Question

27–5. Section 1 of the Sherman Act. The National Collegiate Athletic Association (NCAA) and the National Federation of State High School Associations (NFHS) set a new standard for non-wood baseball bats. Their goal was to ensure that aluminum and composite bats performed like wood bats in order to enhance player safety and reduce technology-driven home runs and other big hits. Marucci Sports, LLC, makes non-wood bats. Under the new standard, four of Marucci’s eleven products were decertified for use in high school and collegiate games. Marucci filed suit against the NCAA and the NFHS under Section 1 of the Sherman Act. At trial, Marucci’s evidence focused on injury to its own business. Did the NCAA and NFHS’s standard restrain trade in violation of the Sherman Act? Explain.

28–1. Registration Requirements. Estrada Hermanos, Inc., a corporation incorporated and doing business in Florida, decides to sell $1 million worth of its common stock to the public. The stock will be sold only within the state of Florida. José Estrada, the chair of the board, says the offering need not be registered with the Securities and Exchange Commission. His brother, Gustavo, disagrees. Who is right? Explain.

28–3. Insider Trading. David Gain was the chief executive officer (CEO) of Forest Media Corporation, which became interested in acquiring RS Communications, Inc. To initiate negotiations, Gain met with RS’s CEO, Gill Raz, on Friday, July 12. Two days later, Gain phoned his brother Mark, who bought 3,800 shares of RS stock on the following Monday. Mark discussed the deal with their father, Jordan, who bought 20,000 RS shares on Thursday. On July 25, the day before the RS bid was due, Gain phoned his parents’ home, and Mark bought another 3,200 RS shares. The same routine was followed over the next few days, with Gain periodically phoning Mark or Jordan, both of whom continued to buy RS shares. Forest’s bid was refused, but on August 5, RS announced its merger with another company. The price of RS stock rose 30 percent, increasing the value of Mark’s and Jordan’s shares by $664,024 and $412,875, respectively. Did Gain engage in insider trading? What is required to impose sanctions for this offense? Could a court hold Gain liable? Why or why not?

Answer 1

27-5.

Section 1 of the sherman act forbids any joining of the hands of the competing firms ,parties or companies which would unfairly disadvantage the consumer. Firms agreeing to impose restrictions on trade areas, lowering or controlling the price of product etc are unfair means which are prohibited under the Antitrust law section 1.

Since in this scenario, the NCAA and the NFSH both joined hands ,not to harm the consumer but to safeguard the interest of the sport ,and it does not impose restrictions on trade or control prices ,it is not in violation of the Sherman act. Sherman acts objective is to protect consumer from unfair trade agreements. This agreement does not constitute an unfair trade agreement.