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Abbott, Alden F.; Wright, Joshua D. --- "Antitrust Analysis of Tying Arrangements and Exclusive Dealing" [2010] ELECD 276; in Hylton, N. Keith (ed), "Antitrust Law and Economics" (Edward Elgar Publishing, 2010)

Book Title: Antitrust Law and Economics

Editor(s): Hylton, N. Keith

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781847207319

Section: Chapter 8

Section Title: Antitrust Analysis of Tying Arrangements and Exclusive Dealing

Author(s): Abbott, Alden F.; Wright, Joshua D.

Number of pages: 30

Extract:

8 Antitrust analysis of tying arrangements
and exclusive dealing
Alden F. Abbott and Joshua D. Wright*


I Introduction
Identifying exclusionary conduct is one of the most controversial tasks in
antitrust. As evidenced by the Federal Trade Commission and Department
of Justice Joint Hearings on Single Firm Conduct, antitrust jurisprudence
is still in the process of identifying what conduct a firm with market power
can engage in without creating the risk of antitrust liability. Two areas of
significant concern involving potentially exclusionary conduct are tying
(and bundling) and exclusive dealing. Both tying and exclusive dealing can
potentially harm competition and generate anticompetitive effects under
certain conditions that may be difficult to identify in practice. Further,
both tying and exclusive dealing contracts are prevalent in markets without
significant antitrust market power and have a number of procompetitive
uses. The key question for antitrust policy is how to design optimal rules
when the costs of false positives (finding liability for an efficient practice)
significantly outweigh the costs of false negatives (failing to condemn an
anticompetitive practice).
In this chapter, we consider the legal framework applied to tying,
bundling and exclusive dealing arrangements and survey the relevant
economic literature.

II Tying and bundling arrangements
A tying arrangement occurs when, through a contractual or technological
requirement, a seller conditions the sale or lease of one product or service
on the customer's agreement to take a second product or service.1 The term
`tying' is most often used by economists when the proportion in which ...