A comparative analysis of EC competition and US antitrust approaches to tying with special reference to economic thinking and intellectual property rights

Schmidt, Hedvig (2008) A comparative analysis of EC competition and US antitrust approaches to tying with special reference to economic thinking and intellectual property rights. University of Essex, Department of Law, Doctoral Thesis, 449pp.

Abstract

The thesis analyses the EC competition and US antitrust approaches to tying with special reference to economic thinking and intellectual property rights. It establishes that from an economic perspective that tying cannot be considered purely anti-competitive. Only when certain conditions are present is this the case: market power, an imperfect tied product market, which includes insufficient competition, high barriers to entry, and competitors' inability to compete with the dominant company's tied product package. Even in these circumstances, tying may have pro-competitive effects, which can outweigh the anti-competitive effects. While in the EC, competition law has completely overtaken the dealings with tying, in the US the Patent Act has adopted a per se legality approach only condemning tying when the intellectual property owner holds market power and applies the tying arrangement together with the patent to extend his patent monopoly to staple products.
In comparison, competition law on both sides of the Atlantic see tying as (almost) illegal per se - almost because both jurisdictions require establishment of market power.
A similar four-step test has been applied in both the EC and the US:

1) market power in the tying product market
2) two separate products
3) anti-competitive effects on the tied product market
4) no objective justifications

By assessing these steps in detail, the thesis identifies that when dealing with more complex products, technologically integrated products and products protected by intellectual property rights, the four-step test is inadequate and will often result in a wrong conclusion. The thesis therefore proposes a new test, which takes into consideration economic thinking, the recent reform debate of Article 82 of the EC Treaty, which has proposed a more economic approach to exclusionary behaviour and the fact that intellectual property rights do not always confer market power and also attempts to create greater legal certainty to ensure that despite having market power a company can tie when the pro-competitive benefits outweigh the anti-competitive effects.

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Contributors

Author: Hedvig Schmidt

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