MCLE Self-Assessment Test

IMPORTANT NOTICE: This article is provided solely for research and archival purposes. MCLE self-study credit is no longer available. Even if you follow the instructions and submit payment you will not be granted MCLE self-study credit. Please note that low-cost MCLE is provided by the California Lawyers Association, pursuant to Business and Professions Code section 6056.

Answer the following questions after reading the article on attorneys' fees. Use the answer form provided to send the test, along with a $20 processing fee, to the State Bar. Please allow at least eight weeks for MCLE certificates to reach you in the mail.

1. A is monopolist in market for lobster traps in Friendship Inc. Mr. Lobsterman approaches A to buy traps and A refuses, stating that A is known to intend to use the traps as a model to start a competing business. Mr. L is unable to obtain another trap for the purpose and A succeeds in eliminating this incipient corporation. Does A have a Cartwright Act claim?

2. A is considering raising its prices for its entire line of hiking boots but is worried that its main competitor B will not follow. A's marketing manager calls B's to discuss the general future of hiking boot prices and A learns that B would raise prices if A did. A and B do not sign any agreement or even orally agree that either would actually raise prices. Violation?

3. Loan Shark Inc. specializes in extending excessive credit to elderly customers, and has a very high rate of success in taking over their meager estates in hardball foreclosure proceedings. The Fair Lenders Trade Association meets to discuss how to stop Loan Shark. Loan Shark's ads from a local TV station are pulled by the broadcaster in response to notification of the resolution. Can Loan Shark collect treble damages?

4. California Happy Hotels, which owns and operates all of the hotels at several remote destination resort areas in California, enters the long distance telephone market by acquiring American Total Telephone. Guests in Happy Hotels soon find they are unable to use calling credit cards from American Total's rivals -- all calls out of the hotels go through and are billed by Total. Which antitrust rule is violated?

a. Happy Hotels has unlawfully monopolized the market for telephone calls by guests from its hotels, in violation of the Cartwright Act.

b. Happy Hotels has engaged in unlawful tying by coercing guests to buy its telephone service as a condition of purchasing room space.

5. Garbage Hauling Inc. and Junk Removal Inc. own and operate residential waste hauling trucks and provide related services. The two companies both operate in Homefront, an unincorporated rural area in Alpine county. The owners meet for lunch and agree that their trucks, operating simultaneously over the same narrow winding mountain roads, pose a safety threat to their drivers and others. To streamline things and eliminate this hazard, they split the territory in half and agree Garbage Hauling will haul only over north county roads and Junk Removal only over south county roads. The two also agree that their purpose is not to increase profits. The state attorney general, hearing of the arrangement, will probably:

a. Give these public-spirited businessmen the Good Samaritan Award.

b. Investigate to make sure prices did not go up after the agreement, and then drop the matter.

c. Bring a civil or criminal action (or both) for territory allocation.

d. Turn the matter over to the PUC to consider a rate decrease to reflect reduced costs from the efficient arrangement.

6. Garbage Hauling and Junk Removal also had experienced a 25 per cent increase in fuel prices for trucks and 40 per cent labor cost increases under collective bargaining, and had not increased their prices. Garbage Hauling at the lunch suggests that the companies should not take these cost increases as an excuse to gouge but that it would be fair to raise prices 20 per cent to recoup the increased costs. Junk Removal says he can't discuss that because it might be price fixing. Within a month, both companies increased prices 20 per cent. Are the two guilty or liable for price fixing?

a. No, because a mere invitation to agree is not enough, and Junk Removal rejected the invitation.

b. No, because the 20 per cent increase did not even cover all increased costs and was a very fair price.

c. Yes, because the two companies discussed the amount by which prices would increase by mutual agreement, and then, although one party verbally repudiated the proposal, both parties raised prices by the discussed amount.

7. Manufacturer maintains an independent distribution network. One of its more successful distributors, A, approaches Manufacturer and asks for a bigger territory. Manufacturer considers the request and several weeks later announces that distributor B is terminated, and A is to serve B's former territory. B sues Manufacturer and A for antitrust violations. Result:

a. A and Manufacturer liable for group boycott under per se rule.

b. A and Manufacturer liable for territory allocation under per se rule.

c. A and Manufacturer not liable for any antitrust violation.

8. Same as 7, except two carpeting distributors, A and C, jointly approach Manufacturer and each ask for half of B's territory, to which Manufacturer agrees. Same result?

9. Five years ago, Fall Line Ski Area and Basin Mountain Ski Area, both in Lake Clinton Basin, Calif., were rapidly failing. They met in mid-season and agreed to raise prices by $2 per ticket immediately. However, even at this new price, Fall Line went out of business before the next season, issuing a press release admitting to its failed effort to fix prices. Five years later, the attorney general brings price-fixing charges. Can the suit proceed?

10. Dirty Cleaners sells its extensive cleaning services business to its arch-rival, Like Totally Clean Dude Cleaners. In the sale agreement, Like Totally insists on a provision that prohibits Dirty from competing after the acquisition closes. Dirty ignores the provision and reopens in exactly its former locations under the new name "Like Dirty Cleaners." In the ensuing contract dispute, "Like Dirty" would prevail, because the agreement not to compete was a per se illegal market allocation between the two companies.

11. Matching Hats manufactures and sells the latest head wear fashions through retail outlets. The concept is to sell hats in pairs, so that couples will walk around in identical hats, no two pairs of which are alike. Men's hats are sold for an average price to dealers of $85, while women's hats go for $125. Women's groups mount a very successful boycott against all stores that carry Matching Hats, crippling their sales. A retailing group sues Matching Hats for price discrimination under the Unfair Practices Act. They will:

a. Prevail, because the manufacturer is discriminating in prices without competitive justification.

b. Prevail, because violations of the Unfair Practices Act are presumed once plaintiff establishes two or more sales at different prices and injury to the dealers.

c. Fail, because the Unfair Practices Act does not prohibit pricing different products differently.

12. Lurethemin Stored runs an ad campaign touting alarm clocks for "one penny" to its customers, in ads that present a different clock than the one actually available at most stores, and at some stores there are no clocks other than by redeeming "rain checks." On the day of the promotion, Lurethemin decides to cancel the offer because it is worried that these sales might be loss leaders, but many disappointed customers respond to the ads. The district attorney charges Lurethemin with unlawful use of loss leaders. The district attorney will:

a. Lose, because a loss leader is a sale at below cost, and Lurethemin has not actually sold anything at below cost.

b. Prevail because the ads for below-cost clocks are confusingly presented, and likely to mislead or confuse customers, particularly where the promotion is withdrawn while the ads are running.

13. CBA manufactures and sells ski boots directly to retailers, such as Molehill Ski Shops, CBA's biggest customer. Molehill switches shelf space seasonally between winter and summer sports and is demanding that CBA agree to accept back all unsold ski boots tendered by Molehill before May 1 of each year, refunding the full price plus stocking and unstocking costs. Molehill demonstrates that the costs involved are substantial and documented, so CBA agrees. Mompop Ski Shops, Molehill's rival, becomes unable to compete with Molehill's ski boot prices, and goes out of this line of business. Mompop later learns of the special Molehill inventory chargeback arrangement and sues Molehill and CBA for unlawful secret rebating under California Business & Professions Code §17045. On demurrer, Mompop's complaint will:

a. Be dismissed without leave to amend because §17045 prohibits secret discounts, but not all forms of preferential arrangements between supplier and dealer.

b. Not be dismissed, because Mompop has a claim based upon secret discounts that were not made public and available to similarly situated rivals of the favored customer, and which allegedly tended to destroy fair and honest ski boot competition.

14. Vendor Inc. manufactures and sells juice made from California grapes. This is a low-margin business and often the fluctuations in grape prices are more rapid than Vendor can achieve in its sales prices of juices. Vendor sees an opportunity in this situation and offers to customers over specified volumes long-term contracts to provide juices at fixed prices, knowing that competitors will be unable to meet those prices at times, depending on the grape price movements. Overall, Vendor expects these contracts to be profitable, but also intends that they will lose money for periods of time. Rival Juice Inc. sues. On what theory might Rival prevail?

a. Vendor could be charged with extending a secret discount, concealed within the long-term contracts, in violation of §17045.

b. Vendor could be charged with engaging in locality discrimination because not all of its customers are getting the long-term contracts.

c. Vendor could be charged with below-cost sales, for selling juices at less than the cost to Vendor for the purpose of injuring Rival and other competitors.

15. Vendor consults with you as its antitrust counsel and expresses a preference for state court over federal court proceedings. Vendor is particularly concerned because he has heard that antitrust plaintiffs in federal court get treble damages and attorneys' fees. Agree or disagree?

16. Your client proposes to advertise on children's television for its products, which are cigarettes designed for children between the ages of 14 and 18 years old. You should be concerned that the client might violate:

a. The Cartwright Act.

b. The Unfair Practices Act.

c. The Unfair Competition Act.

d. No particular statute.

17. Your client ignores your advice and proceeds to advertise and market "Tiny Tot Cigarettes" on children's television and in other media. A retired school teacher forms an association to raise money to challenge the advertising and brings an Unfair Competition Act suit in the name of A Bunch of People, or "ABOP." Your motion to dismiss for ABOP's lack of standing, on the ground that ABOP itself does not even consume cigarettes, and also has no members who are either children or cigarette smokers, will:

a. Prevail, because ABOP as the named plaintiff does not claim that it has been injured by the alleged violation.

b. Fail, because any person may sue under the Unfair Competition Act without any requirement of proving that the plaintiff suffered or is likely to suffer any injury.

18. A group of teenagers hospitalized around the state for various health problems generally attributable to smoking tobacco join the suit and seek punitive damages under the Unfair Competition Act based upon the outrageous and wanton conduct alleged. The minors:

a. Will not be awarded punitive damages.

b. Will obtain punitive damages if they can establish the usual prerequisites for that form of relief.

19. A major beer wholesaler adopts a discounting policy that violates the Unfair Practices Act as a form of prohibited secret discounting. An association of small bars and restaurants brings an action for injunctive relief seeking to stop the practice. The motion to dismiss on the ground that the trade association lacks standing under the Unfair Practices Act will:

a. Succeed, because unlike the Unfair Competition Act, the plaintiff must establish injury to itself, which the association cannot do.

b. Succeed, but probably the association's members will be allowed to bring the suit separately.

c. Fail because §17070 specifically permits trade associations to sue for injunctive relief.

20. Which of the following categories of conduct are per se illegal under the Cartwright Act:

a. Price fixing agreements between competitors.

b. Vertical price fixing agreements between manufacturers and dealers.

c. Group refusals to deal by rivals targeting one or more of their suppliers or customers.

d. Tying a product or service over which the seller has economic power of some kind to a second product that the customer might not want or at least might prefer from another seller.

e. Agreements between competitors allocating between them the customers they will serve, the types of products they will sell, or the regions in which they will market.

This activity has been approved for Minimum Continuing Legal Education credit by the State Bar of California in the amount of 1 hour.

The State Bar of California certifies that this activity conforms to the standards for approved education activities prescribed by the rules and regulations of the State Bar of California governing minimum continuing legal education.