Chapter 38 Legal Environment of Business

Term Definition
Antitrust laws Laws protecting commerce from unlawful restraints and anticompetitive practices.
Restraints of Trade Agreements between or among firms that have the effect of reducing competition in the marketplace.
Business Trusts Unincorporated organizations with limited liability
Sherman Antitrust Act An Act to protect trade and Commerce against unlawful restraints and monopolies (1890)
Monopoly A market in which there is a single seller or a very limited number of sellers
Monopoly Power The ability of a monopoly to dictate what takes place in a given market
Market Power The power of a firm to control the market price of its product. A monopoly has the greatest degree of market power.
Per se violations A restraint of trade that is so anticompetitive that it is deemed inherently (per se) illegal
Rule of reason A test used to determine whether an anticompetitive agreement constitutes a reasonable restraint on trade. Courts consider such factors as the purpose of the agreement, its effect on competition, and whether less restrictive means could have been used.
Horizontal restraint Any agreement that restrains competition between rival firms competing in the same market.
Price-fixing agreement An agreement between competitors to fix the prices of products or services at a certain level.
Group boycott An agreement by two or more sellers to refuse to deal with a particular person or firm.
Concentrated Industry An industry in which a small number of firms control a large percentage of market sales.
Vertical restraint A restraint of trade created by an agreement between firms at different levels in the manufacturing and distribution process
Vertically integrated firm A firm that carries out two or more functional phases (manufacturing, distribution, and retailing, for example) of the chain of production.
Resale price maintenance agreement An agreement between a manufacturer and a retailer in which the manufacturer specifies what the retail prices of its products must be.
Predatory Pricing The pricing of a product below cost with the intent to drive competitors out of the market
Monopolization The possession of monopoly power in the relevant market and the willful acquisition or maintenance of that power, as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.

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