Which act served as an amendment to the Clayton Act?
While it remains fully in force today, the Clayton Antitrust Act was amended in 1936 by the Robinson-Patman Act and in 1950 by the Celler-Kefauver Act. The Robinson-Patman Act strengthened laws banning price discrimination among customers.
Which of the following is the amendment to the Clayton Act that prohibited mergers through the acquisition of a firm’s physical assets of the merger would lessen competition?
A 1936 amendment to the Clayton Act that strengthens the Clayton Act against price discrimination. A 1950 amendment to the Clayton Act that prohibits one firm from merging with a competitor by purchasing its physical assets if the effect is to substantially lessen competition.
What is the purpose of the Clayton Act?
The Clayton Antitrust Act, passed in 1914, continues to regulate U.S. business practices today. Intended to strengthen earlier antitrust legislation, the act prohibits anticompetitive mergers, predatory and discriminatory pricing, and other forms of unethical corporate behavior.
What led to the Clayton Antitrust Act?
The US Congress passed the bill in June 1914, and President Woodrow Wilson later signed it into law. The Clayton Antitrust Act sought to address the weaknesses in the Sherman Act by expanding the list of prohibited business practices that would prevent a level playing field for all businesses.
What is price fixing and why is it against the law?
Price fixing is difficult to detect when the product or service is identical, such as corn and air cargo shipping. Price fixing is illegal because it fosters unfair competition and imposes high prices on consumers. Horizontal and vertical price fixing are the two most common types.
What are some examples of price fixing?
This involves an agreement by competitors to set a minimum or maximum price for their products. For example, electronics retail companies may collectively fix the price of televisions by setting a price premium or discount.
What would cause a cartel to fall apart?
Many collusive agreements between firms in an oligopoly eventually collapse either because of exposure by the competition authorities, the impact of a recession or perhaps because of a breakdown in co-operation between firms and cheating on output agreements.
Why is there a strong incentive to cheat on a cartel agreement?
Game theory indicates that cartels are inherently unstable. Each individual member has an incentive to cheat in order to make higher profits in the short run. Cheating may lead to the collapse of a cartel. With the collapse, firms would revert to competing, which would lead to decreased profits.
What are the 2 biggest reasons we don’t see cartels in the United States?
The first major reason is that cartels are illegal in the U.S. The second major reason is that cartels set prices above marginal cost, which creates an incentive for each firm to cheat on the cartel agreement in order to make more profit. This incentive to cheat tends to cause cartels to fall apart.
How does the number of firms in a cartel affect the probability that a cartel will be able to successfully maintain a high price?
Answer: The more firms that are involved in the cartel, the lower the likelihood that the cartel will be able to maintain a high price. Essentially, the larger the number of firms, the greater the probability that someone will cheat!