Dennis Carlton, Michael Waldman, Dec 20, 2012
As with other important cases involving firms such as Kodak and Microsoft, the recent Brantley case raises interesting questions concerning appropriate antitrust policy in situations where firms practice a form of tying. Such cases are particularly difficult from an antitrust perspective because tying is pervasive in the economy and in many cases-actually probably most-the tying behavior has an efficiency justification. Even in cases where the justification may not be efficiency, as might occur in some instances where tying enables price discrimination, the practice may have nothing to do with harming competition. So the difficult issue faced by the courts in analyzing tying under the antitrust laws is to prohibit tying which harms competition and welfare without prohibiting tying that has an efficiency justification and thus improves welfare or where tying has a justification that is unrelated to harming competition.
In this short paper we discuss the specific issues raised by the Brantley case. We begin by describing the case in more detail and then discuss the relevant economic theories that have been developed to understand the type of tying behavior practiced in the case. We then discuss appropriate antitrust policy and end with a concluding discussion.