Tying and Intellectual Property

In perhaps no other area of competition policy is there greater dispute over the appropriate legal rule as there is over the practice of tying. The authors consider when tying is anti-competitive and when the practice should be prohibited, adopting economic efficiency as the policy criterion. Through a review of prominent economic theories and case studies of tying, the variant circumstances in which tying can be pro-competitive, ambiguous, or anti-competitive are explored. Additionally, the linkage with intellectual property rights is discussed to understand how tying affects the relationship between innovation incentives and static market efficiency that is at the core of optimal IP policy. The authors conclude that antitrust authorities cannot rely on general rules in concluding that tying in a given case violates antitrust laws, but must rely on case-by-case analysis. Given the relative rarity of anti-competitive tying, the authorities should require significant evidence of anti-competitive effects before making an order against tying.