The Futility of Antitrust Attacks on Tie-In Sales: An Economic and Legal Analysis

Authors

Henry N. Butler
W. J. Lane
Owen R. Phillips

Abstract

The Supreme Court's treatment of tying arrangements has long been based on an economic theory that tie-ins serve to extend existing monopoly power into new markets. Although this theory has been extensively criticized by economists, the Court has recently reaffirmed, by a narrow margin, the rule that tying arrangements are illegal per se. In light of the Court's persistent adherence to its foreclosure theory, this Article analyzes this antitrust issue from a new perspective. The authors assume that the Court's theory of the monopoly- extending capabilities of tying arrangements is sound. Then they proceed to undermine the Court's implicit assumption that the prohibition of tie-ins forces firms to return to competitive solutions. This is done by demonstrating the availability of legally acceptable, alternative pricing strategies that generate profits approaching those available under even the most lucrative tying arrangement. The authors conclude that the per se rule is futile and unwarranted, and should be replaced by a more sensible rule of reason.

Recommended Citation

Henry N. Butler, W. J. Lane, and Owen R. Phillips, The Futility of Antitrust Attacks on Tie-In Sales: An Economic and Legal Analysis, 36 Hastings L.J. 173 (1984).
Available at: https://repository.uclawsf.edu/hastings_law_journal/vol36/iss2/2