A Neo‐Chicago Perspective on the Law of Product Tying

Abstract

Since the emergence of the 'Chicago School' in the 1970s, U.S. antitrust policy has been evolving into a legal body of increasing economic sophistication. Gone are the days in which courts employed impressionistic assessments of competitive harm in construing challenged business practices. Promoting the welfare of the consumer, economically defined, appears to have emerged as the sole legitimate goal of the antitrust laws. Yet, one area of antitrust jurisprudence - product tying - has remained surprisingly resistant to the recent surge of economic analysis and continues to be regarded with hostility on an almost ubiquitous basis by the courts. It is here that one finds the last refuge of the 'Harvard School,' according to which equitable wealth distribution and harm to competitors must be considered as legitimate antitrust concerns. The law governing tying arrangements is now a focal point of tension between the two major antitrust philosophies. There is in fact a fundamental shortcoming in the economic analysis of product tying, both by the judiciary and the academy. While many academicians have correctly noted the unsatisfactory nature of the current law, their commentary has yet to provide a workable legal standard for courts to readily and effectively dichotomize consumer welfare enhancing instances of tying behavior from injurious forms. Nonetheless, this article submits that neoclassical microeconomic theory is indeed capable of making reliable predictions of the effect of tying on consumer welfare.