The Commerce Requirement in Tying Law

• Author: Christopher R. Leslie
• Position: Chancellor's Professor of Law, University of California Irvine School of Law
• Pages: 2135-2160

2135

The Commerce Requirement in Tying

Law

Christopher R. Leslie

I. INTRODUCTION ........................................................................... 2136

II. THE ORIGINAL FUNCTION OF THE COMMERCE ELEMENT IN TYING

LAW ............................................................................................. 2137

A. THE LEGAL TEST FOR IDENTIFYING WHICH TYING ARRANGEMENTS

ARE ANTICOMPETITIVE .......................................................... 2137

B. THE COMMERCE REQUIREMENT AND DISTINGUISHING

ANTICOMPETITIVE TYING ARRANGEMENTS ............................. 2140

C. PROBLEMS WITH USING DOLLAR VOLUME AS A PROXY FOR

ANTICOMPETITIVE EFFECTS .................................................... 2142

III. THE EVOLUTION OF THE COMMERCE ELEMENT ......................... 2144

A. THE JURISDICTIONAL INQUIRY IN TYING CLAIMS ..................... 2145

B. THE COMMERCE ELEMENT BECOMES JURISDICTIONAL ............ 2146

C. ONE ELEMENT, SEVERAL VARIATIONS ..................................... 2149

D. THE IMPLICATIONS OF—AND THE ARGUMENT AGAINST—A

JURISDICTIONAL INTERPRETATION OF THE COMMERCE

ELEMENT .............................................................................. 2153

IV. FIXING THE COMMERCE ELEMENT .............................................. 2156

A. EXAMINE COMPETITIVE EFFECTS DIRECTLY ............................ 2156

B. ELIMINATE THE PER SE LABEL ............................................... 2158

C. INTERSTATE COMMERCE AS A SEPARATE ELEMENT .................. 2160

V. CONCLUSION .............................................................................. 2160

 Chan cell or’s Professor of Law, University of California Irvine School of Law. T he author

thanks Herbert Hovenkamp and Tony Reese for comments on earlier drafts.

2136 IOWA LAW REVIEW [Vol. 100:2135

I. INTRODUCTION

Courts condemn tying arrangements based on the assumption that firms

are leveraging their market power in one market (the “tying product market”)

in order to monopolize a second market (the “tied product market”).1 A tying

arrangement exists when a seller refuses to sell one product (the “tying

product”) unless the buyer also agrees to purchase another separate product

(the “tied product”). Tying arrangements may potentially injure competition

in numerous ways.2 For example, a tying seller may employ a tie-in to suppress

competition in the market for the tied product.3 Tying arrangements may also

create a barrier to entry into the tying product market.4 Absent proof of a

legitimate purpose for the tying arrangement that cannot be achieved

through less restrictive means, scholars have long argued that “it is a

reasonable assumption that the purpose of the seller in using a tie-in is to

restrain competition in the tied product.”5 The Supreme Court famously

asserted in Standard Stations that “[t]ying agreements serve hardly any purpo se

beyond the suppression of competition.”6 Historically, the fear that tying

arrangements were almost inherently anticompetitive led courts to condemn

some tying arrangements as per se illegal.7

Despite decades of scholarship and hundreds of published opinions,

tying law remains a confusing and controversial area of antitrust

jurisprudence.8 This Essay focuses on the least controversial element: that a

1. See Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 14–15 (1984); Christopher

R. Leslie, Cutting Through Tying Theory with Occam’s Razor: A Simple Explanation of Tying

Arrangements, 78 TUL. L. REV. 727, 732–36 (2004).

2. See Christopher R. Leslie, Tying Conspiracies, 48 WM. & MARY L. REV. 2247, 2260–76

(2007).

3. N. Pac. Ry. Co. v. United States, 356 U.S. 1, 11 (1958) (“[T]he vice of tying

arrangements lies in the use of economic power in one market to restrict competition on the

merits in another . . . .”); Kurt A. Strasser, An Antitrust Policy for Tying Arrangemen ts, 34 EMORY L.J.

253, 267 (1985).

4. See Christopher R. Leslie, Patent Tying, Price Discrimination, and Innovation, 77 ANTITRUST

L.J. 811, 843–44 (2011).

5. Donald F. Turner, The Validity of Tying Arrangements Under the Antitrust Laws, 72 HARV. L.

REV. 50, 62 (1958).

6. Standard Oil Co. of Cal. v. United States, 337 U.S. 293, 305–06 (1949).

7. See Int’l Salt Co. v. United States, 332 U.S. 392, 396 (1947).

8. See generally Rebecca Haw Allensworth, The Influence of the Areeda–Hovenkamp Treatise in

the Lower Courts and What It Means for Institutional Reform in Antit rust, 100 IOWA L. REV. 1919(2015);

Roger D. Blair & Christine Piette Durrance, Licensing Health Care Professionals, State Action and

Antitrust Policy, 100 IOWA L. REV. 1943 (2015); Roger D. Blair & D. Daniel Sokol, Quality-

Enhancing Merger Efficiencies, 100 IOWA L. REV. 1969 (2015); John M. Connor & Robert H. Lande,

Not Treble Damages: Cartel Recoveries Are Mostly Less Than Single Damages, 100 IOWA L. REV. 1997

(2015); Daniel A. Crane, All I Really Need to Know About Antitrust I Learned in 1912, 100 IOWA L.

REV. 2025 (2015); Keith N. Hylton, Deterrence and Antitrust Punishment: Firms Versus Agents, 100

IOWA L. REV. 2069(2015); William E. Kovacic & Marc Winerman, The Federal Trade Commission as

an Independent Agency: Autonomy, Legitimacy, and Effectiveness, 100 IOWA L. REV. 2085 (2015); Mark

A. Lemley & Christopher R. Leslie, Antitrust Arbitration and Illinois Brick, 100 IOWA L. REV. 2115