Per Se Illegality of Exclusive Deals and Tyings as Fair Competition

40 Pages Posted: 11 May 2022 Last revised: 16 Jun 2023

Date Written: May 6, 2022

Abstract

Dominant corporations forcefully deprive customers, distributors, and suppliers of their freedom to conduct business with whom they like and purchase the products and services they want by using exclusive deals and tyings. Exclusive deals and tyings are deeply intertwined restrictive and unfair business practices that are routinely used by dominant corporations due to their potency to entrench their market position, foreclose competition, and leverage their market power into new markets. Tyings and exclusive deals create a range of other public harms, including unfairly inhibiting and degrading the freedom of businesses to engage in competition, suppressing the entry and success of new and small firms, degrading firm rivalry, and causing consumers or other dependent firms to incur higher costs, lower quality products or services, and worse terms. These practices can also have other ancillary adverse and unintended effects, such as creating fragile supply chains and restricting the ability of consumers to repair their products.

Congress explicitly enacted the antitrust laws to promote fair competition between firms. A market governed by fair competition makes certain that the public is free from corporate domination, derives the greatest amount of benefit from vigorous firm rivalry, and ensures the primacy of democratic institutions rather than having markets controlled by private ordering, thus preventing the erosion of our political system and ensuring widespread, equitable, and fair economic prosperity. Indeed, the antitrust laws prohibit a range of conduct and work in conjunction with other laws to ensure firms are competing fairly and in socially beneficial ways. Given the stated harms of exclusive deals and tyings, both practices violate notions of fair competition and thus the spirit and Congress’s intent with the antitrust laws.

This Article makes a simple assertion, given the vast jurisprudence, repeated instances of litigation, the difficulty of succeeding in litigation under the current analysis employed by courts, and the clear public harms associated with these practices, all explicit and implicit exclusive deals and tyings should be subject to a bright line rule that clearly defines when they are illegal. The specific rule this Article proposes is that all exclusive deals that foreclose a substantial share of the relevant market are per se illegal. Concerning tyings, this Article proposes that all tyings should be per se illegal if they foreclose a substantial share of the relevant market and if there are two separate products or services, where the sale of one of the products or services is conditioned on the purchase or use of another. Additionally, this Article proposes a financial metric bright line rule such that all exclusive deals and tyings involving two separate products or services, where the sale of one of the products or services is conditioned on the purchase or use of another, are per se illegal when used by firms with over $1 billion in revenue.

Keywords: antitrust, tying, exclusive deal, monopolies, bright line, rule

Suggested Citation

Hanley, Daniel, Per Se Illegality of Exclusive Deals and Tyings as Fair Competition (May 6, 2022). Berkeley Technology Law Journal, 2023, Available at SSRN: https://ssrn.com/abstract=4101909

Daniel Hanley (Contact Author)

Open Markets Institute ( email )

655 15th St. NW
Suite 800
Washington, DC 20005
United States

HOME PAGE: http://https://www.openmarketsinstitute.org/

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