibited by the Equal Credit Opportunity Act? What is meant by redlining? Prohibits discrimination in the extension of credit based upon: race, color, national origin, religion, sex/marital status, age, receipt of public assistance Prohibits redlining: Refusing to lend to a certain geographical area What types of questions cannot be asked by lenders? What sources of income must be considered? Marital status (unless a joint application), child-bearing plans, spousal income (unless a joint application) What are the significant provisions of the Fair Credit Reporting and the Fair Credit Bill Acts? What may a consumer do if information in a credit report is false?

Deals with errors on credit billing Debtors must notify the creditor in writing within 60 days Creditor must complete investigation within 2 billing cycles or 90 days whichever is less Creditor must notify the debtor in writing of its finding Creditor cannot report it to a credit reporting agency for 10 days and report it as disputed What legislation addresses identity theft by allowing the consumer to put a fraud alert on their account? Fair and Accurate Credit Transaction Act created the national fraud alert system For what purposes may a credit reporting agency disclose information about a consumer? Credit purposes Insurance purposes Employment purposes Government purposes What are the limitations on collection agencies under the Fair Debt Collection Practices Act? Prohibits harassment/abuse/intimidation by collection agencies Prohibits misrepresentations by collection agencies Third Party Rule- Third party can only be contacted once to a locate the debtor Collector cannot contact the debtor: Before 8:00am and after 9:00pm, at work if the employer objects, if the debtor is represented by an attorney, if the debtor gives written notice that s/he does not wish to be contacted again What are the major provisions of the CARD Act? Credit card rate increases can only apply to new transactions No universal default (raising rates because the consumer defaulted on other bills Payments cannot be due earlier than 21 days after bill is mailed Cut-off times on due dates before 5:00pm are unreasonable Payments must apply to the highest interest rate balances first No-over-the-limit fees because of holds on the account What is universal default? Raising rates because the consumer defaulted on other bills What is required of federal agencies under the National Environmental Policy Act? Requires federal agencies to assess every federal project for its environmental impact Requires the drafting of an environmental impact statement before funding What are the significant provisions of the Clean Air Act? What air pollutants are regulated under the Act? Regulates both stationary and mobile sources

Stationary sources (factories) What are the significant provisions of the Clean Water Act? Sources of water pollution (ditches pipes, canals, runoff) What are the rules in relation to wetlands? What is the difference between point sources and nonpoint sources of pollution? Point sources (waterway pollution) are ditches, pipes, canals while nonpoint sources (groundwater pollution) are runoff from industrial, construction, and agricultural activities. What are the significant provisions of the Toxic Substance Control Act? EPA is authorized to assemble list of toxic chemicals If a manufacturer intends to introduce a new chemical or recommend a new use for an existing chemical, it must give notice to the EPA EPA requires safety testing EPA can limit or prohibit sale of chemical EPA can require special labeling What are the significant provisions of the Resource Conservation and Recovery Act? What is a manifest? Persons disposing of hazardous waste must be licensed by the EPA Underground storage facilities must be licensed by the EPA A manifest is required to track the disposal of hazardous waste What are the significant provisions of the Comprehensive Environmental Response, Compensation, and Liability Act? (Superfund) Applied to abandoned hazardous waste dumps Clean-up funded in part by a suttax on the oil and gas and chemical industries Is CERCLA based upon fault? Who may be liable? Strict liability for cleanup for Polluter Transporter Current owner Owner at the time of illegal disposal Lenders with mortgages on the property What are the significant provisions of the Endangered Species Act? Most stringent form of environmental protection Interior Department has the authority to designate a species as either “threatened” or “endangered” Once identified the EPA designates “critical habitat” What is the Safe Drinking Water Act? Nonpoint sources are regulated EPA establishes minimum water quality standards Facilities providing public drinking water mut install the “Best available control” technology Prohibits lead in drinking water pipes

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Requires notice to a community if not in compliance What is the Oil Pollution Act? Enacted in response the Exxon Valdez spill Makes oil companies strictly liable for clean-up of oil spills Tax on oil freighters to fund the Spill Liability Fund Requires double hulls for oil tankers What law, if any, governs climate change? EPA proposed regulations limiting carbon dioxide emissions from power plants (Clean Power Plan) was rejected by the Trump Administration What is the Kyoto Protocal? Did the Senate ratify the Protocal? Kyoto Protocol is the agreement proposed by the UN Convention on Climate Change with a goal to reduce emissions of greenhouse gases by 5% of 1990 levels (not reached). Senate did not ratify What is cap and trade? Allowable levels of emissions are determined for a polluting source Credits are granted to the source if it reduces pollution below the allowable levels Credits can be sold to sources that exceed their levels Allowable levels are reduced each year Used in some EU countries What is the Paris Accord? Is the U.S. a party to the Accord? Agreement among 196 countries with a target to keep global warming under 2 degrees Celsius by 2100. Trump Administration withdrew the US in 2017

LEB Study Guide 3

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