A Simplified Approach to Tying Arrangements: A Legal and Economic Analysis

61 Pages Posted: 11 Oct 2013 Last revised: 8 Jan 2014

Date Written: October 10, 1980

Abstract

Few types of antitrust conduct have received as much treatment from the Supreme Court as tying arrangements. This practice, which is unlawful per se when certain prerequisites are met, "may be defined as an agreement by a party to sell one product [the tying product] but only on the condition that the buyer also purchases different (or tied) product, or at least agrees that he will not purchase that product from any other supplier." Notwithstanding this extensive Supreme Court attention, there is as much heat as light in this area. The doctrine that has developed is often unpredictable and frequently irrational, and the applicable rules make the analysis far more complicated than necessary. A simpler and more direct approach is long overdue.

Present analysis consists of three steps. First, a court must determine whether there indeed is a tying arrangement-the "existence" question. One variation of this determination is whether there really is a tie at all, or whether the two (or more) things sold are merely parts of one "package." Alternatively, the seller may require the buyer-usually a retailer-simply to stock the entire line of the seller's goods, but will impose no requirement of buying certain fixed quantities of each item in the seller's line. Or, the seller may not coerce the buyer or expressly require the purchase of the tied product; the existence of the tying arrangement will have to be inferred from the conduct of the parties.

Next, the court will have to determine whether this is the particular type of tying arrangement which should be held unlawful - the "liability" question. Although it will be rare to find tie-ins which have procompetitive effects, there nonetheless are three categories of tying arrangements - those which are always unlawful (those unreasonable per se), those which are unlawful only after a rule of reason inquiry, and those which are not unlawful under either approach. Then the crazy quilt continues. Tying arrangements are analyzed under two different antitrust statutes-section 1 of the Sherman Act and section 3 of the Clayton Act. For unexplained reasons, the Supreme Court created different standards for applying the per se rule, depending on the statute used; today, however, there is serious doubt whether there still are two or only one test. Even when one knows the appropriate statute and standard to apply, recent cases have displayed a remarkable level of diversity and confusion in the application of the standard to the facts under consideration. Finally, the Court has recognized occasional defenses even to those tie-ins which would fall under the so-called per se rule. Although the existence of such defenses would appear to be an obvious contradiction in terms, it is nonetheless expressly sanctioned by the cases. It is certainly time to clarify some of these inconsistencies.

Keywords: tying arrangements, antitrust, sherman act, clayton act

Suggested Citation

Bauer, Joseph P., A Simplified Approach to Tying Arrangements: A Legal and Economic Analysis (October 10, 1980). Vanderbilt Law Review, Vol. 33 283-342 (1980), Notre Dame Legal Studies Paper No. 1454, Available at SSRN: https://ssrn.com/abstract=2338459

Joseph P. Bauer (Contact Author)

Notre Dame Law School ( email )

P.O. Box 780
Notre Dame, IN 46556-0780
United States
5746316514 (Phone)
5746314197 (Fax)

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