CPP Regulatory Framework & Compliance 2 — Questions and Answers
Question 1: Under the Robinson-Patman Act, which defense allows a seller to match a competitor's lower price to a specific buyer?
- Cost justification defense
- Meeting competition defense (Correct answer)
- Functional discount defense
- Changed conditions defense
Correct answer: Meeting competition defense
The meeting competition defense permits a seller to lower prices to a specific buyer in good faith to match a competitor's equally low price.
Question 2: Which federal agency has primary enforcement authority over deceptive pricing practices under the FTC Act?
- Department of Justice
- Federal Trade Commission (Correct answer)
- Consumer Financial Protection Bureau
- Securities and Exchange Commission
Correct answer: Federal Trade Commission
The Federal Trade Commission enforces Section 5 of the FTC Act, which prohibits unfair or deceptive acts including deceptive pricing.
Question 3: A company prices a product below its average variable cost in order to drive a rival out of the market. This is best described as:
- Volume discounting
- Predatory pricing (Correct answer)
- Price skimming
- Penetration pricing
Correct answer: Predatory pricing
Predatory pricing involves setting prices below cost with the intent to eliminate competition and later raise prices monopolistically.
Question 4: The Sherman Antitrust Act Section 1 prohibits which of the following pricing behaviors?
- Unilateral price increases
- Horizontal price fixing among competitors (Correct answer)
- Seasonal promotional discounts
- Cost-plus pricing contracts
Correct answer: Horizontal price fixing among competitors
Section 1 of the Sherman Act prohibits contracts, combinations, or conspiracies in restraint of trade, including agreements among competitors to fix prices.
Question 5: Under EU competition law, which article of the Treaty on the Functioning of the European Union (TFEU) addresses anticompetitive agreements including price fixing?
- Article 101 (Correct answer)
- Article 102
- Article 107
- Article 119
Correct answer: Article 101
Article 101 TFEU prohibits agreements between undertakings that restrict competition, including horizontal price-fixing arrangements.
Question 6: Which of the following is NOT a recognized exception under the Robinson-Patman Act that allows differential pricing?
- Cost justification
- Meeting competition
- Changing market conditions
- Brand differentiation (Correct answer)
Correct answer: Brand differentiation
Brand differentiation is not a statutory defense under Robinson-Patman; the recognized defenses are cost justification, meeting competition, and changed conditions.
Question 7: A supplier who charges different prices to two competing resellers for the same product may violate the Robinson-Patman Act only if the price difference:
- Exceeds 10% of the list price
- May substantially lessen competition or injure a competitor (Correct answer)
- Is not disclosed in writing
- Applies to products sold across state lines exclusively
Correct answer: May substantially lessen competition or injure a competitor
Robinson-Patman requires a showing that the price discrimination may substantially lessen competition or tend to create a monopoly.
CPP Regulatory Framework & Compliance 2
Under the Robinson-Patman Act, which defense allows a seller to match a competitor's lower price to a specific buyer?