Elhauge on Tying: Vindicated by History

Einer Elhauge is almost singlehandedly winning a battle against the Single Monopoly Theory. The theory, as popularized by early Chicago School theorists,1 argues that a “vertically integrated monopolist can earn monopoly profit only in one of the markets—either the upstream or downstream market, but not both [and that] firms typically cannot extend monopoly power over one product to other products without sacrificing total profit.”2 The theory has been used to decry most any antitrust prohibition on vertical restraints or product bundling. If a monopolist engages in restrictive contracts, vertical acquisitions, or assorted tying arrangements, the theory goes, it can only be motivated by efficiency concerns. After all, if there is only one monopoly profit, then there are no more anticompetitive rents to be obtained, only gains from efficiencies. Though such a permissive attitude might be emblematic of adherents to an extreme view of the Chicago School of Antitrust, there has been surprisingly strong support for relaxing the rules against tying, both in academia and in the Supreme Court. Following a strict version of the Coase Theorem, the logic suggests that any effort invested in obtaining market power in an adjacent market will be (at least) countered by a loss in the rents currently enjoyed in the monopolized market. And any effort to extract higher prices in a competitively supplied good or service will be disciplined by sophisticated purchasers. Professor Elhauge decisively entered this fray with his 2009 Harvard Law Review article, Tying, Bundled Discounts, and the Death of the Single Monopoly Profit Theory.4 Decrying that “[t]ying law has for too long been in the thrall of the single monopoly profit theory,”5 Professor Elhauge argued that contrary to Chicago’s conventional wis-