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Exam 3 (ch 7-9, part of 6)
(ch 7-9, part of 6)
64
Management
Undergraduate 2
03/24/2008

Additional Management Flashcards

 


 

Cards

Term
Executive Agency
Definition

Part of the executive branch

usually created by Executive Order

Department: president can hire and fire head

 

ex: Dept of Labor; head is Secretary of Labor; OSHA is an exec. agency within the Dept. of Labor 

Term
Independent Agency
Definition

Created by Congress

Boards and Commissions: Members appointed by President with advice and consent of Congress

Appointed for terms

Can only be removed with cause

Supposed to be non-political: usually cannot be overly dominated by one political party (bare majority only)

Congress controls money (and thus agency) 

Term
Powers of Administrative Agencies
Definition

Source: Power comes from Congress - delegated

Enabling statute creates agency and defines its purpose and gives power to agency

Administrative Procedures Act (APA) 1947: defines procedural rules and formalities for all federal agencies; rule book for administrative agencies 

Term
Types of powers of Admin. Agencies
Definition
Legislative (Rule Making) Power: Promulgation of rules and regulations; have force of congressional statutes; formal or informal
Term
Informal Legislative Rule of Admin Agency
Definition

Agency promulgates rule

Gives notice to public by printing in the Fed. Register

Public can send written comments for usually 30 days

Usually no hearing; agency can almost totally ignore public 

 

Informal procedure ok for procedural rules or interpretive rules 

Term
Formal Rules of Admin. Agency
Definition

Proposed rules are promulgated

Propposed rule notice is published in the fed. register (hearing dates included; 30+ days notice)

Formal trial-like hearing (oral evidence/testimony, introduce exhibits, long and drawn out 10+yrs)

Final draft published 

 

FOrmal procedures required for substantive rules 

Term
Enforcement power of Agencies
Definition

Main job of most agencies

Able to investigate and gather info

There are constitutional limits 

Term
Types of Investigatory Power
Definition

Requiring busn to self report and monitor (must report on regular basis and if certain events occur)

No 4th or 5th Amendment protection 

 

Agencies can't share info between one another

 

Administrative warrant only (not probable cause)

Open Field observation--no warrant 

 

subpoena power: orders person to appear, present testimony, or produce documents 

Term
Types of enforcement power
Definition

tests and inspections

processing applications and permits

negotiations

settlements

advisory opinions

threat to go public

fines 

Term
Adjudicatory Power
Definition

Hearing before an admin. law judge who is an employee of the agency

Process:

File complaint, violator notified of complaint, agency investigates, response, negotiation, dismiss complaint or take action, hearing before ALJ (usually no absolute right to an attorney, no jury, rules of evidence are relaxed), written opinion, appeal

Term
Craft v. McConoughy
Definition

Four grain merchants in Illinois entered agreement (contract) to fix prices

 

One of the merchants died, son refused to abide by the agreement

 

Other three sued him to make him follow contract

 

Illinois Supreme Court said: price fixing was illegal restraint of trade. They refused to enforce the agreement. 

Term
Interstate Commerce Commission
Definition
Created by the Interstate Commerce Act to regulate railroads
Term
Interstate Commerce Act
Definition
Created the ICC
Term
Sherman Antitrust Act of 1890
Definition

Section 1: "Every contract, combination in the for of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is hereby declared to be illegal." 

Term
Per Se Violation of Section 1
Definition

Automatic Violation

 

You are guilty/responsible with no defense available. 

Term
Rule of Reason Violoation of Section 1
Definition
Can propose a wide variety of justifications for your actions
Term
Section 2 of Sherman Act
Definition
"Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony."
Term
Legal Monopoly
Definition

Where through legal and fair means a company becomes the sole provider of a given good through superior products and doesn't subvert the benefits of market competition  and

 

The monoppoly refrains from maintaining its status through anti-competitive means and allows competitors to readily enter the market 

Term
Clayton antitrust act of 1914
Definition

Passed to supplement Sherman and fill in some gaps.

Specific and preventative

 

only have to prove significant probability of reducing competition under clayton.

 

Clayton is civil (lower burden of proof) 

Term
Price discrimination
Definition

Charging different prices to different buyers without justification

 

(Robinson-Patman Act of 1936) 

Term

Exclusionary practices

(Exclusive dealing) 

Definition

where one firm is given the exclusive right, to the exclusion of others, to buy, sell or trade another's product

 

this is legal up to a point 

Term
Tying Arrangements
Definition
Seller requires a buyer to purchase a "tied" product as a condition of purchasing the desired tying product
Term
Mergers
Definition

joining of two or more companies into one

 

Can substantially lessen competition or tend to create a monopoly, but not all mergers are monopolistic. 

Term
Federal Trade Commission Act 1914
Definition

Establishes the Federal Trade Commission (FTC) as an agency empowered to investigate and enforce antitrust law

 

Section 5: unfair methods of competition and Deceptive Acts or Practices in Commerce = any busn activity that may tend to create a monopoly by unfairly eliminating or excluding competitors from the marketplace 

Term
Enforcement of Sherman
Definition

Private parties (individs. or bsn) have right to sue alleged violators of antitrust law

 

Dept of Justice, antitrust division may bring criminal suit 

Term
Enforcement of Clayton
Definition

Private parties have right to sue alleged violators of antitrust law

 

FTC can bring civil suit 

Term
Civil and criminal penalties under Sherman
Definition

Criminal: felony

Individs up to 3 years in prison and/or $350k fine

 

Civil:

injunction; private-action (individuals can receive 3x their damages, attorney's fees, and court costs) 

Term
Civil penalties under Clayton
Definition

Dept. of Justice and private individs can bring suit, but it's usually the FTC who does

 

FTC can issue cease and desist orders to discontinue or modify business acts

Criminal sanctions follow if cease and desist is violated 

Term
Remedies available for antitrust law
Definition

restrain company or individs from certain conduct

force company to divest a subsidiary

use company assets to create competing companies

force to let other companies use patents, licenses

cancel or modify existing busn contracts

 

remedies only available if harm was the type that antitrust law is meant to prevent 

Term
Brunswick v. Pueblo Bowl-O-Mat (1977)
Definition

Brunswick bought out bowling alleys that were on the verge of bankruptcy and continued to operate them,

pueblo bowlomat sued claiming that if brunswick would have stayed out of the picture, they would have gotten increased busn,

court said this is NOT the type of case covered by antitrust laws

 

injuries must be caused by anticompetitive behaviors 

Term
Standard Oil Co. of NJ v. US (1911)
Definition

Std. Oil controlled 90% of production, shipping, refining, and selling of petroleum products

 

Lower court ruled to break up Std Oil into several competing companies.

 

Supreme Court bowed to Rockefeller and tried to give him a way out by establishing Rule of Reason 

Term
Horizontal Price Fixing
Definition

US v Trenton Potteries (1927)

 

Power to fix prices is power to eliminate competition.

 

Appalachian Coal Company v US

 

US v. Socony-Vacuum Oil Co 

Term
Vertical Price Fixing
Definition
When manufacturer tells buyer they can't sell the product below/above a certain price.
Term
Horizontal Exchange of Info
Definition

Illegal to share info secretly

Illegal to construct common price list

only legal to share info in an open manner as long as it is to enhance competition, create better products, and/or reduce waste 

Term
Horizontal Market Division
Definition

Division of market among competitors based on geographic or other terms

 

per se illegal 

Term
Vertical Market Restraints
Definition

Territorial restraints: manufacture tells retailer where they can sell product

 

Customer restraint: restrictions on who can sell to

 

 

Term
Horizontal Group boycotts
Definition

two competitors agree not to deal with other competitors on the same level of competition; purpose is to eliminate or discipline a competitor

 

per se illegal 

Term
Robinson-Patman Act 1936
Definition

Amends Clayton, section 2a to read:

 

"it shall be unlawful for any person engaged in commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them."

Term
Predatory Pricing
Definition

Sell low to drive out competition, then raise prices

 

Difficult to win these. Predatory or just competion? 

Term

Volume discount

 

(defense to price discrimination)

Definition
Example: buying 1 TV from a manufacture vs. buying 7,000. Is the consumer helped or hurt by the volume discounts?
Term

cost justification

 

(defense to price discrimination)

Definition

difference in transportation costs

 

difficult to prove: it is virtually an acct and economic impossibility to assign specific costs of production to individual products 

Term

changing conditions

 

(defense to price discrimination)

Definition

deterioration of perishable goods

obsolescence of seasonal goods

court ordered sale/judicial sale 

Term

meeting competition

 

(defense to price discrimination)

Definition

must be in good faith

 

seller can only meet, not beat, the competitor's price 

Term

functional discounts

 

(defense to price discrimination)

Definition

legal if the functional discount constitutes a reasonable reimbursement for the actual marketing functions and there is no injury to competition

 

Texaco v. Hasbrouck 1990 

Term
Tying arrangements (tie-in sale)
Definition
sale of one product conditioned upon required purchase of another product
Term
Exclusive-dealing contracts
Definition

contracts under which a seller stops a buyer from purchasing the seller's competitors' products

 

Prohibited under Section 3 of Clayton if the effect of the contract is to substantially lessen competition or tend to create a monopoly 

Term
Boycott
Definition

when a group (consumers, union members, retailers, suppliers, etc) conspires to prevent the carrying on of business or to harm a business

 

Often associated with price fixing schemes or other restraint of trade situations.

 

Usually per se illegal if group possesses market power and the boycott is intended to restrict or exclude a competitor.

 

Eastern States Retail Lumber Dealers Assn v. US 

Term
Horizontal merger
Definition
firms were competitors prior to merger
Term
vertical merger
Definition
combines two firms up and down the business chain
Term
market extension manager
Definition
merger between two firms in similar fields but not in the same exact field
Term
geographic market extension merger
Definition
company merges with another company that sells same product but in a totally different geographic region of the country on which they had no contact prior to merger
Term
product market extension merger
Definition
one company merges with another company that make similar product to the first company
Term
congolmerate merger (diversification merger)
Definition
merger of firms outside of the first three types which is normally the merger of two totally unrelated businesses
Term
When Mergers are allowed
Definition

Failing Firm Defense (created by courts): firm being acquired is unlikely to survive

 

Merger will enhance efficiency in market: will help consumers

 

Power-buyer defense: allowed because buyers still have upper business hand since remaining power buyers still have enough power to keep merged firm from having any control

 

lack of power industry: coal is consistently losing market share, so it won't make a difference 

Term
Natural Monopolies
Definition

Utility companies and state governments regulated by governmental commissions that set the prices for the consumer

 

public transport is regulated by several other agencies (ICC, DOT, FAA, FMC) 

Term
Individual Exceptions to Major Antitrust Law
Definition

-Labor Unions

-Agricultural Cooperatives or Associations: not for profit orgs that work to assist farmers, fisheries, fisheries cooperative marketing act of 1976

-State action: action by states that lead to and/or regulate monopolies

-Foreign trade: antitrust laws generall don't apply to US firms selling primarily to foreign consumers

-Baseball: US Supreme Court

-Political Action Committees (PACs) and Lobbying activities under Noerr-Pennington Doctrine 

Term
Norris-La Guardia Act of 1932
Definition

Outlawed "yellow dog" contracts

Mad it much more difficult for employers to obtain an injunction forcing their striking workers back to work, unless the strike is violent 

 

Didn't directly sanction union nor their activities 

Term
Wagner Act of 1935 (National Labor Relations Act - NLRA)
Definition

Pro-Labor

 

Specifically legalizes unions, specifically gives unions concerted activities, encouraged collective bargaining and employer collective action. "Magna Carta" of the American Labor Movement. 

 

Excludes all government employees, railroads and airlines (under Railway Labor Act), domestic servants, individuals employed by parents or spouse, supervisors (they're basically management), independent contractors 

Term
National Labor Relations Board (NLRB)
Definition

Created by NLRA

 

federal admin agency to administer labor laws

 

Appointed by president, confirmed by senate. Broad admin. powers. 

Term
Taft-Hartley Act 1947
Definition

Passed to get unions under control. Vetoed by Truman, overridden by congress. 

Term
Right to Work Law
Definition

Undermines unions.

 

Sothern and western states have them.

 

Means a worker does not have to join a union, but still gets the benefits of unionization. 

Term
Free Speech under Taft-Hartley and Wagner
Definition

Wagner: almost any speech/action by employer against unionization was considered an unfair labor practice

 

Taft-Hartley: restores free speech rights to employers to speak out against unions. Cannot threaten any reprisal for unionization nor make promises if employees don't unionize. 

Term
Landrum-Griffin Act of 1959
Definition

Regulates the internal affairs of american labor unions.

 

Financial affairs

Election of union oficers (intimidation and violence was used to keep people from running against officers) 

 

Unions are among the most highly regulated private organizations in the country. 

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