Asked by ashish adhikari on May 28, 2024
Verified
Edibles Inc. and Food Stuff Corporation are competitors. Each firm has capital, surplus, and undivided profits in excess of $40 million and competitive sales of more than $5 million. Gina and Hal serve as directors on both firms' boards. Under the Clayton Act's restriction concerning interlocking directorates, Gina and Hal are
A) liable for failing to comply.
B) not liable because the firms are likely to continue to compete.
C) not liable because the firms' officers conduct the competitive activities.
D) not liable because the firms' shareholders can affect company policies.
Clayton Act
A U.S. law enacted in 1914 aimed at promoting competition and preventing monopolies by addressing specific practices not covered by the Sherman Antitrust Act.
Interlocking Directorates
The practice of having the same individuals serve on the boards of directors of multiple, often competing, companies.
Competitive Sales
Sales activities that occur in a market where multiple sellers are trying to attract the same buyers, emphasizing price, quality, and service to win business.
- Identify the legal consequences of interlocking directorates and their impact on competition.
Verified Answer
AB
Anjorin BabajideMay 29, 2024
Final Answer :
A
Explanation :
The Clayton Act prohibits interlocking directorates (where the same individuals serve as directors on the boards of competing companies) when the companies meet certain size thresholds, as is the case with Edibles Inc. and Food Stuff Corporation. Gina and Hal's roles on both boards violate this provision, making them liable.
Learning Objectives
- Identify the legal consequences of interlocking directorates and their impact on competition.