Jefferson Parish Hospital District No. 2. v. Hyde

U.S. Supreme Court Jefferson Parish Hosp. Dist. v. Hyde, 466 U.S. 2 (1984) Jefferson Parish Hospital District
No. 2 v. Hyde No. 82-1031 Argued November 2,
1983 Decided March 27,
1984 466 U.S.
2 CERTIORARI TO THE UNITED STATES
COURT OF APPEALS FOR THE FIFTH CIRCUIT Syllabus A hospital governed by petitioners has a contract with a firm of
anesthesiologists requiring all anesthesiological services for the
hospital's patients to be performed by that firm. Because of this
contract, respondent anesthesiologist's application for admission
to the hospital's medical staff was denied. Respondent then
commenced an action in Federal District Court, claiming that the
exclusive contract violated § 1 of the Sherman Act, and seeking
declaratory and injunctive relief. The District Court denied
relief, finding that the anticompetitive consequences of the
contract were minimal, and outweighed by benefits in the form of
improved patient care. The Court of Appeals reversed, finding the
contract illegal " per se. " The court held that the case
involved a "tying arrangement" because the users of the hospital's
operating rooms (the tying product) were compelled to purchase the
hospital's chosen anesthesiological services (the tied product),
that the hospital possessed sufficient market power in the tying
market to coerce purchasers of the tied product, and that, since
the purchase of the tied product constituted a "not insubstantial
amount of interstate commerce," the tying arrangement was therefore
illegal " per se. " Held: The exclusive contract in question does not
violate § 1 of the Sherman Act. 466 U. S. 9-32.

															(a) Any inquiry into the validity of a tying arrangement must
focus on the market or markets in which the two products are sold,
for that is where the anticompetitive forcing has its impact. Thus,
in this case, the analysis of the tying issue must focus on the
hospital's sale of services to its patients, rather than its
contractual arrangements with the providers of anesthesiological
services. In making that analysis, consideration must be given to
whether petitioners are selling two separate products that may be
tied together, and, if so, whether they have used their market
power to force their patients to accept the tying arrangement. Pp. 466 U. S.
9 -18.

															(b) No tying arrangement can exist here unless there is a
sufficient demand for the purchase of anesthesiological services
separate from hospital services to identify a distinct product
market in which it is efficient to offer anesthesiological services
separately from hospital services. The Page 466 U. S. 3 fact that the exclusive contract requires purchase of two
services that would otherwise be purchased separately does not make
the contract illegal. Only if patients are forced to purchase the
contracting firm's services as a result of the hospital's market
power would the arrangement have anticompetitive consequences. If
no forcing is present, patients are free to enter a competing
hospital and to use another anesthesiologist instead of the firm. 466 U. S. 18-25.

															(c) The record does not provide a basis for applying the per
se rule against tying to the arrangement in question. While
such factors as the Court of Appeals relied on in rendering its
decision -- the prevalence of health insurance as eliminating a
patient's incentive to compare costs, and patients' lack of
sufficient information to compare the quality of the medical care
provided by competing hospitals -- may generate "market power" in
some abstract sense, they do not generate the kind of market power
that justifies condemnation of tying. Tying arrangements need only
be condemned if they restrain competition on the merits by forcing
purchases that would not otherwise be made. The fact that patients
of the hospital lack price consciousness will not force them to
take an anesthesiologist whose services they do not want.
Similarly, if the patients cannot evaluate the quality of
anesthesiological services, it follows that they are indifferent
between certified anesthesiologists even in the absence of a tying
arrangement. Pp. 466 U. S.
26 -29.

															(d) In order to prevail in the absence of per se liability, respondent has the burden of showing that the challenged
contract violated the Sherman Act because it unreasonably
restrained competition, and no such showing has been made. The
evidence is insufficient to provide a basis for finding that the
contract, as it actually operates in the market, has unreasonably
restrained competition. All the record establishes is that the
choice of anesthesiologists at the hospital has been limited to one
of the four doctors who are associated with the contracting firm.
If respondent were admitted to the hospital's staff, the range of
choice would be enlarged, but the most significant restraints on
the patient's freedom to select a specific anesthesiologist would
nevertheless remain. There is no evidence that the price, quality,
or supply or demand for either the "tying product" or the "tied
product" has been adversely affected by the exclusive contract, and
no showing that the market as a whole has been affected at all by
the contract. Pp. 466 U. S.
29 -32.

															686 F.2d 286, reversed and remanded.

															STEVENS, J., delivered the opinion of the Court, in which
BRENNAN, WHITE, MARSHALL, and BLACKMUN, JJ., joined. BRENNAN, J.,
filed a concurring opinion, in which MARSHALL, J., joined, post, p. 466 U. S. 32 .
O'CONNOR, Page 466 U. S. 4 J., filed an opinion concurring in the judgment, in which
BURGER, C.J., and POWELL and REHNQUIST, JJ., joined, post, p. 466 U. S. 32 .

															JUSTICE STEVENS delivered the opinion of the Court.

															At issue in this case is the validity of an exclusive contract
between a hospital and a firm of anesthesiologists. We must decide
whether the contract gives rise to a per se violation of §
1 of the Sherman Act [ Footnote
1 ] because every patient undergoing Page 466 U. S. 5 surgery at the hospital must use the services of one firm of
anesthesiologists, and, if not, whether the contract is
nevertheless illegal because it unreasonably restrains competition
among anesthesiologists.

															In July, 1977, respondent Edwin G. Hyde, a board-certified
anesthesiologist, applied for admission to the medical staff of
East Jefferson Hospital. The credentials committee and the medical
staff executive committee recommended approval, but the hospital
board denied the application because the hospital was a party to a
contract providing that all anesthesiological services required by
the hospital's patients would be performed by Roux &
Associates, a professional medical corporation. Respondent then
commenced this action seeking a declaratory judgment that the
contract is unlawful and an injunction ordering petitioners to
appoint him to the hospital staff. [ Footnote 2 ] After trial, the District Court denied relief,
finding that the anticompetitive consequences of the Roux contract
were minimal, and outweighed by benefits in the form of improved
patient care. 513 F.
Supp. 532 (ED La.1981). The Court of Appeals reversed because
it was persuaded that the contract was illegal " per se. "
686 F.2d 286 (CA5 1982). We granted certiorari, 460 U.S. 1021
(1983), and now reverse. I In February, 1971, shortly before East Jefferson Hospital
opened, it entered into an "Anesthesiology Agreement" with Roux
& Associates (Roux), a firm that had recently been organized by
Dr. Kermit Roux. The contract provided that any anesthesiologist
designated by Roux would be admitted to the hospital's medical
staff. The hospital agreed to Page 466 U. S. 6 provide the space, equipment, maintenance, and other supporting
services necessary to operate the anesthesiology department. It
also agreed to purchase all necessary drugs and other supplies. All
nursing personnel required by the anesthesia department were to be
supplied by the hospital, but Roux had the right to approve their
selection and retention. [ Footnote
3 ] The hospital agreed to

															"restrict the use of its anesthesia department to Roux &
Associates and [that] no other persons, parties or entities shall
perform such services within the Hospital for the ter[m] of this
contract."

															App.19. [ Footnote 4 ]

															The 1971 contract provided for a 1-year term automatically
renewable for successive 1-year periods unless either party elected
to terminate. In 1976, a second written contract was executed
containing most of the provisions of the 1971 agreement. Its term
was five years, and the clause excluding other anesthesiologists
from the hospital was deleted; [ Footnote 5 ] the hospital nevertheless continued to regard
itself as committed to a closed anesthesiology department. Only
Roux was permitted to practice anesthesiology at the hospital. At
the Page 466 U. S. 7 time of trial the department included four anesthesiologists.
The hospital usually employed 13 or 14 certified registered nurse
anesthetists. [ Footnote 6 ]

															The exclusive contract had an impact on two different segments
of the economy: consumers of medical services, and providers of
anesthesiological services. Any consumer of medical services who
elects to have an operation performed at East Jefferson Hospital
may not employ any anesthesiologist not associated with Roux. No
anesthesiologists except those employed by Roux may practice at
East Jefferson.

															There are at least 20 hospitals in the New Orleans metropolitan
area, and about 70 percent of the patients living in Jefferson
Parish go to hospitals other than East Jefferson. Because it
regarded the entire New Orleans metropolitan area as the relevant
geographic market in which hospitals compete, this evidence
convinced the District Court that East Jefferson does not possess
any significant "market power"; therefore it concluded that
petitioners could not use the Roux contract to anticompetitive
ends. [ Footnote 7 ] The same
evidence led the Court of Appeals to draw a different conclusion.
Noting that 30 percent of the residents of the parish go to East
Jefferson Hospital, and that, in fact, "patients tend to choose
hospitals by location, rather than price or quality," the Court
of Page 466 U. S. 8 Appeals concluded that the relevant geographic market was the
East Bank of Jefferson Parish. 686 F.2d at 290. The conclusion that
East Jefferson Hospital possessed market power in that area was
buttressed by the facts that the prevalence of health insurance
eliminates a patient's incentive to compare costs, that the patient
is not sufficiently informed to compare quality, and that family
convenience tends to magnify the importance of location. [ Footnote 8 ]

															The Court of Appeals held that the case involves a "tying
arrangement" because the

															"users of the hospital's operating rooms (the tying product) are
also compelled to purchase the hospital's chosen anesthesia service
(the tied product)." Id. at 289. Having defined the relevant geographic
market for the tying product as the East Bank of Jefferson Parish,
the court held that the hospital possessed "sufficient market power
in the tying market to coerce purchasers of the tied product." Id. at 291. Since the purchase of the tied product
constituted a "not insubstantial amount of interstate commerce,"
under the Court of Appeals' reading of our decision in Northern
Pacific R. Co. v. United States, 356 U. S.
1 , 356 U. S. 11 (1958), the tying arrangement was therefore illegal " per
se. " [ Footnote 9 ] Page 466 U. S. 9 II Certain types of contractual arrangements are deemed
unreasonable as a matter of law. [ Footnote 10 ] The character of the restraint produced by
such an arrangement is considered a sufficient basis for presuming
unreasonableness without the necessity of any analysis of the
market context in which the arrangement may be found. [ Footnote 11 ] A price-fixing
agreement between competitors is the classic example of such an
arrangement. Arizona v. Maricopa County Medical Society, 457 U. S. 332 , 457 U. S.
343 -348 (1982). It is far too late in the history of our
antitrust jurisprudence to question the proposition that certain
tying arrangements pose an unacceptable risk of stifling
competition, and therefore are unreasonable " per se. "
[ Footnote 12 ] The rule was
first enunciated in International Salt Co. v. United
States, 332 U. S. 392 , 332 U. S. 396 (1947), [ Footnote 13 ] and
has been endorsed Page 466 U. S. 10 by this Court many times since. [ Footnote 14 ] The rule also reflects congressional
policies underlying the antitrust laws. In enacting § 3 of the
Clayton Act, 38 Stat. 731, 15 U.S.C. § 14, Congress expressed great
concern about the anticompetitive character of tying arrangements. See H.R.Rep. No. 627, 63d Cong., 2d Sess., 10-13 (1914);
S.Rep. No. 698, 63d Cong., 2d Sess., 6-9 (1914). [ Footnote 15 ] While this case Page 466 U. S. 11 does not arise under the Clayton Act, the congressional finding
made therein concerning the competitive consequences of tying is
illuminating, and must be respected. [ Footnote 16 ]

															It is clear, however, that not every refusal to sell two
products separately can be said to restrain competition. If each of
the products may be purchased separately in a competitive market,
one seller's decision to sell the two in a single package imposes
no unreasonable restraint on either market, particularly Page 466 U. S. 12 if competing suppliers are free to sell either the entire
package or its several parts. [ Footnote 17 ]

															For example, we have written that,

															"if one of a dozen food stores in a community were to refuse to
sell flour unless the buyer also took sugar, it would hardly tend
to restrain competition in sugar if its competitors were ready and
able to sell flour by itself." Northern Pacific R. Co. v. United States, 356 U.S. at
7. [ Footnote 18 ] Buyers
often find package sales attractive; a seller's decision to offer
such packages can merely be an attempt to compete effectively --
conduct that is entirely consistent with the Sherman Act. See
Fortner Enterprises v. United States Steel Corp., 394 U.
S. 495 , 394 U. S.
517 -518 (1969) ( Fortner I ) (WHITE, J.,
dissenting); id. at 394 U. S.
524 -525 (Fortas, J., dissenting).

															Our cases have concluded that the essential characteristic of an
invalid tying arrangement lies in the seller's exploitation of its
control over the tying product to force the buyer into the purchase
of a tied product that the buyer either did not want at all or
might have preferred to purchase elsewhere on different terms. When
such "forcing" is present, competition on the merits in the market
for the tied item is restrained, and the Sherman Act is
violated.

															"Basic to the faith that a free economy best promotes the public
weal is that goods must stand the cold test of competition; that
the public, acting through the market's impersonal judgment, shall
allocate the Nation's resources, and thus direct the course its
economic development will take. . . . By conditioning his sale of
one commodity on Page 466 U. S. 13 the purchase of another, a seller coerces the abdication of
buyers' independent judgment as to the 'tied' product's merits and
insulates it from the competitive stresses of the open market. But
any intrinsic superiority of the 'tied' product would convince
freely choosing buyers to select it over others anyway." Times-Picayune Publishing Co. v. United States, 345 U. S. 594 , 345 U. S. 605 (1953). [ Footnote 19 ]

															Accordingly, we have condemned tying arrangements when the
seller has some special ability -- usually called "market Page 466 U. S. 14 power" -- to force a purchaser to do something that he would not
do in a competitive market. See United States Steel Corp. v.
Fortner Enterprises, 429 U. S. 610 , 429 U. S. 620 (1977) ( Fortner II ); Fortner I, 394 U.S. at 394 U. S.
503 -504; United States v. Loew's Inc., 371 U. S. 38 , 371 U. S. 45 , 371 U. S. 48 , n.
5 (1962); Northern Pacific R. Co. v. United States, 356
U.S. at 6-7. [ Footnote 20 ]
When "forcing" occurs, our cases have found the tying arrangement
to be unlawful.

															Thus, the law draws a distinction between the exploitation of
market power by merely enhancing the price of the tying product, on
the one hand, and by attempting to impose restraints on competition
in the market for a tied product, on the other. When the seller's
power is just used to maximize its return in the tying product
market, where presumably its product enjoys some justifiable
advantage over its competitors, the competitive ideal of the
Sherman Act is not necessarily compromised. But if that power is
used to impair competition on the merits in another market, a
potentially inferior product may be insulated from competitive
pressures. [ Footnote 21 ]
This impairment could either harm existing competitors or create
barriers to entry of new competitors in the market for the tied
product, Fortner I, 394 U.S. at 509, [ Footnote 22 ] and can increase Page 466 U. S. 15 the social costs of market power by facilitating price
discrimination, thereby increasing monopoly profits over what they
would be absent the tie, Fortner II, 429 U.S. at 617.
[ Footnote 23 ] And from the
standpoint of the consumer -- whose interests the statute was
especially intended to serve -- the freedom to select the best
bargain in the second market is impaired by his need to purchase
the tying product, and perhaps by an inability to evaluate the true
cost of either product when they are available only as a package.
[ Footnote 24 ] In sum, to
permit restraint of competition on the merits through tying
arrangements would be, as we observed in Fortner II, to
condone "the existence of power that a free market would not
tolerate." 429 U.S. at 429 U. S. 617 (footnote omitted). Per se condemnation -- condemnation without inquiry
into actual market conditions -- is only appropriate if the
existence of forcing is probable. [ Footnote 25 ] Thus, application of the per se rule Page 466 U. S. 16 focuses on the probability of anticompetitive consequences. Of
course, as a threshold matter, there must be a substantial
potential for impact on competition in order to justify per
se condemnation. If only a single purchaser were "forced" with
respect to the purchase of a tied item, the resultant impact on
competition would not be sufficient to warrant the concern of
antitrust law. It is for this reason that we have refused to
condemn tying arrangements unless a substantial volume of commerce
is foreclosed thereby. See Fortner I, 394 U.S. at 394 U. S.
501 -502; Northern Pacific R. Co. v. United
States, 356 U.S. at 356 U. S. 6 -7; Times-Picayune, 345 U.S. at 345 U. S.
608 -610; International Salt, 332 U.S. at 332 U. S. 396 .
Similarly, when a purchaser is "forced" to buy a product he would
not have otherwise bought even from another seller in the
tied-product market, there can be no adverse impact on competition,
because no portion of the market which would otherwise have been
available to other sellers has been foreclosed.

															Once this threshold is surmounted, per se prohibition
is appropriate if anticompetitive forcing is likely. For example,
if the Government has granted the seller a patent or similar
monopoly over a product, it is fair to presume that the inability
to buy the product elsewhere gives the seller market power. United States v. Loew's Inc., 371 U.S. at 371 U. S. 45 -47.
Any effort to enlarge the scope of the patent monopoly by using the
market power it confers to restrain competition in the market for a
second product will undermine competition on the merits in that
second market. Thus, the sale or lease of a patented item on
condition that the buyer make all his purchases of a separate tied
product from the patentee is unlawful. See United States v.
Paramount Pictures, Inc., 334 U. S. 131 , 334 U. S.
156 -159 (1948); International Salt, 332 Page 466 U. S. 17 U.S. at 332 U. S.
395 -396; International Business Machines Corp. v.
United States, 298 U. S. 131 (1936).

															The same strict rule is appropriate in other situations in which
the existence of market power is probable. When the seller's share
of the market is high, see Times-Picayune Publishing Co. v.
United States, 345 U.S. at 345 U. S.
611 -613, or when the seller offers a unique product that
competitors are not able to offer, see Fortner I, 394 U.S.
at 394 U. S.
504 -506, and n. 2, the Court has held that the
likelihood that market power exists and is being used to restrain
competition in a separate market is sufficient to make per
se condemnation appropriate. Thus, in Northern Pacific R.
Co. v. United States, 356 U. S. 1 (1958),
we held that the railroad's control over vast tracts of western
real estate, although not itself unlawful, gave the railroad a
unique kind of bargaining power that enabled it to tie the sales of
that land to exclusive, long-term commitments that fenced out
competition in the transportation market over a protracted period.
[ Footnote 26 ] When, however,
the Page 466 U. S. 18 seller does not have either the degree or the kind of market
power that enables him to force customers to purchase a second,
unwanted product in order to obtain the tying product, an antitrust
violation can be established only by evidence of an unreasonable
restraint on competition in the relevant market. See Fortner
I, 394 U.S. at 394 U. S.
499 -500; Times-Picayune Publishing Co. v. United
States, 345 U.S. at 345 U. S.
614 -615.

															In sum, any inquiry into the validity of a tying arrangement
must focus on the market or markets in which the two products are
sold, for that is where the anticompetitive forcing has its impact.
Thus, in this case, our analysis of the tying issue must focus on
the hospital's sale of services to its patients, rather than its
contractual arrangements with the providers of anesthesiological
services. In making that analysis, we must consider whether
petitioners are selling two separate products that may be tied
together, and, if so, whether they have used their market power to
force their patients to accept the tying arrangement. III The hospital has provided its patients with a package that
includes the range of facilities and services required for a
variety of surgical operations. [ Footnote 27 ] At East Jefferson Hospital, the package
includes the services of the anesthesiologist. [ Footnote 28 ] Petitioners argue that the
package does not involve a tying arrangement Page 466 U. S. 19 at all -- that they are merely providing a functionally
integrated package of services. [ Footnote 29 ] Therefore, petitioners contend that it is
inappropriate to apply principles concerning tying arrangements to
this case.

															Our cases indicate, however, that the answer to the question
whether one or two products are involved turns not on the
functional relation between them, but rather on the character of
the demand for the two items. [ Footnote 30 ] In Times-Picayune Publishing Co. v.
United States, 345 U. S. 594 (1953), the Court held that a tying arrangement was not present
because the arrangement did not link two distinct markets for
products that were distinguishable in the eyes of buyers. [ Footnote 31 ] In Page 466 U. S. 20 Fortner I, the Court concluded that a sale involving
two independent transactions, separately priced and purchased from
the buyer's perspective, was a tying arrangement. [ Footnote 32 ] These Page 466 U. S. 21 cases make it clear that a tying arrangement cannot exist unless
two separate product markets have been linked.

															The requirement that two distinguishable product markets be
involved follows from the underlying rationale of the rule against
tying. The definitional question depends on whether the arrangement
may have the type of competitive consequences addressed by the
rule. [ Footnote 33 ] The
answer to the question whether petitioners have utilized a tying
arrangement must be based on whether there is a possibility that
the economic effect of the arrangement is that condemned by the
rule against tying -- that petitioners have foreclosed competition
on the merits in a product market distinct from the market for the
tying item. [ Footnote 34 ]
Thus, in this case, no tying arrangement can exist unless there is
a sufficient demand for the purchase of anesthesiological services
separate from hospital services Page 466 U. S. 22 to identify a distinct product market in which it is efficient
to offer anesthesiological services separately from hospital
services. [ Footnote 35 ]

															Unquestionably, the anesthesiological component of the package
offered by the hospital could be provided separately and could be
selected either by the individual patient or by one of the
patient's doctors if the hospital did not insist on including
anesthesiologcal services in the package it offers to its
customers. As a matter of actual practice, anesthesiological
services are billed separately from the hospital services
petitioners provide. There was ample and uncontroverted testimony
that patients or surgeons often request specific anesthesiologists
to come to a hospital and provide anesthesia, and that the choice
of an individual anesthesiologist separate from the choice of a
hospital is particularly frequent in respondent's specialty,
obstetric anesthesiology. [ Footnote 36 ] The District Page 466 U. S. 23 Court found that "[t]he provision of anesthesia services is a
medical service separate from the other services provided by the
hospital." 613 F. Supp. at 540. [ Footnote 37 ] The Court of Appeals agreed with this
finding, and went on to observe:

															"[A]n anesthesiologist is normally selected by the surgeon,
rather than the patient, based on familiarity gained through a
working relationship. Obviously, the surgeons who practice at East
Jefferson Hospital do not gain familiarity with any
anesthesiologists other than Roux and Associates."

															686 F.2d at 291. [ Footnote
38 ] The record amply supports the conclusion that consumers
differentiate between anesthesiological services and the other
hospital services provided by petitioners. [ Footnote 39 ] Page 466 U. S. 24 Thus, the hospital's requirement that its patients obtain
necessary anesthesiological services from Roux combined the
purchase of two distinguishable services in a single transaction.
[ Footnote 40 ] Nevertheless,
the fact that this case involves a required Page 466 U. S. 25 purchase of two services that would otherwise be purchased
separately does not make the Roux contract illegal. As noted above,
there is nothing inherently anticompetitive about packaged sales.
Only if patients are forced to purchase Roux's services as a result
of the hospital's market power would the arrangement have
anticompetitive consequences. If no forcing is present, patients
are free to enter a competing hospital and to use another
anesthesiologist instead of Roux. [ Footnote 41 ] The fact that petitioners' patients are
required to purchase two separate items is only the beginning of
the appropriate inquiry. [ Footnote 42 ] Page 466 U. S. 26 IV The question remains whether this arrangement involves the use
of market power to force patients to buy services they would not
otherwise purchase. Respondent's only basis for invoking the per se rule against tying, and thereby avoiding analysis
of actual market conditions, is by relying on the preference of
persons residing in Jefferson Parish to go to East Jefferson, the
closest hospital. A preference of this kind, however, is not
necessarily probative of significant market power.

															Seventy percent of the patients residing in Jefferson Parish
enter hospitals other than East Jefferson. 513 F. Supp. at 539.
Thus, East Jefferson's "dominance" over persons residing in
Jefferson Parish is far from overwhelming. [ Footnote 43 ] The Page 466 U. S. 27 fact that a substantial majority of the parish's residents elect
not to enter East Jefferson means that the geographic data do not
establish the kind of dominant market position that obviates the
need for further inquiry into actual competitive conditions. The
Court of Appeals acknowledged as much; it recognized that East
Jefferson's market share alone was insufficient as a basis to infer
market power, and buttressed its conclusion by relying on "market
imperfections" [ Footnote 44 ]
that permit petitioners to charge noncompetitive prices for
hospital services: the prevalence of third-party payment for health
care costs reduces price competition, and a lack of adequate
information renders consumers unable to evaluate the quality of the
medical care provided by competing hospitals. 686 F.2d at 290.
[ Footnote 45 ] While these
factors may generate "market power" in some abstract sense,
[ Footnote 46 ] they do not
generate the kind of market power that justifies condemnation of
tying.

															Tying arrangements need only be condemned if they restrain
competition on the merits by forcing purchases that would not
otherwise be made. A lack of price or quality Page 466 U. S. 28 competition does not create this type of forcing. If consumers
lack price consciousness, that fact will not force them to take an
anesthesiologist whose services they do not want -- their
indifference to price will have no impact on their willingness or
ability to go to another hospital where they can utilize the
services of the anesthesiologist of their choice. Similarly, if
consumers cannot evaluate the quality of anesthesiological
services, it follows that they are indifferent between certified
anesthesiologists even in the absence of a tying arrangement --
such an arrangement cannot be said to have foreclosed a choice that
would have otherwise been made "on the merits."

															Thus, neither of the "market imperfections" relied upon by the
Court of Appeals forces consumers to take anesthesiological
services they would not select in the absence of a tie. It is safe
to assume that every patient undergoing a surgical operation needs
the services of an anesthesiologist; at least this record contains
no evidence that the hospital "forced" any such services on
unwilling patients. [ Footnote
47 ] The record therefore Page 466 U. S. 29 does not provide a basis for applying the per se rule
against tying to this arrangement. V In order to prevail in the absence of per se liability,
respondent has the burden of proving that the Roux contract
violated the Sherman Act because it unreasonably restrained
competition. That burden necessarily involves an inquiry into the
actual effect of the exclusive contract on competition among
anesthesiologists. This competition takes place in a market that
has not been defined. The market is not necessarily the same as the
market in which hospitals compete in offering services to patients;
it may encompass competition among anesthesiologists for exclusive
contracts such as the Roux contract and might be statewide or
merely local. [ Footnote 48 ]
There is, however, insufficient evidence in this record to provide
a basis for finding that the Roux contract, as it actually operates
in the market, has unreasonably restrained competition. Page 466 U. S. 30 The record sheds little light on how this arrangement affected
consumer demand for separate arrangements with a specific
anesthesiologist. [ Footnote
49 ] The evidence indicates that some surgeons and patients
preferred respondent's services to those of Roux, but there is no
evidence that any patient who was sophisticated enough to know the
difference between two anesthesiologists was not also able to go to
a hospital that would provide him with the anesthesiologist of his
choice. [ Footnote 50 ]

															In sum, all that the record establishes is that the choice of
anesthesiologists at East Jefferson has been limited to one of the
four doctors who are associated with Roux and therefore have staff
privileges. [ Footnote 51 ]
Even if Roux did not have an exclusive contract, the range of
alternatives open to the patient would be severely limited by the
nature of the transaction and the hospital's unquestioned right to
exercise some control over the identity and the number of doctors
to whom it accords staff privileges. If respondent is admitted to
the staff of East Jefferson, the range of choice will be enlarged
from Page 466 U. S. 31 four to five doctors, but the most significant restraints on the
patient's freedom to select a specific anesthesiologist will
nevertheless remain. [ Footnote
52 ] Without a showing of actual adverse effect on competition,
respondent cannot make out a case under the antitrust laws, and no
such showing has been made. VI Petitioners' closed policy may raise questions of medical ethics
[ Footnote 53 ] and may have
inconvenienced some patients who would prefer to have their
anesthesia administered by someone other than a member of Roux
& Associates, but it does not have the obviously unreasonable
impact on purchasers that has characterized the tying arrangements
that this Court has branded unlawful. There is no evidence that the
price, the quality, or the supply or demand for either the "tying
product" or the "tied product" involved in this case has been
adversely affected by the exclusive contract between Roux and the
hospital. It may well be true that the contract made it necessary
for Dr. Hyde and others to practice elsewhere, rather than at East
Jefferson. But there has been no showing that the market as a whole
has been affected at all by the contract. Indeed, as we previously
noted, the record tells us very little about the market for the
services of anesthesiologists. Page 466 U. S. 32 Yet that is the market in which the exclusive contract has had
its principal impact. There is simply no showing here of the kind
of restraint on competition that is prohibited by the Sherman Act.
Accordingly, the judgment of the Court of Appeals is reversed, and
the case is remanded to that court for further proceedings
consistent with this opinion. [ Footnote 54 ] It is so ordered. [ Footnote 1 ]

															Section 1 of the Sherman Act states:

															"Every contract, combination in the form of trust or otherwise,
or conspiracy, in restraint of trade or commerce among the several
States, or with foreign nations, is declared to be illegal. . .
."

															26 Stat. 209, as amended, 15 U.S.C. § 1. Respondent has standing
to enforce § 1 by virtue of § 4 of the Clayton Act, 38 Stat. 731,
as amended, 15 U.S.C. § 15.

															[ Footnote 2 ]

															In addition to seeking relief under the Sherman Act,
respondent's complaint alleged violations of 42 U.S.C. § 1983 and
state law. The District Court rejected these claims. The Court of
Appeals passed only on the Sherman Act claim.

															[ Footnote 3 ]

															The contract required all of the physicians employed by Roux to
confine their practice of anesthesiology to East Jefferson.

															[ Footnote 4 ]

															Originally Roux agreed to provide at least two full-time
anesthesiologists acceptable to the hospital's credentials
committee. Roux agreed to furnish additional anesthesiologists as
necessary. The contract also provided that Roux would designate one
of its qualified anesthesiologists to serve as the head of the
hospital's department of anesthesia.

															The fees for anesthesiological services are billed separately to
the patients by the hospital. They cover the hospital's costs and
the professional services provided by Roux. After a deduction of
eight percent to provide a reserve for uncollectible accounts, the
fees are divided equally between Roux and the hospital.

															[ Footnote 5 ]

															"Roux testified that he requested the omission of the exclusive
language in his 1976 contract because he believes a surgeon or
patient is entitled to the services of the anesthesiologist of his
choice. He admitted that he and others in his group did work
outside East Jefferson following the 1976 contract, but felt he was
not in violation of the contract in light of the changes made in
it." 513 F.
Supp. 532 , 537 (ED La.1981).

															[ Footnote 6 ]

															Approximately 875 operations are performed at the hospital each
month; as many as 12 or 13 operating rooms may be in use at one
time.

															[ Footnote 7 ]

															The District Court found:

															"The impact on commerce resulting from the East Jefferson
contract is minimal. The contract is restricted in effect to one
hospital in an area containing at least twenty others providing the
same surgical services. It would be a different situation if Dr.
Roux had exclusive contracts in several hospitals in the relevant
market. As pointed out by plaintiff, the majority of surgeons have
privileges at more than one hospital in the area. They have the
option of admitting their patients to another hospital where they
can select the anesthesiologist of their choice. Similarly, a
patient can go to another hospital if he is not satisfied with the
physicians available at East Jefferson." Id. at 541.

															[ Footnote 8 ]

															While the Court of Appeals did discuss the impact of the
contract upon patients, it did not discuss its impact upon
anesthesiologists. The District Court had referred to evidence
that, in the entire State of Louisiana, there are 156
anesthesiologists and 345 hospitals with operating rooms. The
record does not tell us how many of the hospitals in the New
Orleans metropolitan area have "open" anesthesiology departments
and how many have closed departments. Respondent, for example,
practices with two other anesthesiologists at a hospital which has
an open department; he previously practiced for several years in a
different New Orleans hospital and, prior to that, had practiced in
Florida. The record does not tell us whether there is a shortage or
a surplus of anesthesiologists in any part of the country, or
whether they are thriving or starving.

															[ Footnote 9 ]

															The Court of Appeals rejected as "clearly erroneous" the
District Court's finding that the exclusive contract was justified
by quality considerations. See 686 F.2d at 292.

															[ Footnote 10 ]

															"For example, where a complaint charges that the defendants have
engaged in price fixing, or have concertedly refused to deal with
nonmembers of an association, or have licensed a patented device on
condition that unpatented materials be employed in conjunction with
the patented device, then the amount of commerce involved is
immaterial, because such restraints are illegal per se." United States v. Columbia Steel Co., 334 U.
S. 495 , 334 U. S.
522 -523 (1948) (footnotes omitted).

															[ Footnote 11 ] See, e.g., Continental T.V., Inc. v. GTE Sylvania Inc., 433 U. S. 36 , 433 U. S. 49 -50
(1977)

															[ Footnote 12 ]

															The District Court intimated that the principles of per
se liability might not apply to cases involving the medical
profession. 513 F. Supp. at 543-544. The Court of Appeals rejected
this approach. 686 F.2d at 292-294. In this Court, petitioners
"assume" that the same principles apply to the provision of
professional services as apply to other trades or businesses. Brief
for Petitioners 4, n. 2. See generally National Society of
Professional Engineers v. United States, 435 U.
S. 679 (1978).

															[ Footnote 13 ]

															The roots of the doctrine date at least to Motion Picture
Patents Co. v. Universal Film Co., 243 U.
S. 502 (1917), a case holding that the sale of a
patented film projector could not be conditioned on its use only
with the patentee's films, since this would have the effect of
extending the scope of the patent monopoly. See also Henry v.
Dick Co., 224 U. S. 1 , 224 U. S. 70 -73
(1912) (White, C.J., dissenting).

															[ Footnote 14 ] See United States Steel Corp. v. Fortner Enterprises, 429 U. S. 610 , 429 U. S.
619 -621 (1977); Fortner Enterprises v. United States
Steel Corp., 394 U. S. 495 , 394 U. S.
498 -499 (1969); White Motor Co. v. United
States, 372 U. S. 253 , 372 U. S. 262 (1963); Brown Shoe Co. v. United States, 370 U.
S. 294 , 370 U. S. 330 (1962); United States v. Loew's Inc., 371 U. S.
38 (1962); Northern Pacific R. Co. v. United
States, 356 U. S. 1 , 356 U. S. 5 (1958); Black v. Magnolia Liquor Co., 355 U. S.
24 , 355 U. S. 25 (1957); Times-Picayune Publishing Co. v. United States, 345 U. S. 594 , 345 U. S.
608 -609 (1953); Standard Oil Co. of California v.
United States, 337 U. S. 293 , 337 U. S.
305 -306(1949).

															[ Footnote 15 ] See also 51 Cong.Rec. 9072 (1914) (remarks of Rep.
Webb); id. at 9084 (remarks of Rep. Madden); id. at 9090 (remarks of Rep. Mitchell); id. at 9160-9164
(remarks of Rep. Floyd); id. at 9184-9185 (remarks of Rep.
Helvering); id. at 9409 (remarks of Rep. Gardner); id. at 9410 (remarks of Rep. Mitchell); id. at
9553-9554 (remarks of Rep. Barkley); id. at 14091-14097
(remarks of Sen. Reed); id. at 14094 (remarks of Sen.
Walsh); id. at 14209 (remarks of Sen. Shields); id. at 14226 (remarks of Sen. Reed); id. at 14268
(remarks of Sen. Reed); id. at 14599 (remarks of Sen.
White); id. at 15991 (remarks of Sen. Martine); id. at 16146 (remarks of Sen. Walsh); Spivack, The Chicago
School Approach to Single Firm Exercises of Monopoly Power: A
Response, 52 Antitrust L.J. 651, 664-665 (1983). For example, the
House Report on the Clayton Act stated:

															"The public is compelled to pay a higher price and local
customers are put to the inconvenience of securing many commodities
in other communities or through mail-order houses that can not be
procured at their local stores. The price is raised as an
inducement. This is the local effect. Where the concern making
these contracts is already great and powerful, such as the United
Shoe Machinery Co., the American Tobacco Co., and the General Film
Co., the exclusive or 'tying' contract made with local dealers
becomes one of the greatest agencies and instrumentalities of
monopoly ever devised by the brain of man. It completely shuts out
competitors, not only from trade in which they are already engaged,
but from the opportunities to build up trade in any community where
these great and powerful combinations are operating under this
system and practice. By this method and practice, the Shoe
Machinery Co. has built up a monopoly that owns and controls the
entire machinery now being used by all great shoe-manufacturing
houses of the United States. No independent manufacturer of shoe
machines has the slightest opportunity to build up any considerable
trade in this country while this condition obtains. If a
manufacturer who is using machines of the Shoe Machinery Co. were
to purchase and place a machine manufactured by any independent
company in his establishment, the Shoe Machinery Co. could, under
its contracts, withdraw all their machinery from the establishment
of the shoe manufacturer and thereby wreck the business of the
manufacturer. The General Film Co., by the same method practiced by
the Shoe Machinery Co. under the lease system, has practically
destroyed all competition and acquired a virtual monopoly of all
films manufactured and sold in the United States. When we consider
contracts of sales made under this system, the result to the
consumer, the general public, and the local dealer and his business
is even worse than under the lease system."

															H.R.Rep. No. 627, 63d Cong., 2d Sess., 12-13 (1914).

															Similarly, Representative Mitchell said:

															"[M]onopoly has been built up by these 'tying' contracts so
that, in order to get one machine, one must take all of the
essential machines, or practically all. Independent companies who
have sought to enter the field have found that the markets have
been preempted. . . . The manufacturers do not want to break their
contracts with these giant monopolies, because, if they should
attempt to install machinery, their business might be jeopardized
and all of the machinery now leased by these giant monopolies would
be removed from their places of business. No situation cries more
urgently for relief than does this situation, and this bill seeks
to prevent exclusive 'tying' contracts that have brought about a
monopoly, alike injurious to the small dealers, to the
manufacturers, and grossly unfair to those who seek to enter the
field of competition and to the millions of consumers."

															51 Cong.Rec. 9090 (1914).

															[ Footnote 16 ] See generally, e.g., Hodel v. Virginia Surface Mining &
Reclamation Assn., 452 U. S. 264 , 452 U. S.
276 -277 (1981); New Orleans v. Dukes, 427 U. S. 297 , 427 U. S.
303 -304 (1976) (per curiam).

															[ Footnote 17 ]

															"Of course, where the buyer is free to take either product by ,
there is no tying problem even though the seller may also offer the
two items as a unit at a single price." Northern Pacific R. Co. v. United States, 356 U.S. at 356 U. S. 6 , n.
4.

															[ Footnote 18 ]

															Thus, we have held that a seller who ties the sale of houses to
the provision of credit simply as a way of effectively competing in
a competitive market does not violate the antitrust laws.

															"The unusual credit bargain offered to Fortner proves nothing
more than a willingness to provide cheap financing in order to sell
expensive houses." United States Steel Corp. v. Fortner Enterprises, 429
U.S. at 429 U. S. 622 (footnote omitted).

															[ Footnote 19 ] Accord, Fortner I, 394 U.S. at 394 U. S.
508 -509; Atlantic Refining Co. v. FTC, 381 U. S. 357 , 381 U. S.
369 -371 (1965); United States v. Loew's Inc., 371 U.S. at 371 U. S. 44 -45; Northern Pacific R. Co. v. United States, 356 U.S. at 356 U. S. 6 . For
example, JUSTICE WHITE has written:

															"There is general agreement in the cases and among commentators
that the fundamental restraint against which the tying proscription
is meant to guard is the use of power over one product to attain
power over another, or otherwise to distort freedom of trade and
competition in the second product. This distortion injures the
buyers of the second product, who, because of their preference for
the seller's brand of the first, are artificially forced to make a
less than optimal choice in the second. And even if the customer is
indifferent among brands of the second product, and therefore loses
nothing by agreeing to use the seller's brand of the second in
order to get his brand of the first, such tying agreements may work
significant restraints on competition in the tied product. The
tying seller may be working toward a monopoly position in the tied
product and, even if he is not, the practice of tying forecloses
other sellers of the tied product and makes it more difficult for
new firms to enter that market. They must be prepared not only to
match existing sellers of the tied product in price and quality,
but to offset the attraction of the tying product itself. Even if
this is possible through simultaneous entry into production of the
tying product, entry into both markets is significantly more
expensive than simple entry into the tied market, and shifting
buying habits in the tied product is considerably more cumbersome
and less responsive to variations in competitive offers. In
addition to these anticompetitive effects in the tied product,
tying arrangements may be used to evade price control in the tying
product through clandestine transfer of the profit to the tied
product; they may be used as a counting device to effect price
discrimination; and they may be used to force a full line of
products on the customer so as to extract more easily from him a
monopoly return on one unique product in the line." Fortner I, 394 U.S. at 394 U. S.
512 -514 (dissenting opinion) (footnotes omitted).

															[ Footnote 20 ]

															This type of market power has sometimes been referred to as
"leverage." Professors Areeda and Turner provide a definition that
suits present purposes.

															"'Leverage' is loosely defined here as a supplier's power to
induce his customer for one product to buy a second product from
him that would not otherwise be purchased solely on the merit of
that second product."

															5 P. Areeda & D. Turner, Antitrust Law � 1134a, p. 202
(1980).

															[ Footnote 21 ] See Report of the Attorney General's National Committee
to Study the Antitrust Laws 145 (1955); \, Tying Requirements in
Competitive Markets: The Consumer Protection Issues, 62 B.U.L.Rev.
661, 666-668 (1982); Slawson, A Stronger, Simpler Tie-In Doctrine,
25 Antitrust Bull. 671, 676-684 (1980); Turner, The Validity of
Tying Arrangements under the Antitrust Laws, 72 Harv.L.Rev. 50,
60-62 (1958).

															[ Footnote 22 ] See 3 Areeda & Turner, supra, n. 20, �
733e (1978); C. Kaysen & D. Turner, Antitrust Policy 157
(1959); L. Sullivan, Law of Antitrust § 156 (1977); O. Williamson,
Markets and Hierarchies: Analysis and Antitrust Implications 111
(1975); Pearson, Tying Arrangements and Antitrust Policy, 60
Nw.U.L.Rev. 626, 637-638 (1965).

															[ Footnote 23 ]

															Sales of the tied item can be used to measure demand for the
tying item; purchasers with greater needs for the tied item make
larger purchases and in effect must pay a higher price to obtain
the tying item. See P. Areeda, Antitrust Analysis 11533
(2d ed.1974); R. Posner, Antitrust Law 173-180 (1976); Sullivan, supra, n. 22, § 156; Bowman, Tying Arrangements and the
Leverage Problem, 67 Yale L.J.19 (1957); Burstein, A Theory of
Full-Line Forcing, 55 Nw.U.L.Rev. 62 (1960); Dam, Fortner
Enterprises v. United States Steel: "Neither a Borrower Nor a
Lender Be," 1969 S.Ct.Rev. 1, 15-16; Ferguson, Tying Arrangements
and Reciprocity: An Economic Analysis, 30 Law & Contemp.Prob.
552, 554-558 (1965); Markovits, Tie-Ins, Reciprocity, and the
Leverage Theory, 76 Yale L.J. 1397 (1967); Pearson, supra, n. 22, at 647-653; Sidak, Debunking Predatory Innovation, 83
Colum.L.Rev. 1121, 1127-1131 (1983); Stigler, United States v.
Loew's Inc.: A Note on Block-Booking, 1963 S.Ct.Rev. 152.

															[ Footnote 24 ]

															Especially where market imperfections exist, purchasers may not
be fully sensitive to the price or quality implications of a tying
arrangement, and hence it may impede competition on the merits. See \, supra, n 21, at 675-679.

															[ Footnote 25 ]

															The rationale for per se rules in part is to avoid a
burdensome inquiry into actual market conditions in situations
where the likelihood of anticompetitive conduct is so great as to
render unjustified the costs of determining whether the particular
case at bar involves anticompetitive conduct. See, e.g.,
Arizona v. Maricopa County Medical Society, 457 U.
S. 332 , 457 U. S.
350 -351 (1982).

															[ Footnote 26 ]

															"As pointed out before, the defendant was initially granted
large acreages by Congress in the several Northwestern States
through which its lines now run. This land was strategically
located in checkerboard fashion amid private holdings and within
economic distance of transportation facilities. Not only the
testimony of various witnesses but common sense makes it evident
that this particular land was often prized by those who purchased
or leased it, and was frequently essential to their business
activities. In disposing of its holdings, the defendant entered
into contracts of sale or lease covering at least several million
acres of land which included 'preferential routing' clauses. The
very existence of this host of tying arrangements is itself
compelling evidence of the defendant's great power, at least where,
as here, no other explanation has been offered for the existence of
these restraints. The 'preferential routing' clauses conferred no
benefit on the purchasers or lessees. While they got the land they
wanted by yielding their freedom to deal with competing carriers,
the defendant makes no claim that it came any cheaper than if the
restrictive clauses had been omitted. In fact, any such price
reduction in return for rail shipments would have quite plainly
constituted an unlawful rebate to the shipper. So far as the
Railroad was concerned, its purpose obviously was to fence out
competitors, to stifle competition."

															356 U.S. at 356 U. S. 7 -8
(footnote omitted).

															[ Footnote 27 ]

															The physical facilities include the operating room, the recovery
room, and the hospital room where the patient stays before and
after the operation. The services include those provided by staff
physicians, such as radiologists or pathologists, and interns,
nurses, dietitians, pharmacists, and laboratory technicians.

															[ Footnote 28 ]

															It is essential to differentiate between the Roux contract and
the legality of the contract between the hospital and its patients.
The Roux contract is nothing more than an arrangement whereby Roux
supplies all of the hospital's needs for anesthesiological
services. That contract raises only an exclusive dealing question, see n 51, infra. The issue here is whether the hospital's insistence
that its patients purchase anesthesiological services from Roux
creates a tying arrangement.

															[ Footnote 29 ] See generally Dolan & Ralston, Hospital Admitting
Privileges and the Sherman Act, 18 Hous.L.Rev. 707, 756-758 (1981);
Kissam, Webber, Bigus, & Holzgraefe, Antitrust and Hospital
Privileges: Testing the Conventional Wisdom, 70 Calif.L.Rev. 595,
666-667 (1982).

															[ Footnote 30 ]

															The fact that anesthesiological services are functionally linked
to the other services provided by the hospital is not, in itself,
sufficient to remove the Roux contract from the realm of tying
arrangements. We have often found arrangements involving
functionally linked products at least one of which is useless
without the other to be prohibited tying devices. See Mercoid
Corp. v. Mid-Continent Co., 320 U. S. 661 (1944) (heating system and stoker switch); Morton Salt Co. v.
Suppiger Co., 314 U. S. 488 (1942) (salt machine and salt); International Salt Co. v.
United States, 332 U. S. 392 (1947) (same); Leitch Mfg. Co. v. Barber Co., 302 U.
S. 458 (1938) (process patent and material used in the
patented process); International Business Machines Corp. v.
United States, 298 U. S. 131 (1936) (tabulators and tabulating punch cards); Carbice Corp.
v. American Patents Development Corp., 283 U. S.
27 (1931) (ice cream transportation package and
coolant); FTC v. Sinclair Refining Co., 261 U.
S. 463 (1923) (gasoline and underground tanks and
pumps); United Shoe Machinery Co. v. United States, 258 U. S. 451 (1922) (shoe machinery and supplies, maintenance, and peripheral
machinery); United States v. Jerrold Electronics
Corp., 187 F.
Supp. 545 , 558-560 (ED Pa.1960) (components of television
antennas), aff'd, 365 U. S. 567 (1961) (per curiam). In fact, in some situations the functional
link between the two items may enable the seller to maximize its
monopoly return on the tying item as a means of charging a higher
rent or purchase price to a larger user of the tying item. See n 23, supra. [ Footnote 31 ]

															"The District Court determined that the Times-Picayune and the
States were separate and distinct newspapers, though published
under single ownership and control. But that readers consciously
distinguished between these two publications does not necessarily
imply that advertisers bought separate and distinct products when
insertions were placed in the Times-Picayune and the States. So to
conclude here would involve speculation that advertisers bought
space motivated by considerations other than customer coverage;
that their media selections, in effect, rested on generic qualities
differentiating morning from evening readers in New Orleans.
Although advertising space in the Times-Picayune, as the sole
morning daily, was doubtless essential to blanket coverage of the
local newspaper readership, nothing in the record suggests that
advertisers viewed the city's newspaper readers, morning or
evening, as other than fungible customer potential. We must assume,
therefore, that the readership 'bought' by advertisers in the
Times-Picayune was the self-same 'product' sold by the States and,
for that matter, the Item."

															"The factual departure from the 'tying' cases then becomes
manifest. The common core of the adjudicated unlawful tying
arrangements is the forced purchase of a second distinct commodity
with the desired purchase of a dominant 'tying' product, resulting
in economic harm to competition in the 'tied' market. Here,
however, two newspapers under single ownership at the same place,
time, and terms sell indistinguishable products to advertisers; no
dominant 'tying' product exists (in fact, since space in neither
the Times-Picayune nor the States can be bought alone, one may be
viewed as 'tying' as the other); no leverage in one market excludes
sellers in the second, because, for present purposes, the products
are identical and the market the same."

															345 U.S. at 345 U. S.
613 -614 (footnote omitted).

															[ Footnote 32 ]

															"There is, at the outset of every tie-in case, including the
familiar cases involving physical goods, the problem of determining
whether two separate products are in fact involved. In the usual
sale on credit the seller, a single individual or corporation,
simply makes an agreement determining when and how much he will be
paid for his product. In such a sale, the credit may constitute
such an inseparable part of the purchase price for the item that
the entire transaction could be considered to involve only a single
product. It will be time enough to pass on the issue of credit
sales when a case involving it actually arises. Sales such as that
are a far cry from the arrangement involved here, where the credit
is provided by one corporation on condition that a product be
purchased from a separate corporation, and where the borrower
contracts to obtain a large sum of money over and above that needed
to pay the seller for the physical products purchased. Whatever the
standards for determining exactly when a transaction involves only
a 'single product,' we cannot see how an arrangement such as that
present in this case could ever be said to involve only a single
product."

															394 U.S. at 394 U. S. 507 (footnote omitted).

															[ Footnote 33 ]

															Professor Dam has pointed out that the per se rule
against tying can be coherent only if tying is defined by reference
to the economic effect of the arrangement.

															"[T]he definitional question is hard to separate from the
question when tie-ins are harmful. Yet the decisions, in adopting
the per se rule, have attempted to flee from that economic
question by ruling that tying arrangements are presumptively
harmful, at least whenever certain nominal threshold standards on
power and foreclosure are met. The weakness of the per se methodology is that it places crucial importance on the definition
of the practice. Once an arrangement falls within the defined
limits, no justification will be heard. But a per se rule
gives no economic standards for defining the practice. To treat the
definitional question as an abstract inquiry into whether one or
two products is involved is thus to compound the weakness of the per se approach."

															Dam, supra, n 23, at 19.

															[ Footnote 34 ]

															Of course, the Sherman Act does not prohibit "tying"; it
prohibits "contract[s] . . . in restraint of trade." Thus, in a
sense, the question whether this case involves "tying" is beside
the point. The legality of petitioners' conduct depends on its
competitive consequences, not on whether it can be labeled "tying."
If the competitive consequences of this arrangement are not those
to which the per se rule is addressed, then it should not
be condemned irrespective of its label.

															[ Footnote 35 ]

															This approach is consistent with that taken by a number of lower
courts. See Moore v. Jas. H. Matthews & Co., 550 F.2d
1207, 1214-1215 (CA9 1977); Siegel v. Chicken Delight,
Inc., 448 F.2d 43, 48-49 (CA9 1971), cert. denied, 405 U.S. 955 (1972); Washington Gas Light Co. v. Virginia
Electric & Power Co., 438 F.2d 248, 253 (CA4 1971); Susser v. Carvel Corp., 332 F.2d 505, 514 (CA2 1964), cert. dism'd, 381 U. S. 125 (1965); United States v. Mercedes-Benz of North America,
Inc., 517 F.
Supp. 1369 , 1379-1381 (ND Cal.1981); In re Data General
Corp. Antitrust Litigation, 490 F.
Supp. 1089 , 1104-1110 (ND Cal.1980); Jones v. 247 East
Chestnut Properties, 1975-2 Trade Cases � 60,491, pp. 67,
162-67, 163 (ND Ill.1974); N.W. Controls, Inc. v. Outboard
Marine Corp., 333 F.
Supp. 493 , 501-504 (Del.1971); Teleflex Industrial
Products, Inc. v. Brunswick Corp., 293 F. Supp. 107, 109, and
n. 6 (ED Pa.1968). See generally Ross, The Single Product
Issue in Antitrust Tying: A Functional Approach, 23 Emory L.J. 963
(1974); Wheeler, Some Observations on Tie-ins, the Single-Product
Defense, Exclusive Dealing and Regulated Industries, 60
Calif.L.Rev. 1557, 1558-1567, 1572-1573 (1972); Note, Product
Separability: A Workable Standard to Identify Tie-In Arrangements
Under the Antitrust Laws, 46 S.Cal.L.Rev. 160 (1972). See also
Fortner I, 394 U.S. at 394 U. S. 525 (Fortas, J., dissenting); Note, Tying Arrangements and the Single
Product Issue, 31 Ohio St.L.J. 861 (1970).

															[ Footnote 36 ]

															Testimony that patients and their physicians frequently do
differentiate between hospital services and anesthesiological
services, and request specific anesthesiologists, was provided by
Dr. Roux, Tr. 17, 20 (May 15, 1980, afternoon session), Dr. Hyde, id. at 68-69, 72-74 (May 16, 1980), and other
anesthesiologists as well, see id. at 64, 87-88 (May 15,
1980, afternoon session) (testimony of Dr. Charles Eckert); id. at 25-30, 33-34 (May 16, 1980) (testimony of Dr. John
Adriani). There was no testimony that patients or their surgeons do
not differentiate between anesthesiological services and hospital
services when making purchasing decisions. As a statistical matter,
only 27 percent of anesthesiologists have financial relationships
with hospitals. American Medical Association, Socioeconomic
Characteristics of Medical Practice: 1983, p. 12 (1983). In this
respect, anesthesiologists may differ from radiologists,
pathologists, and other types of hospital-based physicians
(HBPs).

															"In some respects, anesthesiologists are more akin to
office-based MDs (particularly surgeons) than other HBPs.
Anesthesiologists' outputs are more discrete, and these HBPs are
predominantly fee-for-service practitioners who directly provide
services to patients."

															Steinwald, Hospital-Based Physicians: Current Issues and
Descriptive Evidence, Health Care Financing Rev. 63, 69 (Summer
1980). See also United States v. American Society of
Anesthesiologists, Inc., 473 F.
Supp. 147 , 150 (SDNY 1979) ("By 1957 the salaried
anesthesiologist had become the exception. Anesthesiologists began
to establish independent practices and were able to obtain hospital
privileges upon the same terms and conditions as other
clinicians").

															[ Footnote 37 ]

															Accordingly, in its conclusions of law, the District Court
treated the case as involving a tying arrangement. 513 F. Supp. at
542.

															[ Footnote 38 ]

															Petitioners do not challenge these findings of the District
Court and the Court of Appeals.

															[ Footnote 39 ]

															One of the most frequently cited statements on this subject was
made by Judge Van Dusen in United States v. Jerrold Electronics
Corp., 187 F.
Supp. 545 (ED Pa.1960), aff'd, 365 U.
S. 567 (1961) (per curiam). While this statement was
specifically made with respect to § 3 of the Clayton Act, 15 U.S.C.
§ 14, its analysis is also applicable to § 1 of the Sherman Act,
since, with respect to the definition of tying, the standards used
by the two statutes are the same. See Times-Picayune, 345
U.S. at 345 U. S.
608 -609.

															"There are several facts presented in this record which tend to
show that a community television antenna system cannot properly be
characterized as a single product. Others who entered the community
antenna field offered all of the equipment necessary for a complete
system, but none of them sold their gear exclusively as a single
package as did Jerrold. The record also establishes that the number
of pieces in each system varied considerably, so that hardly any
two versions of the alleged product were the same. Furthermore, the
customer was charged for each item of equipment, and not a lump sum
for the total system. Finally, while Jerrold had cable and antennas
to sell which were manufactured by other concerns, it only required
that the electronic equipment in the system be bought from it."

															187 F. Supp. at 559.

															The record here shows that other hospitals often permit
anesthesiological services to be purchased separately, that
anesthesiologists are not fungible, in that the services provided
by each are not precisely the same, that anesthesiological services
are billed separately, and that the hospital required purchases
from Roux even though other anesthesiologists were available and
Roux had no objection to their receiving staff privileges at East
Jefferson. Therefore, the Jerrold analysis indicates that
there was a tying arrangement here. Jerrold also indicates
that tying may be permissible when necessary to enable a new
business to break into the market. See id. at 555-558.
Assuming this defense exists, and assuming it justified the 1971
Roux contract in order to give Roux an incentive to go to work at a
new hospital with an uncertain future, that justification is
inapplicable to the 1976 contract, since by then Roux was willing
to continue to service the hospital without a tying
arrangement.

															[ Footnote 40 ]

															This is not to say that § 1 of the Sherman Act gives a purchaser
the right to buy a product that the seller does not wish to offer
for sale. A grocer may decide to carry four brands of cookies and
no more. If the customer wants a fifth brand, he may go elsewhere,
but he cannot sue the grocer even if there is no other in town.
However, in such a case, the customer is free to purchase no
cookies at all, while buying other needed food. If the grocer
required the customer to buy an unwanted brand of cookies in order
to buy other items which the customer needs and cannot readily
obtain elsewhere, then a tying question arises. Cf. Northern
Pacific R. Co. v. United States, 356 U.S. at 356 U. S. 7 (grocer selling flour can require customers to also buy sugar only
"if its competitors were ready and able to sell flour by itself").
Here, the question is whether patients are forced to use an
unwanted anesthesiologist in order to obtain needed hospital
services.

															[ Footnote 41 ]

															An examination of the reason or reasons why petitioners denied
respondent staff privileges will not provide the answer to the
question whether the package of services they offered to their
patients is an illegal tying arrangement. As a matter of antitrust
law, petitioners may give their anesthesiology business to Roux
because he is the best doctor available, because he is willing to
work long hours, or because he is the son-in-law of the hospital
administrator without violating the per se rule against
tying. Without evidence that petitioners are using market power to
force Roux upon patients, there is no basis to view the arrangement
as unreasonably restraining competition, whatever the reasons for
its creation. Conversely, with such evidence, the per se rule against tying may apply. Thus, we reject the view of the
District Court that the legality of an arrangement of this kind
turns on whether it was adopted for the purpose of improving
patient care.

															[ Footnote 42 ]

															Petitioners argue and the District Court found that the
exclusive contract had what it characterized as procompetitive
justifications in that an exclusive contract ensures 24-hour
anesthesiology coverage, enables flexible scheduling, and
facilitates work routine, professional standards, and maintenance
of equipment. The Court of Appeals held these findings to be
clearly erroneous, since the exclusive contract was not necessary
to achieve these ends. Roux was willing to provide 24-hour coverage
even without an exclusive contract, and the credentials committee
of the hospital could impose standards for staff privileges that
would ensure staff would comply with the demands of scheduling,
maintenance, and professional standards. 686 F.2d at 292. In the
past, we have refused to tolerate manifestly anticompetitive
conduct simply because the health care industry is involved. See Arizona v. Maricopa Medical Society, 457 U.S. at 457 U. S.
348 -351; National Gerimedical Hospital v. Blue
Cross, 452 U. S. 378 (1981); American Medical Assn. v. United States, 317 U. S. 519 , 317 U. S.
528 -529 (1943). Petitioners seek no special solicitude. See n 12, supra. We have also uniformly rejected similar "goodwill"
defenses for tying arrangements, finding that the use of
contractual quality specifications are generally sufficient to
protect quality without the use of a tying arrangement. See
Standard Oil Co. of California v. United States, 337 U.S. at 337 U. S.
305 -306; International Salt Co. v. United
States, 332 U.S. at 332 U. S.
397 -398; International Business Machines Corp. v.
United States, 298 U.S. at 298 U. S.
138 -140. See generally Comment, Tying
Arrangements under the Antitrust Laws: The "Integrity of the
Product" Defense, 62 Mich.L.Rev. 1413 (1964). Since the District
Court made no finding as to why contractual quality specifications
would not protect the hospital, there is no basis for departing
from our prior cases here.

															[ Footnote 43 ]

															In fact, its position in this market is not dissimilar from the
market share at issue in Times-Picayune, which the Court
found insufficient as a basis for inferring market power. See 345 U.S. at 345 U. S.
611 -613. Moreover, in other antitrust contexts this
Court has found that market shares comparable to that present here
do not create an unacceptable likelihood of anticompetitive
conduct. See United States v. Connecticut National Bank, 418 U. S. 656 (1974); United States v. E. I. du Pont de Nemours &
Co., 351 U. S. 377 (1956).

															[ Footnote 44 ]

															The Court of Appeals acknowledged that, absent these market
imperfections, there was no basis for applying the per se rule against tying.

															"The contract at issue here involved only one hospital out of at
least twenty in the area. Under the analysis applied to a truly
competitive market, appellant has failed to prove an illegal tying
arrangement."

															686 F.2d at 290.

															[ Footnote 45 ]

															Congress has found these market imperfections to exist. See
National Gerimedical Hospital v. Blue Cross, 452 U.S. at 452 U. S. 388 ,
n. 13, 391-393, and n. 18; 42 U.S.C. §§ 300k, 300k-2(b);
H.R.Conf.Rep. No. 96-420, pp. 57-58 (1979); S.Rep. No. 96-96, pp.
52-53 (1979).

															[ Footnote 46 ]

															As an economic matter, market power exists whenever prices can
be raised above the levels that would be charged in a competitive
market. See Fortner II, 429 U.S. at 429 U. S. 620 ; Fortner I, 394 U.S. at 394 U. S.
503 -504.

															[ Footnote 47 ]

															Nor is there an indication in the record that petitioners'
practices have increased the social costs of their market power.
Since patients' anesthesiological needs are fixed by medical
judgment, respondent does not argue that the tying arrangement
facilitates price discrimination. Where variable-quantity
purchasing is unavailable as a means to enable price
discrimination, commentators have seen less justification for
condemning tying. See Dam, supra, n 23, at 15-17; Turner, supra, n 21, at 67-72. While tying
arrangements like the one at issue here are unlikely to be used to
facilitate price discrimination, they could have the similar effect
of enabling hospitals "to evade price control in the tying product
through clandestine transfer of the profit to the tied product. . .
." Fortner I, 394 U.S. at 394 U. S. 513 (WHITE, J., dissenting). Insurance companies are the principal
source of price restraint in the hospital industry; they place some
limitations on the ability of hospitals to exploit their market
power. Through this arrangement, petitioners may be able to evade
that restraint by obtaining a portion of the anesthesiologists'
fees, and therefore realize a greater return than they could in the
absence of the arrangement. This could also have an adverse effect
on the anesthesiology market, since it is possible that only less
able anesthesiologists would be willing to give up part of their
fees in return for the security of an exclusive contract. However,
there are no findings of either the District Court or the Court of
Appeals which indicate that this type of exploitation of market
power has occurred here. The Court of Appeals found only that
Roux's use of nurse anesthetists increased its and the hospital's
profits, but there was no finding that nurse anesthetists might not
be used with equal frequency absent the exclusive contract. Indeed,
the District Court found that nurse anesthetists are utilized in
all hospitals in the area. 513 F. Supp. at 537, 543. Moreover,
there is nothing in the record which details whether this
arrangement has enhanced the value of East Jefferson's market power
or harmed quality competition in the anesthesiology market.

															[ Footnote 48 ]

															While there was some rather impressionistic testimony that the
prevalence of exclusive contracts tended to discourage young
doctors from entering the market, the evidence was equivocal, and
neither the District Court nor the Court of Appeals made any
findings concerning the contract's effect on entry barriers.
Respondent does not press the point before this Court. It is
possible that, under some circumstances, an exclusive contract
could raise entry barriers, since anesthesiologists could not
compete for the contract without raising the capital necessary to
run a hospital-wide operation. However, since the hospital has
provided most of the capital for the exclusive contractor in this
case, that problem does not appear to be present.

															[ Footnote 49 ]

															While it is true that purchasers may not be fully sensitive to
the price or quality implications of a tying arrangement, so that
competition may be impeded, see n 24, supra, this depends on an empirical
demonstration concerning the effect of the arrangement on price or
quality, and the record reveals little if anything about the effect
of this arrangement on the market for anesthesiological
services.

															[ Footnote 50 ]

															If, as is likely, it is the patient's doctor, and not the
patient, who selects an anesthesiologist, the doctor can simply
take the patient elsewhere if he is dissatisfied with Roux. The
District Court found that most doctors in the area have staff
privileges at more than one hospital. 513 F. Supp. at 541.

															[ Footnote 51 ]

															The effect of the contract, of course, has been to remove the
East Jefferson Hospital from the market open to Roux's competitors.
Like any exclusive requirements contract, this contract could be
unlawful if it foreclosed so much of the market from penetration by
Roux's competitors as to unreasonably restrain competition in the
affected market, the market for anesthesiological services. See
generally Tampa Electric Co. v. Nashville Coal Co., 365 U. S. 320 (1961); Standard Oil Co. of California v. United States, 337 U. S. 293 (1949). However, respondent has not attempted to make this
showing.

															[ Footnote 52 ]

															The record simply tells us little if anything about the effect
of this arrangement on price or quality of anesthesiological
services. As to price, the arrangement did not lead to an increase
in the price charged to the patient. 686 F.2d at 291. As to
quality, the record indicates little more than that there have
never been any complaints about the quality of Roux's services, and
no contention that his services are in any respect inferior to
those of respondent. Moreover, the self-interest of the hospital,
as well as the ethical and professional norms under which it
operates, presumably protect the quality of anesthesiological
services. See Joint Commission on Accreditation of
Hospitals, Accreditation Manual for Hospitals 3-10, 151-154
(1983).

															[ Footnote 53 ] See App. A to Brief for American Society of
Anesthesiologists, Inc., as Amicus Curiae. [ Footnote 54 ]

															The claims raised by respondent but not passed upon by the Court
of Appeals remain open on remand. See n 2, supra. JUSTICE BRENNAN, with whom JUSTICE MARSHALL joins,
concurring.

															As the opinion for the Court demonstrates, we have long held
that tying arrangements are subject to evaluation for per
se illegality under § 1 of the Sherman Act. Whatever merit the
policy arguments against this longstanding construction of the Act
might have, Congress, presumably aware of our decisions, has never
changed the rule by amending the Act. In such circumstances, our
practice usually has been to stand by a settled statutory
interpretation and leave the task of modifying the statute's reach
to Congress. See Monsanto Co. v. Spray-Rite Service Corp., 465 U. S. 752 , 465 U. S. 769 (1984) (BRENNAN, J., concurring). I see no reason to depart from
that principle in this case, and therefore join the opinion and
judgment of the Court.

															JUSTICE O'CONNOR, with whom THE CHIEF JUSTICE, JUSTICE POWELL,
and JUSTICE REHNQUIST join, concurring in the judgment.

															East Jefferson Hospital, a public hospital governed by
petitioners, requires patients to use the anesthesiological
services provided by Roux & Associates, as they are the only
doctors authorized to administer anesthesia to patients in the
hospital. The Court of Appeals found that this arrangement was a
tie-in illegal under the Sherman Act. 686 F.2d 286 Page 466 U. S. 33 (CA5 1982). I concur in the Court's decision to reverse, but
write separately to explain why I believe the hospital-Roux
contract, whether treated as effecting a tie between services
provided to patients or as an exclusive dealing arrangement between
the hospital and certain anesthesiologists, is properly analyzed
under the rule of reason. I Tying is a form of marketing in which a seller insists on
selling two distinct products or services as a package. A
supermarket that will sell flour to consumers only if they will
also buy sugar is engaged in tying. Flour is referred to as the
tying product, sugar as the tied product. In this case, the
allegation is that East Jefferson Hospital has unlawfully tied the
sale of general hospital services and operating room facilities
(the tying service) to the sale of anesthesiologists' services (the
tied services). The Court has on occasion applied a per se rule of illegality in actions alleging tying in violation of § 1 of
the Sherman Act. International Salt Co. v. United States, 332 U. S. 392 (1947).

															Under the usual logic of the per se rule, a restraint
on trade that rarely serves any purposes other than to restrain
competition is illegal without proof of market power or
anticompetitive effect. See, e.g., Northern Pacific R. Co. v.
United States, 356 U. S. 1 , 356 U. S. 5 (1958). In deciding whether an economic restraint should be
declared illegal per se, "[t]he probability that anticompetitive consequences will result
from a practice and the severity of those consequences [is]
balanced against its procompetitive consequences. Cases that do not
fit the generalization may arise, but a per se rule
reflects the judgment that such cases are not sufficiently common
or important to justify the time and expense necessary to identify
them." Continental T.V., Inc. v. GTE Sylvania Inc., 433 U. S. 36 , 433 U. S. 50 , n.
16 (1977). See also Arizona v. Maricopa County Medical
Society, 457 U. S. 332 , 457 U. S. 351 (1982). Only when there is very little loss to society from banning
a restraint Page 466 U. S. 34 altogether is an inquiry into its costs in the individual case
considered to be unnecessary.

															Some of our earlier cases did indeed declare that tying
arrangements serve "hardly any purpose beyond the suppression of
competition." Standard Oil Co. of California v. United
States, 337 U. S. 293 , 337 U. S.
305 -306 (1949) (dictum). However, this declaration was
not taken literally even by the cases that purported to rely upon
it. In practice, a tie has been illegal only if the seller is shown
to have "sufficient economic power with respect to the tying
product to appreciably restrain free competition in the market for
the tied product. . . ." Northern Pacific R. Co., 356 U.S.
at 356 U. S. 6 .
Without "control or dominance over the tying product," the seller
could not use the tying product as "an effectual weapon to pressure
buyers into taking the tied item," so that any restraint of trade
would be "insignificant." Ibid. The Court has never been
willing to say of tying arrangements, as it has of price fixing,
division of markets, and other agreements subject to per
se analysis, that they are always illegal, without proof of
market power or anticompetitive effect.

															The " per se " doctrine in tying cases has thus always
required an elaborate inquiry into the economic effects of the
tying arrangement. [ Footnote 2/1 ]
As a result, tying doctrine incurs the costs of a rule of reason
approach without achieving its benefits: the doctrine calls for the
extensive and time-consuming economic analysis characteristic of
the rule of reason, but then may be interpreted to prohibit
arrangements that economic analysis would show to be beneficial.
Moreover, the per se label in the tying context has
generated more confusion Page 466 U. S. 35 than coherent law, because it appears to invite lower courts to
omit the analysis of economic circumstances of the tie that has
always been a necessary element of tying analysis.

															The time has therefore come to abandon the " per se "
label and refocus the inquiry on the adverse economic effects, and
the potential economic benefits, that the tie may have. The law of
tie-ins will thus be brought into accord with the law applicable to
all other allegedly anticompetitive economic arrangements, except
those few horizontal or quasi-horizontal restraints that can be
said to have no economic justification whatsoever. [ Footnote 2/2 ] This change will rationalize, rather
than abandon, tie-in doctrine as it is already applied. II Our prior opinions indicate that the purpose of tying law has
been to identify and control those tie-ins that have a demonstrable
exclusionary impact in the tied-product market, see
Times-Picayune Publishing Co. v. United States, 345 U.
S. 594 , 345 U. S. 605 (1953), or that abet the harmful exercise of market power that the
seller possesses in the tying product market. [ Footnote 2/3 ] Under the rule of reason, tying
arrangements should be disapproved only in such instances.

															Market power in the tying product may be acquired
legitimately ( e.g., through the grant of a patent) or
illegitimately ( e.g., as a result of unlawful
monopolization). In either event, exploitation of consumers in the
market for the tying Page 466 U. S. 36 product is a possibility that exists and that may be regulated
under § 2 of the Sherman Act without reference to any tying
arrangements that the seller may have developed. The existence of a
tied product normally does not increase the profit that the seller
with market power can extract from sales of the tying product. A seller with a monopoly on flour, for example, cannot
increase the profit it can extract from flour consumers simply by
forcing them to buy sugar along with their flour. Counterintuitive
though that assertion may seem, it is easily demonstrated and
widely accepted. See, e.g., R. Bork, The Antitrust Paradox
372-374 (1978); P. Areeda, Antitrust Analysis 735 (3d ed.1981).

															Tying may be economically harmful primarily in the rare cases
where power in the market for the tying product is used to create additional market power in the market for the tied product. [ Footnote
2/4 ] The antitrust law is properly concerned with Page 466 U. S. 37 tying when, for example, the flour monopolist threatens to use
its market power to acquire additional power in the sugar market,
perhaps by driving out competing sellers of sugar, or by making it
more difficult for new sellers to enter the sugar market. But such
extension of market power is unlikely, or poses no threat of
economic harm, unless the two markets in question and the nature of
the two products tied satisfy three threshold criteria. [ Footnote 2/5 ]

															First, the seller must have power in the tying product market.
[ Footnote 2/6 ] Absent such power,
tying cannot conceivably have any adverse impact in the tied
product market, and can be only procompetitive in the tying product
market. [ Footnote 2/7 ] If the Page 466 U. S. 38 seller of flour has no market power over flour, it will gain
none by insisting that its buyers take some sugar as well. See
United States Steel Corp. v. Fortner Enterprises, Inc., 429 U. S. 610 , 429 U. S. 620 (1977) ( Fortner II ); Fortner Enterprises, Inc. v.
United States Steel Corp., 394 U. S. 495 , 394 U. S.
503 -504 (1969) ( Fortner I ); United States
v. Loew's Inc., 371 U. S. 38 , 371 U. S. 45 , 371 U. S. 48 , n.
5 (1962); Northern Pacific R. Co. v. United States, 356
U.S. at 356 U. S. 6 -7.

															Second, there must be a substantial threat that the tying seller
will acquire market power in the tied product market. No such
threat exists if the tied product market is occupied by many stable
sellers who are not likely to be driven out by the tying, or if
entry barriers in the tied product market are low. If, for example,
there is an active and vibrant market for sugar -- one with
numerous sellers and buyers who do not deal in flour -- the flour
monopolist's tying of sugar to flour need not be declared unlawful. Cf. Fortner II, supra, at 429 U. S.
617 -618, and n. 8; Fortner I, supra, at 394 U. S.
498 -499; Times-Picayune Publishing Co. v. United
States, 345 U.S. at 345 U. S. 611 ; Standard Oil Co. of California v. United States, 337 U.S.
at 337 U. S.
305 -306; International Salt Co. v. United
States, 332 Page 466 U. S. 39 U.S. at 332 U. S. 396 .
If, on the other hand, the tying arrangement is likely to erect
significant barriers to entry into the tied product market, the tie
remains suspect. Atlantic Refining Co. v. FTC, 381 U. S. 357 , 381 U. S. 371 (1965).

															Third, there must be a coherent economic basis for treating the
tying and tied products as distinct. All but the simplest products
can be broken down into two or more components that are "tied
together" in the final sale. Unless it is to be illegal to sell
cars with engines or cameras with lenses, this analysis must be
guided by some limiting principle. For products to be treated as
distinct, the tied product must, at a minimum, be one that some
consumers might wish to purchase separately without also
purchasing the tying product. [ Footnote 2/8 ] When the tied product has no use other
than in conjunction with the tying product, a seller of the tying
product can acquire no additional market power by selling
the two products together. If sugar is useless to consumers except
when used with flour, the flour seller's market power is projected
into the sugar market whether or not the two products are actually
sold together; the flour seller can exploit what market power it
has over flour with or without the tie. [ Footnote 2/9 ] The flour seller will therefore have
little incentive to monopolize the sugar market unless it can
produce and distribute sugar more cheaply than other sugar sellers.
And in this unusual case, where flour is monopolized and sugar is
useful only when Page 466 U. S. 40 used with flour, consumers will suffer no further economic
injury by the monopolization of the sugar market.

															Even when the tied product does have a use separate from the
tying product, it makes little sense to label a package as two
products without also considering the economic justifications for
the sale of the package as a unit. When the economic advantages of
joint packaging are substantial the package is not appropriately
viewed as two products, and that should be the end of the tying
inquiry. The lower courts largely have adopted this approach.
[ Footnote 2/10 ] See, e.g.,
Foster v. Maryland State Savings and Loan Assn., 191
U.S.App.D.C. 226, 228-231, 590 F.2d 928, 930-933 (1978), cert.
denied, 439 U.S. 1071 (1979); Response of Carolina, Inc.
v. Leasco Response, Inc., 537 F.2d 1307, 1330 (CA5 1976); Kugler v. AAMCO Automatic Transmissions, Inc., 460 F.2d
1214 (CA8 1972); ILC Peripherals Leasing Corp. v. International
Business Machines Corp., 448 F.
Supp. 228 , 230 Page 466 U. S. 41 (ND Cal.1978); United States v. Jerrold Electronics
Corp., 187 F.
Supp. 545 , 563 (ED Pa.1960), aff'd per curiam, 365 U. S. 567 (1961).

															These three conditions -- market power in the tying product, a
substantial threat of market power in the tied product, and a
coherent economic basis for treating the products as distinct --
are only threshold requirements. Under the rule of reason a tie-in
may prove acceptable even when all three are met. Tie-ins may
entail economic benefits as well as economic harms, and if the
threshold requirements are met, these benefits should enter the
rule of reason balance.

															"[Tie-ins] may facilitate new entry into fields where
established sellers have wedded their customers to them by ties of
habit and custom. Brown Shoe Co. v. United States, 370 U. S.
294 , 370 U. S. 330 (1962). . . .
They may permit clandestine price-cutting in products which
otherwise would have no price competition at all because of fear of
retaliation from the few other producers dealing in the market.
They may protect the reputation of the tying product if failure to
use the tied product in conjunction with it may cause it to
misfunction. . . . [Citing] Pick Mfg. Co. v. General Motors
Corp., 80 F.2d 641 (C. A. 7th Cir.1935), aff'd, 299 U. S.
3 (1936). And, if the tied and tying products are
functionally related, they may reduce costs through economies of
joint production and distribution." Fortner I, 394 U.S. at 394 U. S. 514 ,
n. 9 (WHITE, J., dissenting).

															The ultimate decision whether a tie-in is illegal under the
antitrust laws should depend upon the demonstrated economic effects
of the challenged agreement. It may, for example, be entirely
innocuous that the seller exploits its control over the tying
product to "force" the buyer to purchase the tied product. For when
the seller exerts market power only in the tying product market, it
makes no difference to him or his customers whether he exploits
that power by raising Page 466 U. S. 42 the price of the tying product or by "forcing" customers to buy
a tied product. See Markovits, Tie-Ins, Reciprocity and
the Leverage Theory, 76 Yale L.J. 1397, 1397-1398 (1967); Burstein,
A Theory of Full-Line Forcing, 55 Nw.U.L.Rev. 62, 62-63 (1960). On
the other hand, tying may make the provision of packages of goods
and services more efficient. A tie-in should be condemned only when
its anticompetitive impact outweighs its contribution to
efficiency. III Application of these criteria to the case at hand is
straightforward.

															Although the issue is in doubt, we may assume that the hospital
does have market power in the provision of hospital services in its
area. The District Court found to the contrary, 513 F.
Supp. 532 , 541 (ED La.1981), but the Court of Appeals
determined that the hospital does possess market power in an
appropriately defined market. While appellate courts should
normally defer to the district courts' findings on such fact-bound
questions [ Footnote 2/11 ] I shall
assume for the purposes of this discussion that the Court of
Appeals' determination that the hospital does have some power in
the provision of hospital services in its local market is
accepted.

															Second, in light of the hospital's presumed market power, we may
also assume that there is a substantial threat that East Jefferson
will acquire market power over the provision of anesthesiological
services in its market. By tying the sale of anesthesia to the sale
of other hospital services the hospital can drive out other sellers
of those services who might otherwise operate in the local market.
The hospital may thus gain local market power in the provision of
anesthesiology: anesthesiological services offered in the
hospital's market, narrowly defined, will be purchased only from
Roux, under the hospital's auspices. Page 466 U. S. 43 But the third threshold condition for giving closer scrutiny to
a tying arrangement is not satisfied here: there is no sound
economic reason for treating surgery and anesthesia as separate
services. Patients are interested in purchasing anesthesia only in
conjunction with hospital services, [ Footnote 2/12 ] so the hospital can acquire no
additional market power by selling the two services together.
Accordingly, the link between the hospital's services and
anesthesia administered by Roux will affect neither the amount of
anesthesia provided nor the combined price of anesthesia and
surgery for those who choose to become the hospital's patients. In
these circumstances, anesthesia and surgical services should
probably not be characterized as distinct products for tying
purposes.

															Even if they are, the tying should not be considered a violation
of § 1 of the Sherman Act, because tying here cannot increase the
seller's already absolute power over the volume of production of
the tied product, which is an inevitable consequence of the fact
that very few patients will choose to undergo surgery without
receiving anesthesia. The hospital-Roux contract therefore has
little potential to harm the patients. On the other side of the
balance, the District Court found, and the Court of Appeals did not
dispute, that the tie-in conferred significant benefits upon the
hospital and the patients that it served.

															The tie-in improves patient care and permits more efficient
hospital operation in a number of ways. From the viewpoint of
hospital management, the tie-in ensures 24-hour anesthesiology
coverage, aids in standardization of procedures and efficient use
of equipment, facilitates flexible scheduling of operations, and
permits the hospital more effectively to monitor the quality of
anesthesiological services. Further, the tying arrangement is
advantageous to patients because, as the District Court found, the
closed anesthesiology department Page 466 U. S. 44 places upon the hospital, rather than the individual patient,
responsibility to select the physician who is to provide
anesthesiological services. The hospital also assumes the
responsibility that the anesthesiologist will be available, will be
acceptable to the surgeon, and will provide suitable care to the
patient. In assuming these responsibilities -- responsibilities
that a seriously ill patient frequently may be unable to discharge
-- the hospital provides a valuable service to its patients. And
there is no indication that patients were dissatisfied with the
quality of anesthesiology that was provided at the hospital or that
patients wished to enjoy the services of anesthesiologists other
than those that the hospital employed. Given this evidence of the
advantages and effectiveness of the closed anesthesiology
department, it is not surprising that, as the District Court found,
such arrangements are accepted practice in the majority of
hospitals of New Orleans and in the health care industry generally.
Such an arrangement, which has little anticompetitive effect and
achieves substantial benefits in the provision of care to patients,
is hardly one that the antitrust law should condemn. [ Footnote 2/13 ] This conclusion reaffirms
our threshold determination that the joint provision of hospital
services and anesthesiology should not be viewed as involving a tie
between distinct products, and therefore should require no
additional scrutiny under the antitrust law. IV Whether or not the hospital-Roux contract is characterized as a
tie between distinct products, the contract unquestionably does
constitute exclusive dealing. Exclusive dealing arrangements are
independently subject to scrutiny under § 1 of the Sherman Act, and
are also analyzed under the rule of Page 466 U. S. 45 reason. Tampa Electric Co. v. Nashville Coal Co., 365 U. S. 320 , 365 U. S.
333 -335 (1961).

															The hospital-Roux arrangement could conceivably have an adverse
effect on horizontal competition among anesthesiologists, or among
hospitals. Dr. Hyde, who competes with the Roux anesthesiologists,
and other hospitals in the area, who compete with East Jefferson,
may have grounds to complain that the exclusive contract stifles
horizontal competition and therefore has an adverse, albeit
indirect, impact on consumer welfare even if it is not a tie.

															Exclusive dealing arrangements may, in some circumstances,
create or extend market power of a supplier or the purchaser party
to the exclusive dealing arrangement, and may thus restrain
horizontal competition. Exclusive dealing can have adverse economic
consequences by allowing one supplier of goods or services
unreasonably to deprive other suppliers of a market for their
goods, or by allowing one buyer of goods unreasonably to deprive
other buyers of a needed source of supply. In determining whether
an exclusive dealing contract is unreasonable, the proper focus is
on the structure of the market for the products or services in
question -- the number of sellers and buyers in the market, the
volume of their business, and the ease with which buyers and
sellers can redirect their purchases or sales to others. Exclusive
dealing is an unreasonable restraint on trade only when a
significant fraction of buyers or sellers are frozen out of a
market by the exclusive deal. Standard Oil Co. of California v.
United States, 337 U. S. 293 (1949). When the sellers of services are numerous and mobile, and
the number of buyers is large, exclusive dealing arrangements of
narrow scope pose no threat of adverse economic consequences. To
the contrary, they may be substantially procompetitive by ensuring
stable markets and encouraging long-term, mutually advantageous
business relationships.

															At issue here is an exclusive-dealing arrangement between a firm
of four anesthesiologists and one relatively small hospital. Page 466 U. S. 46 There is no suggestion that East Jefferson Hospital is likely to
create a "bottleneck" in the availability of anesthesiologists that
might deprive other hospitals of access to needed anesthesiological
services, or that the Roux associates have unreasonably narrowed
the range of choices available to other anesthesiologists in search
of a hospital or patients that will buy their services. Cf.
Associated Press v. United States, 326 U. S.
1 (1945). A firm of four anesthesiologists represents
only a very small fraction of the total number of anesthesiologists
whose services are available for hire by other hospitals, and East
Jefferson is one among numerous hospitals buying such services.
Even without engaging in a detailed analysis of the size of the
relevant markets we may readily conclude that there is no
likelihood that the exclusive dealing arrangement challenged here
will either unreasonably enhance the hospital's market position
relative to other hospitals or unreasonably permit Roux to acquire
power relative to other anesthesiologists. Accordingly, this
exclusive dealing arrangement must be sustained under the rule of
reason. V For these reasons, I conclude that the hospital-Roux contract
does not violate § 1 of the Sherman Act. Since anesthesia is a
service useful to consumers only when purchased in conjunction with
hospital services, the arrangement is not properly characterized as
a tie between distinct products. It threatens no additional
economic harm to consumers beyond that already made possible by any
market power that the hospital may possess. The fact that
anesthesia is used only together with other hospital services is
sufficient, standing alone, to insulate from attack the hospital's
decision to tie the two types of service.

															Whether or not this case involves tying of distinct products,
the hospital-Roux contract is subject to scrutiny under the rule of
reason as an exclusive dealing arrangement. Plainly, however, the
arrangement forecloses only a small Page 466 U. S. 47 fraction of the markets in which anesthesiologists may sell
their services, and a still smaller fraction of the market in which
hospitals may secure anesthesiological services. The contract
therefore survives scrutiny under the rule of reason.

															The judgment of the Court of Appeals for the Fifth Circuit
should be reversed, and the case should be remanded for any further
proceedings on respondent's remaining claims. See ante at 466 U. S. 5 , n.
2.

															[ Footnote 2/1 ]

															This inquiry has been required in analyzing both the prima
facie case and affirmative defenses. Most notably, United
States v. Jerrold Electronics Corp., 187 F.
Supp. 545 , 559-560 (ED Pa.1960), aff'd per curiam, 365 U. S. 567 (1961), upheld a requirement that buyers of television systems
purchase the complete system, as well as installation and repair
service, on the grounds that the tie assured that the systems would
operate, and thereby protected the seller's business
reputation.

															[ Footnote 2/2 ]

															Tying law is particularly anomalous in this respect, because
arrangements largely indistinguishable from tie-ins are generally
analyzed under the rule of reason. For example, the " per
se " analysis of tie-ins subjects restrictions on a
franchisee's freedom to purchase supplies to a more searching
scrutiny than restrictions on his freedom to sell his products. Compare, e.g., Siegel v. Chicken Delight, Inc., 448 F.2d
43 (CA9 1971), cert. denied, 405 U.S. 955 (1972), with
Continental T.V., Inc. v. GTE Sylvania Inc., 433 U. S.
36 (1977). And exclusive contracts that, like tie-ins,
require the buyer to purchase a product from one seller are subject
only to the rule of reason. See infra at 466 U. S.
44 -45.

															[ Footnote 2/3 ] See 466 U.S.
2 fn2/4|>n. 4, infra. [ Footnote 2/4 ]

															Tying might be undesirable in two other instances, but the
hospital-Roux arrangement involves neither one.

															In a regulated industry, a firm with market power may be unable
to extract a supercompetitive profit because it lacks control over
the prices it charges for regulated products or services. Tying may
then be used to extract that profit from sale of the unregulated,
tied products or services. See Fortner Enterprises, Inc. v.
United States Steel Corp., 394 U. S. 495 , 394 U. S. 513 (1969) (WHITE, J., dissenting).

															Tying may also help the seller engage in price discrimination by
"metering" the buyer's use of the tying product. Cf.
International Business Machines Corp. v. United States, 298 U. S. 131 (1936); International Salt Co. v. United States, 332 U. S. 392 (1947). Price discrimination may be independently unlawful, see 15 U.S.C. § 13. Price discrimination may, however,
decrease, rather than increase, the economic costs of a seller's
market power. See, e.g., R. Bork, The Antitrust Paradox
398 (1978); P. Areeda, Antitrust Analysis 608-610 (3d ed.1981); O.
Williamson, Markets and Hierarchies: Analysis and Antitrust
Implications 11-13 (1975). United States Steel Corp. v. Fortner
Enterprises, Inc., 429 U. S. 610 , 429 U. S. 617 (1977) ( Fortner II ), did not hold that price
discrimination in the form of a tie-in is always economically
harmful; that case indicated only that price discrimination may
indicate market power in the tying product market. But there is no
need in this case to address the problem of price discrimination
facilitated by tying. The discussion herein is aimed only at tying
arrangement as to which no price discrimination is alleged.

															[ Footnote 2/5 ]

															Wholly apart from market characteristics, a prerequisite to
application of the Sherman Act is an effect on interstate commerce. See, e.g., McLain v. Real Estate Board of New Orleans, 444 U. S. 232 , 444 U. S. 246 (1980); Burke v. Ford, 389 U. S. 320 , 389 U. S. 322 (1967). It is not disputed that such an impact is present here.

															[ Footnote 2/6 ]

															The Court has failed in the past to define how much market power
is necessary, but, in the context of this case, it is inappropriate
to attempt to resolve that question. In International Salt Co.
v. United States, supra, the Court assumed that a patent
conferred market power, and therefore sufficiently established "the
tendency of the arrangement to accomplishment of monopoly." Id. at 332 U. S. 396 .
In its next tying case, Times-Picayune Publishing Co. v. United
States, 345 U. S. 594 (1953), the Court distinguished International Salt in part
by finding that there was no market "dominance," 345 U.S. at 345 U.S. 610 -613, after a
careful consideration of the relevant market. Then, in Northern
Pacific R. Co. v. United States, 356 U. S.
1 , 356 U. S. 6 -8, 356 U. S. 11 (1958), the Court required only a minimal showing of market power.
More recently, in Fortner II, supra, the Court conducted a
more extensive analysis of whether the tie was actually an exercise
of market power, considering such factors as the size and
profitability of the firm seeking to impose the tie, the character
of the tying product, and the effects of the tie -- the price
charged for the products, the number of customers affected, the
functional relation between the tied and tying product.

															[ Footnote 2/7 ]

															A common misconception has been that a patent or copyright, a
high market share, or a unique product that competitors are not
able to offer suffices to demonstrate market power. While each of
these three factors might help to give market power to a seller, it
is also possible that a seller in these situations will have no
market power: for example, a patent holder has no market power in
any relevant sense if there are close substitutes for the patented
product. Similarly, a high market share indicates market power only
if the market is properly defined to include all reasonable
substitutes for the product. See generally Landes &
Posner, Market Power in Antitrust Cases, 94 Harv.L.Rev. 937
(1981).

															Nor does any presumption of market power find support in our
prior cases. Although United States v. Paramount Pictures,
Inc., 334 U. S. 131 (1948), considered the legality of "block-booking" of motion
pictures, which ties the purchase of rights to copyrighted motion
pictures to purchase of other motion pictures of the same copyright
holder, the Court did not analyze the arrangement with the schema
of the tying cases. Rather, the Court borrowed the patent law
principle of "patent misuse," which prevents the holder of a patent
from using the patent to require his customers to purchase
unpatented products. Id. at 334 U. S.
156 -159. See, e.g., Mercoid Corp. v. Mid-Continent
Investment Co., 320 U. S. 661 , 320 U.S. 665 (1944). The
"patent misuse" doctrine may have influenced the Court's
willingness to strike down the arrangement at issue in International Salt as well, although the Court did not
cite the doctrine in that case.

															[ Footnote 2/8 ]

															Whether the tying product is one that consumers might wish to
purchase without the tied product should be irrelevant. Once it is
conceded that the seller has market power over the tying product it
follows that the seller can sell the tying product on
noncompetitive terms. The injury to consumers does not depend on
whether the seller chooses to charge a supercompetitive price, or
charges a competitive price, but insists that consumers also buy a
product that they do not want.

															[ Footnote 2/9 ] Cf. Areeda, supra, 466 U.S.
2 fn2/4|>n. 4, at 735; Ross, The Single Product Issue in
Antitrust Tying: A Functional Approach, 23 Emory L.J. 963, 1010
(1974); Bowman, Tying Arrangements and the Leverage Problem, 67
Yale L.J.19, 21-23 (1957).

															[ Footnote 2/10 ]

															The examination of the economic advantages of tying may properly
be conducted as part of the rule of reason analysis, rather than at
the threshold of the tying inquiry. This approach is consistent
with this Court's occasional references to the problem. The Court
has not heretofore had occasion to set forth any general criteria
for determining when two apparently separate products are
components of a single product for tying analysis. In Times-Picayune Publishing Co., the Court held that
advertising space in a morning newspaper was the same product as
advertising space in the evening newspaper -- access to readership
of the respective newspapers -- because the subscribers had no
reason to distinguish among the readers of the two papers. 345 U.S.
at 345 U. S.
613 -616. In Fortner I, the Court, reversing the
grant of a motion for summary judgment, rejected the contention
that credit could never be separate from the product for whose
purchase credit was extended. 394 U.S. at 394 U. S.
506 -507. The Court disclaimed any determination of "the
standards for determining exactly when a transaction involves only
a single product." Id. at 394 U. S. 507 .
These cases indicate that consideration of whether a buyer might
prefer to purchase one component without the other is one of the
factors in tying analysis and, more generally, that economic
analysis, rather than mere conventional separability into different
markets, should determine whether one or two products are involved
in the alleged tie.

															[ Footnote 2/11 ] See Fed.Rule Civ.Proc. 52(a); Inwood Laboratories,
Inc. v. Ives Laboratories, Inc., 456 U.
S. 844 , 456 U. S.
855 -858 (1982).

															[ Footnote 2/12 ]

															While the record appears to be devoid of factual findings on
this point the assumption is a safe one, and certainly one that
finds no contradiction in the record.

															[ Footnote 2/13 ]

															The Court of Appeals disregarded the benefits of the tie because
it found that there were less restrictive means of achieving them.
In the absence of an adequate basis to expect any harm to
competition from the tie-in, this objection is simply
irrelevant.

Summary: In Jefferson Parish Hospital District No. 2 v. Hyde, the US Supreme Court ruled that a hospital's exclusive contract with an anesthesiology firm, requiring all anesthesiological services to be performed by that firm, did not violate the Sherman Act's prohibition on tying arrangements. The Court focused on the market demand for separate anesthesiological services and the hospital's market power in forcing patients to accept the arrangement. The Court found no distinct product market for anesthesiological services and no anticompetitive forcing, concluding that patients were free to choose alternative hospitals or anesthesia providers.