Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:**Understanding Antitrust Authorities' Reactions**
**Considerations for Antitrust Cases:**
**a. A proposed merger of Ford and General Motors.**
- They would block this horizontal merger because it violates Section 7 of the Clayton Act.
- They would block this horizontal merger because it violates Section 1 of the Sherman Act.
- They would allow this horizontal merger unless both firms had very large market shares and the resultant merger would substantially lessen competition.
**b. Evidence of secret meetings by contractors to rig bids for highway construction projects.**
- They would allow this.
- They would charge these firms with price-fixing, which violates Section 7 of the Clayton Act.
- They would charge these firms with price-fixing, which violates Section 1 of the Sherman Act.
**c. A proposed merger of a large shoe manufacturer and a chain of retail shoe stores.**
- They would block this merger because it violates Section 7 of the Clayton Act.
- They would block this merger because it violates Section 1 of the Sherman Act.
- They would allow this vertical merger unless both firms had very large market shares and the resultant merger would substantially lessen competition.
Transcribed Image Text:### Antitrust and Merger Considerations
**c. A proposed merger of a large shoe manufacturer and a chain of retail shoe stores.**
- They would block this merger because it violates Section 7 of the Clayton Act.
- They would block this merger because it violates Section 1 of the Sherman Act.
- They would allow this vertical merger unless both firms had very large market shares and the resultant merger would substantially lessen competition.
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**d. A proposed merger of a small life-insurance company and a regional candy manufacturer.**
- They would allow this conglomerate merger.
- They would block this conglomerate merger because it violates Section 7 of the Clayton Act.
- They would block this conglomerate merger because it violates Section 1 of the Sherman Act.
---
**e. An automobile rental firm that charges higher rates for last-minute rentals than for rentals reserved weeks in advance.**
- They would not interfere with this price discrimination.
- They would block this price discrimination because it violates Section 7 of the Clayton Act.
- They would block this price discrimination because it violates Section 1 of the Sherman Act.
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