M11-14 Past Paper PDF

M11 P1 Agency An agency is: ​ An agent ​ Is authorized ​ To negotiate/enter into ​ Contracts ​ On behalf of a principal Once the contract is formed: ​ Only the principal and the third party are bound by it ​ The agent is not a party to the contrac...

M11 P1 Agency An agency is: ​ An agent ​ Is authorized ​ To negotiate/enter into ​ Contracts ​ On behalf of a principal Once the contract is formed: ​ Only the principal and the third party are bound by it ​ The agent is not a party to the contract Agency: ​ Allows businesses to expand ​ Allows principals to enter into contracts all over the world, at the same time Principals and agents: ​ Have an agency relationship, with special requirements ​ Could also have a contractual relationship, with special terms ​ Either or both could be breached Classification of agents: ​ Special--one specific act/project/contract ​ General: transact all affairs in connection with a particular kind of business Power of attorney: ​ Agent can enter into contracts on behalf of the principal ​ Must be in writing ​ For health care: doesn’t come into effect until principal is incompetent Agency coupled with an interest:  ​ Agent has a financial interest in the subject matter of the agency ​ Example: real estate agent sells property he is part owner of Employer-employee and independent contractor-client: ​ Could be different relationships than the agency relationship ​ Could be combined with the agency relationship Employer-employee: ​ Control is inherent in the relationship ​ Employer dictates clothes, performance, breaks, etc. ​ Because of this control: employers are liable for employees’ conduct while on the job Independent contractor-client: ​ Clients pay for a result and don’t care how that result is reached ​ Clients are not liable for independent contractors’ conduct while on the job Factors indicating employer-employee relationship: ​ Social security/income tax withholding ​ Worker’s compensation ​ Salary vs. fee/hourly Employees and independent contractors: ​ Can also be agents if authorized to negotiate/enter into contracts If an independent contractor is an agent: ​ The client may be liable for his/her conduct during the agency Requirements of agency: ​ Principal must be competent ​ Must be consensual by both parties Agents can be incompetent: ​ They are not bound by the contract negotiated ​ If they contract with the principal, they must be competent Creation of the agency: ​ Can be express or implied ​ Express: can be oral, unless power of attorney or equal dignities rule Implied agency: ​ Can only be created by the principal ​ Agency by estoppel, ratification and apparent authority Agency by estoppel: ​ Principal leads agent to believe there is an agency relationship ​ May have allowed agent to negotiate for principal in the past ​ May fail to object to their negotiations Effect of agency by estoppel: ​ Implied agency created ​ Principal bound by any contract negotiated Agency by ratification: ​ Principal accepts the benefit of the agency ​ Could be express acceptance of the contract ​ Could be implied acceptance-accepting a payment ​ Could be a failure to object to the contract Effect of agency by ratification: ​ Implied agency created Apparent authority: ​ Principal leads a third party to reasonably believe there is an agency ​ Example: principal terminates agent, but fails to take away the company credit card, company car, uniform, etc. This is called “emblems of authority” ​ Could also be: a secret limitation on an agent’s authority Effect of apparent authority: ​ Implied agency created ​ Agent may be liable to principal for negotiating a contract without authority The burden of proving the agency: ​ Is with the person seeking to benefit from the agency ​ Example: a third party seeking to bind a principal to a contract ​ Example: an agent seeking compensation Agent’s authority:  ​ Agents are not able to bind the principal to a contract with a 3rd party unless they have authority ​ 4 types: express, incidental, customary, apparent Express authority: ​ Principal tells agent to perform a specific act ​ Could be oral or in writing Incidental authority: ​ The authority the agent needs to carry out express authority ​ The details necessary to complete the main negotiation may not always be specified ​ Example: if told to purchase something on credit, and there is no account, the agent may open an account Customary authority: ​ The authority customarily possessed by agents in that industry/position ​ Example: the president of a company customarily has the authority to hire employees to work for the company Apparent authority: ​ Principal’s words or conduct lead a 3rd party to reasonably believe the agent has authority ​ Emblems of authority or secret limitation on authority Duty to ascertain extent of agent’s authority: ​ 3rd party must “reasonably” believe in agent’s authority ​ Must check with principal if agent does something indicating they don’t have authority Limitations on agent’s authority: ​ If agency relationship is expressed in a writing ​ And the 3rd party is aware of the writing ​ The 3rd party is bound by any limitations expressed in the writing Duties and liabilities: ​ The agent has duties to the principal ​ The principal has duties to the agent ​ If either side breaches any duties: lawsuit for breach of agency Agent’s duties to principal: ​ Fiduciary ​ Obedience ​ Reasonable care ​ Accounting ​ Disclosure The agent’s fiduciary duty: ​ Can’t make a secret profit ​ Can’t be the agent for the principal and the 3rd party without the consent of both ​ Can’t disclose confidential information to the principal’s competitors or 3rd party ​ Can’t compete with the principal Duty to act with reasonable care: ​ Agent must not act negligently ​ Principal is liable for agent’s negligence while on the job Duty to keep an accounting: ​ Agent must keep agency money separate from personal funds ​ Agent must provide accountings on dates and intervals specified in agency agreement or upon request Duty of obedience: ​ Agent must obey all legal instructions ​ Even if he feels it’s not in the principal’s best interests ​ If agent doesn’t want to follow instructions: agent should terminate the agency Duty of full disclosure: ​ Agent must disclose to principal all information relevant to agency ​ Principal is held to know everything that the agent knows Remedies for breach of agency by agent: ​ Principal gets the secret profit ​ Principal can void the contract ​ Principal doesn’t have to pay the agent ​ Damages Duties of principal to agent: ​ Employment for term ​ Compensation ​ Indemnification The duty to employ for term: ​ The principal can’t terminate the agent early to avoid payment ​ Can terminate at any time if agency is “terminable at will” ​ Can terminate if agent breaches the agency The duty to pay compensation: ​ If there is no agency contract, the principal must pay the agent “reasonable compensation” ​ Conduct and custom evidence could be used to determine what is reasonable The duty of indemnification: ​ The principal must reimburse the agent for any losses/expenses incurred because of the agency ​ The principal must hold the agent harmless in the event the agent is sued because of the agency Remedy for breach of agency by principal: ​ Damages The agency may be terminated at any time: ​ It must be consensual ​ The principal can’t terminate early, to avoid payment ​ An agency coupled with an interest won’t terminate until the interest terminates After termination of agency: ​ Notice must be given to 3rd parties, or apparent authority may exist ​ 3rd parties who have done business with the agent before get actual notice ​ The rest of the world gets constructive notice: publication in the newspaper Termination of the agency by operation of law: ​ Death of principal or agent ​ Bankruptcy of principal or agent ​ Insanity of principal or agent M11 P2 Agency... Part two Agents: ​ Are personally liable for their own torts and crimes Principals: ​ Are liable for an agent’s torts committed during the agency ​ Exception: torts committed intentionally, for a personal reason ​ Are not generally liable for an agent’s crimes ​ Exception: the principal participated in the crime Undisclosed principal: ​ Agent pretends to be the principal ​ Third party can bind the agent and the principal to the contract Partially disclosed principal: ​ Agent discloses the fact that there is a principal ​ Agent doesn’t disclose the principal’s identity ​ Third party can bind the agent and the principal to the contract Agents: ​ Can become parties to the contract negotiated under certain circumstances ​ The agent will be bound by the contract if there is an undisclosed or partially disclosed principal Assumption of liability: ​ Agent can consensually become a party to the contract ​ Example; cosign An agent signing a contract on behalf of a principal, should:  ​ Sign his/her own name ​ Write “per” or “on behalf of” or “for” ​ Then write the principal’s name ​ This will disclose the principal, so the agent won’t be bound by the contract The agent: ​ Stands in the principal’s shoes ​ Payment to the agent = payment to the principal ​ Statements made by the agent = statements made by the principal ​ Agent’s knowledge = principal’s knowledge M12 P1 Equal Employment Opportunity Law Three federal statutes: ​ Title 7 ​ ADEA (Age) ​ ADA (Disabilities) Title 7 protected categories: ​ Religion ​ Gender ​ Race/color ​ National origin People protected by Title 7: ​ Applicants ​ Employees ​ Title 7 applies to employers with 15 or more employees Actions covered by Title 7: ​ Hiring ​ Firing  ​ Discipline ​ Promotion ​ Benefits Equal Employment Opportunity Commission: ​ Federal administrative agency in charge of enforcing Title 7, ADEA (Age Discrimination) and ADA (Disabilities Discrimination) ​ States form local Equal Employment Opportunity (EEO) agencies ​ Complaints under Title 7 filed with state agency first ​ Then, complainant can file with the EEOC ​ Right to sue letter issued if EEOC decides not to litigate Remedies for violating Title 7: ​ Damages-including compensatory, punitive, attorney’s fees, expert witness fees. Damages are capped depending on size of the company except for race/color ​ Reinstatement ​ Hiring ​ Promotion ​ Retroactive seniority There are two theories of discrimination: ​ Disparate treatment ​ Disparate impact ​ Both are illegal pursuant to Title 7 Disparate treatment is: ​ Employer’s intentional discrimination against one of the categories protected by Title 7 Disparate impact is: ​ An unintentional act by the employer ​ This act ends up having a discriminatory impact against one of the categories protected by Title 7 ​ Example: testing which is discriminatory and unjustified Bona fide occupational qualification exception to Title 7: ​ Biggest exception to title 7 ​ Employer can discriminate if employee can’t perform the job because of their membership in one of the categories protected by Title 7 Religion: ​ Reasonable accommodation required ​ What is reasonable will depend upon employer ​ Bigger/wealthier employer will have to do more ​ Holidays off; special meals ​ BFOQ: church/religious school can restrict hiring to that religion Sex: ​ Male/female ​ Pregnancy ​ Sexual harassment BFOQs for gender discrimination: ​ Height/weight requirements that relate to safety ​ Strength requirements ​ Appropriate behavior: example--you wouldn’t want a female as a male restroom attendant, you wouldn’t want a male police officer strip-searching a female ​ Non-BFOQs: cute female flight attendants, waitresses Pregnancy: ​ Must be treated like any temporary disability ​ Pregnancy Discrimination Act ​ Employer shouldn’t question potential employee regarding marriage, intent to start a family Sexual harassment: ​ A form of gender discrimination ​ Two kinds-quid pro quo and hostile working environment ​ Neither requires tangible economic detriment (out of pocket losses), modernly ​ Employee can quit and still sue-constructive termination Quid pro quo sexual harassment: ​ Supervisor tries to trade a benefit/ or take a benefit away for sex with employee/applicant ​ If plaintiff can prove that a tangible economic detriment was suffered-employer will be liable vicariously ​ If employer knew/should have known, and took no action-vicarious liability ​ Employer can use antiharassment policy as a defense Hostile working environment harassment: ​ Severe or pervasive conduct ​ Flirtation, propositions, degrading words, display of sexually explicit or suggestive pictures ​ Workplace is poisoned ​ Same rules as to tangible economic detriment/vicarious liability Sexual harassment and non-supervisors: ​ Employer will only be vicariously liable if it knew/should have known of coworker harassment and failed to correct it Race and color: ​ No BFOQ ​ Races: black, white, native american and asian-pacific islander ​ Color: skin color National origin: ​ Country of origin, ethnicity ​ BFOQs: height requirements related to safety, language skills Language skills: ​ Could be a heavy accent while speaking English ​ If speaking English clearly is necessary for performance of the job--this is a valid BFOQ ​ Also: if a bilingual employee is required for job performance Other BFOQs for national origin: ​ Embassy employee ​ Restaurant employee in ethnic restaurant Exceptions to Title 7: ​ BFOQ ​ Testing and educational requirements that are job related ​ Valid seniority systems ​ Pay scale based on quantity ​ Affirmative action Affirmative action: ​ Is reverse discrimination  ​ No CA affirmative action any more-but there is federal ​ Affirmative action in school admissions has just been found constitutional by the US Supreme Court ​ Employment affirmative action-incentives are given ​ Tax breaks, grants A valid affirmative action plan (AAP) has 3 requirements: ​ Voluntary-can’t be required by law ​ Justified-by a record of past discrimination ​ Temporary-until past discrimination is eradicated Age Discrimination in Employment Act (ADEA): ​ Applies to employers with 20 or more employees ​ Employers can’t discriminate against people over 40 ​ Double damages if intentional ​ Also must get the same insurance benefits unless proof that they are more expensive ​ BFOQ: strength, stamina ADA: Americans with Disabilities Act ​ Employers can’t discriminate against people with disabilities ​ Applies to employers with 15 or more employees ​ Reasonable accommodation is the standard ​ Seeing, hearing, speaking, walking, breathing, performing manual tasks, learning and working ​ Excluded: kleptomania, pyromania, pedophilia, exhibitionism, compulsive gambling, transvestitism, transsexuals The ADA: ​ Protects those with HIV, drug addicts and alcoholics that have reformed ​ New US Supreme Court case: employers don’t have to hire those who test positive for drugs Extraterritorial employment: ​ Title 7 and ADA apply to US companies abroad, unless the country forbids it M12 P2 Forms of Business Organizations Sole proprietorship: ​ One individual owns and operates ​ May have employees Advantages of a sole proprietorship: ​ No organizational expenses ​ Sole proprietor makes all business decisions ​ Sole proprietor gets all profits ​ Single taxation-profits taxed as personal income ​ Commingling of assets permitted Disadvantages of a sole proprietorship: ​ Unlimited personal liability ​ Capital is limited to the sole proprietor’s resources ​ Duration is limited to the life span of the sole proprietor General partnership: ​ Two or more own and operate a business for profit ​ It doesn’t matter if the partners know they are in a partnership relationship Advantages of a general partnership: ​ No organizational expenses ​ All partners get to make business decisions ​ All partners can pool capital ​ Partners are taxed on profits as personal income Disadvantages of a general partnership: ​ All partners have unlimited personal liability ​ Duration is typically very short  ​ Terminated by death or bankruptcy of any partner or partnership, or any time the partnership structure changes Limited partnership: ​ At least one general partner ​ Limited partners can invest, but cannot make business decisions Advantages of a limited partnership: ​ Limited partners don’t have personal liability ​ Taxed like a general partnership Disadvantages of a limited partnership: ​ Organizational expenses-an attorney must file application, certificate ​ Limited partners can’t make business decisions Corporation: ​ Fictional legal person, that is created by state statute ​ All states permit incorporation ​ Shareholders own the business and elect a board of directors ​ Board of directors manage/control business, appoint/hire officers ​ Officers run day to day operations Advantages of a corporation: ​ Limited liability for shareholders ​ Easy to raise capital ​ Easy transferability of shares ​ Long duration-could last forever if not terminated Disadvantages of a corporation: ​ Organizational expenses-an attorney must file application, articles ​ It takes time to incorporate ​ Double taxation-the corporation is taxed on profits, and shareholders are taxed on dividends Joint venture: ​ Two or more own/operate a project ​ Exactly like a general partnership, except a project rather than an ongoing business for profit Advantages and disadvantages of a joint venture:  ​ Same as general partnership Unincorporated association: ​ Two or more combine to further a common purpose without incorporating ​ Typically nonprofit ​ Examples: fraternity, club, organization ​ Cannot sue or be sued: no identity apart from its members Cooperative: ​ Two or more combine to further a common business objective ​ Example: agriculture, dairy Franchise: ​ A business format, not a business organization (could be corporate, partnership, etc.) ​ Owner of trademark, trade name or copyright licenses others to use it ​ Rights and obligations set forth in a contract ​ Franchiser-franchisee; independent contractors Vicarious liability claims against franchisers: ​ Franchiser will be vicariously liable if they controlled the conduct of the franchisee ​ Principal-agent relationship, rather than independent contractor ​ This can be a successful claim if all franchises are identical ​ Franchisee should publicly maintain their own independent identity-dealer owned/operated M13 P1 General Partnerships Definition: ​ Voluntary association of two or more to own/operate a business for profit ​ All partners get to manage and control the business  ​ All partners get unlimited personal liability ​ This is regardless of the percentage of partnership ownership ​ UPA and RUPA: Uniform Partnership Act and Revised UPA-a uniform act adopted by some states and governing partnership law Entity theory: ​ Partnership is an entity apart from its owners ​ Partnership obligations, however, are guaranteed by its owners, the partners Creation of partnership: ​ By agreement ​ Doesn’t have to be in writing ​ Express or implied ​ Partners don’t have to realize they are involved in a partnership Partnership contract: ​ Articles of partnership ​ Could be oral unless more than one year (statute of frauds) ​ If there is no contract, UPA/RUPA sets the rules Partner: ​ Agent of partnership and of each partner ​ Never an employee ​ Has the right to manage/control partnership ​ Family member, individual, business entity can all be partners Firm name: ​ Can’t be the same/deceptively similar to another enterprise ​ Can’t use and company, unless there is an additional partner ​ Fictitious business name statement must be filed in the county of partnership, unless all partners’ first and last names are used when naming the partnership Implied partnership: ​ The court will look at the situation, and determine whether or not there is a partnership based on the facts and various factors Factors court will consider in determining a partnership: ​ Burden of proof-on person claiming there is a partnership  ​ Control-does each member get to make business decisions? ​ Sharing profits rather than wages, salary ​ If profits are shared-are they net or gross? Net indicates a partnership ​ Are they sharing losses? Loss sharing indicates a partnership Partnership by estoppel: ​ If two or more act as if they are partners, and a 3rd party relies on the fact that they are partners, the court may determine a partnership ​ This creates personal liability Classification of partners: ​ General-publicly known to run the business ​ Silent-publicly known not to run the business ​ Secret-not publicly known, but runs the business ​ Dormant-not publicly known, doesn’t run the business ​ Nominal-not a partner Duties partners owe each other: ​ Serve: work for the partnership ​ Loyalty: fiduciary-put the partnership ahead of individual needs or desire, don’t compete with the partnership, don’t make a secret profit, don’t disclose confidential information ​ Duty of care: don’t be negligent ​ Duty of obedience ​ Duty to disclose pertinent information to partners ​ Duty to account and keep accurate records Rights of partners: ​ Distributions: profits, losses ​ Right to indemnification: partnership should cover a partner if sued in the course of business ​ Return of capital contribution ​ Right to compensation: reasonable ​ Right to management and control of the partnership ​ Right to choose partners ​ Right to partnership property Partnership property: ​ All property contributed by partners ​ All property acquired with partnership funds  ​ All property in the partnership name Tenancy in partnership: ​ Real property owned by the partnership ​ All partners get to use the real property to the same degree ​ Upon death of a partner, vests in all other partners automatically Assignment of partnership interest: ​ Only the right to profits-and share of assets upon dissolution ​ No right to manage and control partnership ​ No consent of other partners required ​ Doesn’t trigger dissolution of partnership Partnership liability: ​ Partnership is liable for contracts made by partners ​ Partnership is also liable for conduct of partners while acting on behalf of the partnership Liability of individual partners: ​ Personal, unlimited liability for all obligations of the partnership ​ Joint and several liability: every partner is 100% liable ​ Judgment creditor should exhaust partnership funds before going after individual partners (RUPA); partners guarantee partnership liability ​ Incoming partners not liable for old debt that predated their partner status Dissolution: ​ A phase the partnership goes through when it is ready to terminate ​ No new contracts should be made by partners ​ Winding up process ​ Triggered whenever there is a change in the structure of the partnership Dissolution by action of the parties: ​ Agreement-must be unanimous ​ Expulsion of a partner ​ Withdrawal of a partner Dissolution by operation of law: ​ Death of a partner ​ Bankruptcy of a partner  ​ Bankruptcy of partnership ​ Illegality of partnership business Dissolution by decree of court: ​ Insanity ​ Incapacity ​ Misconduct ​ Impracticability ​ Lack of success ​ Other equitable circumstances Notice of dissolution: ​ Actual-must be given to other partners, or they can continue to bind the partnership in contract ​ Actual-must be given to 3rd parties that have done business with the partnership ​ Constructive-to the rest of the world; publication in the newspaper ​ 3rd parties don’t need notice if dissolved by operation of law Distribution of assets in this order of priority: ​ 3rd party creditors-secured first ​ Partner creditors ​ Partner assets ​ The rest divided as profits M14 P1 Corporations Definition: ​ Artificial person ​ Created by state statute Pertinent uniform law:  ​ Revised Model Business Corporation Act ​ Adopted by about half of the states Characteristics: ​ Can be sued ​ Can own property ​ Can borrow money ​ Can be a partner in a partnership Classifications: ​ Public corporation: corporation established for governmental purposes ​ Publicly held corporation: shares of stock are available to the public for purchase ​ Private corporation: privately owned/operated ​ Privately held corporation: shares of stock are not available to the public for purchase ​ Quasi-public: privately owned, but performs a public service Terminology: ​ Domestic-doing business in the state of incorporation ​ Foreign-doing business outside the state of incorporation ​ Close-shares held by a single shareholder/small group of shareholders ​ Subchapter s-taxed like a partnership because small in size/shareholders ​ Professional-conducts a profession like law/medicine ​ Nonprofit-charitable or benevolent purpose Organization: ​ Must file an application ​ Must draft articles of incorporation ​ Must be issued a certificate of incorporation ​ This takes time and money Constitution: ​ Corporations generally get the same constitutional protections as real people ​ Exception: privileges and immunities clause, freedom from self-incrimination ​ Corporations can be treated differently by different states, people can’t ​ Corporations must turn over incriminating documents-even if they incriminate officers or employees Piercing the corporate veil:  ​ Shareholders will not have their personal assets protected by the corporate form if they are using the corporation to perpetrate a fraud ​ If the court decides to pierce the corporate veil, all shareholders will be held personally liable ​ Courts are hesitant to do this Factors to consider when piercing the corporate veil: ​ Failure to maintain adequate corporation records ​ Commingling corporate assets with personal assets ​ Grossly inadequate capitalization of the corporation ​ Diversion by shareholders of corporate funds ​ Formation of corporation to evade existing obligation ​ Formation of corporation to perpetrate a fraud ​ Injustice The court will not pierce the corporate veil when: ​ The corporation was formed for the purpose of protecting assets from personal liability ​ The shareholders are not perpetrating a fraud ​ The corporation is financially unstable even though the shareholders are not Promoters: ​ Get subscriptions to stock ​ Prepare the steps necessary to incorporate ​ Set the groundwork for the business that the corporation will be conducting ​ Enter leases, buy property, hire employees, enter into contracts Promoter liability: ​ Liable for all torts/crimes ​ Not agents for the corporation ​ Liable on all contracts entered into, until adoption by the corporation ​ After the corporation adopts the contract, the promoter should draft a new contract (novation) releasing the promoter from contract liability Incorporators: ​ Sign and file appropriate forms for incorporation process ​ Usually future members of the board of the corporation Incorporation process: ​ Different in every state  ​ Application for incorporation is the first step, accompanied by a filing fee ​ Filed with the secretary of state in the state of incorporation ​ Application must be accompanied by articles of incorporation Articles of incorporation must include: ​ Name of corporation ​ Number of shares of stock issued ​ Street address and name of registered agent ​ Name and address of each incorporator ​ Purpose of corporation ​ The date the articles are filed is usually the date of incorporation Corporate name: ​ Should indicate corporate character ​ Exa: Inc., PC ​ Can’t be the same or deceptively similar to another corporation Certificate of incorporation: ​ Issued by state ​ Proof of incorporation ​ The date of issuance is the date the corporation is formed in some states Corporate bylaws: ​ Rules and regulations enacted by the corporation to govern it’s affairs ​ Binding on all shareholders Corporate powers: ​ Stock may be issued ​ Can enter into contracts ​ Can buy property/lease property ​ Can borrow money ​ Can buy back stock ​ Can donate to charity De facto vs. de jure corporation: ​ De jure-formed properly ​ De facto-not formed properly, but because the business is holding itself out to be a corporation, the shareholders assets will still be protected ​ De facto isn’t recognized in every state ​ Must be a good faith attempt to incorporate for de facto Termination of corporate status: ​ May be done judicially, when management is deadlocked ​ May be done by the state if corporation laws are violated ​ May be due to corporation bankruptcy Consolidation: ​ Joining of corporations ​ Separate existences cease and a new corporation is formed Merger: ​ Joining of corporations ​ One corporation absorbs the other ​ The original corporation retains its original identity ​ The absorbed corporation terminates Conglomerate: ​ Joining of corporations ​ One corporation owns another ​ Parent-subsidiary ​ Both retain independent characteristics M14 P2 Government Regulation of Business Federal and state governments can regulate business: ​ Fed--pursuant to the Commerce Clause ​ State--pursuant to police power Some aspects of business that can be regulated: ​ Quality of products ​ Quantity of products ​ Communication ​ Prices  ​ Competition An administrative agency may regulate quality: ​ Like the FDA-food and drug administration An administrative agency may regulate communication: ​ Like the FCC-federal communications commission ​ 1st amendment concerns Quantity may be restricted: ​ To protect the economy Prices may also be restricted: ​ Like rent, interest, airline rates Competition is always regulated: ​ To ensure a competitive marketplace ​ To protect the consumer ​ FTC-Federal Trade Commission ​ Sherman and Clayton acts The Sherman Act prohibits: ​ Agreements to restrain trade ​ Horizontal price fixing ​ Vertical price fixing ​ Tying ​ Monopolizing Horizontal price fixing is: ​ An agreement between competitors to set a certain price Vertical price fixing is: ​ An agreement between a manufacturer/retailer to set a certain price Tying is: ​ Forcing the consumer to buy an inferior product by attaching it to a different superior product Monopolizing is:  ​ Excluding competitors by using market power ​ O.K. if the market power results from a superior product or consumer preference The Clayton act prohibits: ​ Price discrimination ​ Monopolistic takeovers Price discrimination is: ​ Charging different customers different prices for the same goods with the goal of restricting competition ​ Example: a company with a large market power selling goods cheaper in areas served by small local companies to put these small companies out of business It is not price discrimination if: ​ There is a difference in quality ​ There is a difference in the cost of goods ​ Closeout sale ​ Meeting the competition in a competitive market ​ Deterioration of goods Monopolistic takeovers are: ​ When one business buys up all of the competition ​ FTC approval required before large companies can consolidate/merge The Sherman and Clayton acts are: ​ Quasi-criminal ​ They also allow for punitive damages Securities: ​ Documents that represent an interest ​ Includes shares of stock ​ The exchange or sale of securities is federally regulated by the Securities and Exchange Commission (SEC); a federal administrative agency ​ The Sarbanes-Oxley Act of 2002 makes securities fraud a serious federal crime ​ States also regulate securities International law: ​ Nations have ruling power over citizens within a given geographical territory. Nations should not interfere with legal and political matters within the borders of other nations. ​ A treaty is an agreement between nations ​ International disputes are resolved in national court systems