Sagi’s A Comprehensive Economic and Legal Analysis of Tying Arrangements

From the conclusion of Guy Sagi’s A Comprehensive Economic and Legal Analysis of Tying Arrangements, 38 Seattle University Law Review 1 (2014):

There is currently a gap between the economic theory and the prevailing law regarding tying arrangements. These arrangements, which used to be considered essentially harmful, have been shown to possess limited potential for harm—certainly less significant potential than was previously thought. Moreover, tying arrangements have been shown to hold the potential for great and essential benefit. This Article has presented the main accepted modern economic insights, and has proposed the appropriate legal rules for analyzing the various tying scenarios. When the tying arrangement does not lead to a significant closing of the tied product market, and so it does not affect this market’s competitive structure, the legal per se rule should be applied. In contrast, when the tying arrangement leads to a significant closing of the tied product market, the rule of reason test should be applied, but not in the format that assumes that tying arrangements in these scenarios are harmful. Rather, it should be applied in a format that requires the plaintiff to prove the existence of real potential to harm competition significantly. If the existence of harmful potential is proven, the defendant will have to prove a significant efficiency justification. Then, the onus returns to the plaintiff to show that the anticompetitive potential of the tying outweighs its procompetitive potential.

— Joe

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