Antitrust Implications of Aftermarkets
| Published date | 01 March 2007 |
| Date | 01 March 2007 |
| DOI | 10.1177/0003603X0705200103 |
| Subject Matter | Article |
THE
ANTITRUST
BULLETIN:
Vol.52, No. IjSpring 2007 :31
Antitrust implications
of aftermarkets
By
JOSEPH
P.
BAUER*
I. INTRODUCTION
The
methods
used
by
firms to extend their sales into the aftermarket
for
their
primary
products
are
varied
and
pervasive-involving
a
multitude
of
industries
and
hundreds
of billions of dollars of sales.
Therefore, it is
hardly
surprising that this
behavior
deserves,
and
con-
tinues to receive, extensive
antitrust
scrutiny,
by
lawyers
and
busi-
nessmen, by scholars
and
by courts.
Auseful
way
to undertake an analysis of
the
antitrust implications
of activities in aftermarkets is to start
with
an overview of the nature of
the behavior involved. Therefore, this article
will
begin
with
abrief
survey of a
handful
of the multitude of factual situations
and
industry
settings in which aftermarket issues have arisen. Next, 1 will identify
the variety of
means
by
which
firms
attempt
to restrict
the
choices
open
to consumers as to the products or services available in the after-
market. This article will then address the competitive implications of
these various forms of restrictive
behavior-the
potential efficiency-
*Professor of Law, Notre Dame Law School.
AUTHOR'S NOTE: I wish to thank
Profs.
Warren
Grimes
and Greg
Gudlach
for their
comments and suggestions and to
acknowledge
gratefully the assistance of David
Grimm,Notre
Dame
Law
School
Class
of2007,in the
preparation
ofthis
article.
©
20071Jy
Federal
Legal
Publications, Inc.
32
:
THE
ANTITRUST
BULLETIN:
Vol. 52, No.
IjSpring
2007
enhancing justifications for these restraints,
and
then their potential
anticompetitive consequences. Iwill
conclude
with
adiscussion of
some
of the legal theories
and
case
law
in this area
and
with
some
comments
about
further treatment of aftermarket restrictions.
II. BREADTH
AND
HISTORY OF
AFTERMARKET RESTRAINTS
To
put
this analysis in context, it is helpful to set forth adefinition
of the behavior
under
discussion. By "aftermarket restraints," I
mean
to include
the
array
of techniques by which a firm selling (or licens-
ing
or
leasing)
a
product
(or
service
or
franchise)-which
is fre-
quently
referred to as
the
"primary
product"
-is
able to require its
customers
(or its licensees or franchisees) to
purchase
some
other
product
or
service-oftentimes
referred to as the "secondary
prod-
uct"
-from
that
firm.'
The
adage
that
"those
who
cannot
remember
history
are
con-
demned
to repeat
it'"
applies
with
full force to a discussion of after-
markets.
The
multiple
strategies
that
sellers of certain
products
or
services
have
used
in
attempts
to
extend
their
market
power
into
adjacent or
secondary
markets
doubtless
have
alineage
extending
back for centuries. In
any
event, challenges
under
the antitrust laws
to this behavior,
and
judicial consideration thereof, can be traced at
least to
the
early
part
of
the
previous
century. Abrief
review
of a
handful
of cases will illustrate
the
enormous
diversity of industries in
which aftermarket restraints
have
been
attempted.
Many
of these decisions will be familiar to
students
of
antitrust
law. The first
such
Supreme
Court
case dates back almost a
hundred
IFor
purposes
of simplicity, this article will henceforth refer only to the
sales of products.
The
transactions which give rise to aftermarket issues
may
in fact include all of the various
methods
by which products, services or fran-
chises
are
distributed.
1 GEORGE SANTAYANA, THE LIFE OF REASON (1905-06).
Lower
court
analysis of aftermarket restraints dates back at least to
the
end
of the nineteenth century. In Heaton-Peninsular Button-Fastener Co.
v. Eureka Specialty Co., 77 Fed. 288 (6th Cir. 1896), the court of appeals held
that the plaintiff, the
patentee
of a machine for fastening buttons to shoes,
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