Tying Arrangements and the Leverage Problem

Abstract

In antitrust law, the conclusion that tying the sale of a second product to a patented product is automatically illegal has been accepted by courts for forty years. Under this theory, tying is harmful because it creates a new monopoly wholly outside the patent. Conditioning the sale or lease of one commodity on the sale or lease of another, a practice known as a tying agreement or a tie-in, is generally considered a trade-restraining device. The recent Report of the Attorney General's Committee to Study the Antitrust Laws declares that the purpose of a tying contract is monopolistic exploitation. This exploitation is achieved by "artificially extending the market for the 'tied' product beyond the consumer acceptance it would rate if competing independently on its merits and on equal terms." The view that tying contracts allow the wielding of monopolistic leverage is widely accepted.