Opinion ID: 343484
Heading Depth: 3
Heading Rank: 1

Heading: the rationale for presumptive illegality.

Text: 13 The rationale for proscribing the practice of tie-ins rests on the leverage theory. As we observed in Siegel v. Chicken Delight, Inc., 448 F.2d 43, 47 (9th Cir. 1971), cert. denied, 405 U.S. 955, 92 S.Ct. 1172, 31 L.Ed.2d 232 (1972): 14 The hallmark of a tie-in is that it denies competitors free access to the tied product market, not because the party imposing the arrangement has a superior product in that market, but because of the power or leverage exerted by the tying product. 15 Competitors in the tied product market are injured if they cannot offer their products on an equal basis with the distributor of the tying product. United States v. Loew's, Inc., 371 U.S. 38, 44-45, 83 S.Ct. 97, 9 L.Ed.2d 11 (1962); Times-Picayune Publishing Co., supra, 345 U.S. at 605, 73 S.Ct. 872. Buyers are injured because they forego choices among products and services, see, e. g., Fortner I, supra, 394 U.S. at 503-04, 89 S.Ct. 1252; Northern Pacific Ry. Co., supra, 356 U.S. at 6, 78 S.Ct. 514, and the public is harmed by the adverse effect on the market for the tied product. 4 16 These reasons for the presumptive illegality of tie-ins have been questioned persuasively by commentators and economists. See, e. g., Posner, Exclusionary Practices and the Antitrust Laws, 41 U.Chi.L.Rev. 506 (1974); Bowman, Tying Arrangements and the Leverage Problem, 67 Yale L.J. 19 (1957). Underlying their criticism is the belief that enforcement and interpretation of the antitrust laws should be governed by economic principles for maximizing consumer welfare. The effect of this premise would be to shift our focus from the traditional interests in avoiding coerced sacrifice(s) of alternatives to an analysis of the tie-in's effect on economic efficiency. Compare Turner, The Validity of Tying Arrangements under the Antitrust Laws, 72 Harv.L.Rev. 50, 60 (1958), with Posner, supra, at 509. 17 From either vantage point, but particularly that of economic efficiency, the logic of some tie-in opinions leaves something to be desired. They have failed to recognize the importance of tie-ins as a means of price discrimination. But cf. United States Steel Corp. v. Fortner Enterprises, Inc., --- U.S. ----, 97 S.Ct. 861, 51 L.Ed.2d 80 (Feb. 22, 1977) (Fortner II). 18 If the price for the tied item exceeds the price the purchaser otherwise would have to pay, absent the tying arrangement, then the purchaser will tend to regard this difference not as an increase in the price of the tied item, but rather as an increase in the price of the tying product. He is interested in the end price for the product or service here, the total cost of burial. As a result, increases in the price of the installation service, for example, should decrease the demand for the tying product, the cemetery lot. 5 Only when the tying arrangement permits price discrimination does our traditional concern with the seller's economic position in the tied product market become realistic. 19 The clear implication from a purely economic standpoint is that tie-ins should be considered on a case-by-case basis because they are not inherently detrimental. They can in fact be beneficial. 20 The difficulty with adopting such an approach is well-recognized and it derives from the nature of courts and the costs of judicial enforcement. The problem stems from the unwillingness, if not the inability, of courts to undertake complex economic decision making in the face of economic indeterminacy and over-crowded court calendars. 21 As courts, we engage in our own balancing of notions about efficiency and have concluded that rules of presumptive illegality serve two vital functions. First, the per se rule: 22 avoids the necessity for an incredibly complicated and prolonged economic investigation . . . in an effort to determine at large whether a particular restraint has been unreasonable an inquiry so often wholly fruitless . . . . 23 Northern Pacific Ry. Co., supra, 356 U.S. at 5, 78 S.Ct. at 518. 24 Second, the Court's steadfast refusal to heed arguments premised solely on the theory of consumer welfare recognizes the fact that enforcement of the antitrust laws requires rules which are both predictable and workable. The test of presumptive illegality is such a mechanism. It protects competition on the merits, Northern Pacific Ry. Co., supra, 356 U.S. at 6, 78 S.Ct. 514, by identifying situations which diminish equality of opportunity in competitive markets and proscribing them. 25