Antitrust Laws

Cooperation among oligopolies runs counter to the public interest because it leads to underproduction and high prices. In an effort to bring resource allocation closer to the social optimum, public officials attempt to force oligopolies to compete instead of cooperating.

Consider the following scenario: Suppose that the presidents of two auto manufacturing companies exchange text messages in which they discuss jointly raising prices on their new lines of hybrid SUVs.

This illegal communication would violate which of the following laws?

a) The Sherman Antitrust Act of 1890

b) The Celler-Kefauver Act of 1950

c) The Robinson-Patman Act of 1936

d) The Clayton Act of 1914

d) The Clayton Act of 1914.

Explanation:

The antitrust laws are federal laws that check and prohibit unlawful or illegal activities by business firms. It comprise of three major antitrust laws namely the Sherman Antitrust Act, the Federal Trade Commission Act and the Clayton Act. The Clayton Act of 1914 incorporated in the antitrust laws provide restrictions on unethical activities which may be practiced by businesses. It prohibits price-fixing and control of market by a group of interested individuals. One of the most notable provision of this act is that it prohibits arranged dealings, like price fixing, within two or more bus business firms or individuals. This is done in order to ensure that monopoly is not practiced in the market.