SPRING 202 0 TODAY’S GENER AL COUNSEL
THE ANTITRUST LITIGATOR
The Antitrust Analysis of “Tying” By Jeffery M. Cross
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n my antitrust practice over the past 45 years, I have frequently had to address the antitrust law’s treatment of “tying” both in litigation and in counseling. Tying occurs when a party requires those wanting to purchase one product to purchase another as well. One area where tying frequently comes up is franchising. Franchisees are often required to buy products from the franchiser, leading to tying claims. Indeed, one court has noted that tying may be the most common non-price antitrust claim in franchise litigation. The product that consumers or franchisees want to purchase is referred to as the “tying” product. The second product that a franchisee must purchase to obtain the first is referred to as the “tied” product. Often the seller has monopoly or market power in the tying product. Some academics and commentators have questioned whether tying ever should be a concern of antitrust law. Even if a seller had a monopoly in the tying product, a monopolist can only obtain a single monopoly profit. Because having a monopoly by itself and earning monopoly profits is not illegal, there would be no anti-competitive effect from tying.
Jeffrey Cross is a columnist for Today’s General Counsel and a member of the Editorial Advisory Board. He is a partner in the Litigation Practice Group of Freeborn and Peters LLP and a member of the firm’s Antitrust and Trade Regulation Group. jcross@freeborn.com
Others have argued that the single monopoly profit theory of tying applies only when there are certain key assumptions made regarding the market. If any of those assumptions are not valid, there can be anti-competitive effects with tying. Depending on the market conditions, tying can increase monopoly profits, and lower both consumer and total welfare. Tying can also reduce the competitiveness of rivals in the tied product market and restrict entry into the tying market. Under the antitrust laws, the analysis of tying applies a “hybrid” per se rule. Tying is deemed unlawful only if the tying
seller has sufficient market power in the tying product to force buyers to take an otherwise unwanted tied product, and the tying arrangement has a substantial effect on the tied market. The antitrust consideration of tying is a hybrid per se analysis because it requires some of the features of the Rule of Reason — a determination of market power and impact upon the tied product market — without the benefit of considering the pro-competitive justifications permitted under the Rule of Reason. Significantly, the antitrust analysis of tying goes beyond just a determination
