Comments on: Per se tying: Why no simple “relative size of markets” test?

By: Namwoo

Namwoo — Thu, 27 Dec 2007 03:41:07 +0000

One of requirements for tying to be illegal per se is that the (tying) arrangement must affect a “substantial volume of commerce in the tied market.” See, e.g., Fortner Enters, Inc., v. United States Steel Corp., 394 U.S. 495, 503 (1969). The example noted above would not be a problem in the court because it would fail to satisfy this requirement. In other words, your example seems to satisfy other requirements, i.e., (1) monopoly power in the tying market (2) tying arrangement (3) two distinctive products, but failed to meet the fourth requirement noted in the first sentence. I don’t think that we need to compute the “relative” market share of the tying product. If calculation is really necessary, I agree with you in that at least 30% of market share in the tying product market should be possessed to affect a “substantial volume of commerce in the tied market.” If I don’t understand your point precisely, correct me, please. Thank you.

By: ernesto

ernesto — Thu, 13 Dec 2007 18:55:55 +0000

A is actually using the tie to insulate sales of cd’s to his installed base of users of the tool. By appropriately choosing the price of the tool and of the cd’s - given perfect tying - firm A can price discriminate users of the tool depending on their usage habits.

By: Hanno Kaiser

Hanno Kaiser — Mon, 10 Dec 2007 16:35:13 +0000

They don't! Those who want the tool must buy the CD-ROMs (for use with the tool) from A. Their business will be lost to B, D, and E. My point is not that no foreclosure occurs in the tied product market for CD-ROMs, but that because of the relatively small size of the entire tying product market compared to the tied market, the degree of foreclosure in the tied market cannot exceed a threshold of concern no matter how complete A's monopoly is in the tying market. (One might argue whether a 30% threshold is too high or too low, but there surely must be some threshold in the tying product market below which we should no longer care about foreclosure.)

By: Jay

Jay — Mon, 10 Dec 2007 01:59:47 +0000

But what if A says, I’ll sell you my monopoly lab tool only if you also buy my CD-ROMs. How do all the C’s get the tool, and still buy from B, D & E.