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DSST Business Law II Exam Prep

Category - DSST Business Law II

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New Cola announced its intention to buy Old Cola, and Rival Cola said it would buy Other Cola. The Federal Trade Commission (FTC) reviewed the proposed transactions, looking at the size of the companies in relation to the size of the industry. The FTC decided to block the mergers. On what did the FTC base its decision?
  1. Competition index
  2. Competition-Merger index
  3. Herfindahl-Hirschman index
  4. Taft-Hartley index
  5. Sheman-Clayton index
Explanation
Answer: C. The FTC based its decision on the Herfindahl-Hirschman index. The Herfindahl-Hirschman index is a measure of the size of companies in relation to the size of the industry. The calculation measures the amount of competition that the companies represent within an industry. If the index is high, then the FTC will block a merger.
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