The Determinants of Tying Litigation, 1961-2001

By Bays, Carson W. | International Advances in Economic Research, February 2007 | Go to article overview

The Determinants of Tying Litigation, 1961-2001


Bays, Carson W., International Advances in Economic Research


Abstract The idea that changes in Supreme Court decision rules should have measurable effects on the volume of cases litigated has a compelling plausibility, and several models of litigation predict this result. The prediction is a fragile one, however, because it implies very restrictive assumptions about the probability distributions of the cases subject to dispute. The period studied includes four Supreme Court decisions widely regarded as changing the rules and altering the level of uncertainty surrounding the legality of the anti-tying provisions of the antitrust laws. Broad trends in antitrust activity generally and changes in firm profitability statistically explain over three-quarters of the observed variation in tying litigation. Changes in legal precedent have only modest effects upon litigation.

Keywords common law efficiency * empirical antitrust * tying litigation

JEL Classification K21 * L42

Introduction

Antitrust policy in the United States has gone through a variety of changes since its genesis in the Sherman Act over a century ago. The treatment of some types of actions, such as horizontal conspiracy, evolved toward a standard of per se illegality in a relatively straightforward fashion, with the exception of an infrequent aberrant decision such as Appalachian Coals. (1) Other areas of antitrust have changed in the opposite direction. Tolerance of certain types of mergers, for example, has increased significantly since the period of populist hostility that characterized many decisions of the Warren Court era. Change in the legal status of other types of business behavior appears to be cyclical. For example, enforcement against tying arrangements has ranged from relative leniency during the very early years, to per se illegality beginning in the 1950s, toward a de facto rule of reason in the mid-1980s, and then back toward a more stringent standard during the last 10 years. The volume of tying litigation fluctuated substantially over the period in which standards were changing. This paper investigates these volume changes empirically and seeks to measure the influence of changes in Supreme Court precedent.

Most empirical analyses of antitrust activity date from Posner's massive statistical description of antitrust enforcement over the period 1890 through 1969 (Posner, 1970). Subsequent work has focused on explaining the determinants of enforcement. Some have studied antitrust litigation in specific industries (Lean, Ogur, & Rogers, 1985; Preston & Connor, 1992), while others have concentrated on the role of the allocation of public enforcement resources (Asch, 1975; Coate & McChesney, 1994; Ghosal & Gallo, 2001; Long, Schramm, & Tollison, 1973; Siegfried, 1975), and the effect of macroeconomic variables upon the volume of litigation (Bachmeier, Guaghan, & Swanson, 2004; Donohue & Siegelman, 1993; Siegelman & Donohue, 1995). The political determinants of antitrust litigation have been studied by economists (Amacher, Higgins, Shughart, & Tollison, 1985; Faith, Leavens, & Tollison, 1982) and political scientists (Eisner & Meier, 1994; Lewis-Beck, 1979). None of these papers, however, considered the possible influence of changes in Supreme Court precedent as a determinant of antitrust litigation.

The balance of this paper is organized as follows. The next section explains why changes in Supreme Court decisions would affect the volume of subsequent litigation and develops a simple model to develop testable predictions. A brief review of the changing status of tying illustrates why tying law provides a useful venue on which to test the model. The data and empirical results are then presented and a final section gives concluding perspectives on the results.

Why Does Precedent Matter?

The Supreme Court is the final arbiter of conflict between lower courts and its decisions help define and delimit the statutes created by the legislative branch. …

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