On July 6, The Wall Street Journal reported that the Justice Department’s Antitrust Division is investigating the wireless telephone industry, looking at least in part at the agreements that give certain wireless carriers exclusive rights to certain devices. For instance, iPhones are exclusive to AT&T Wireless, the Palm Pre is exclusive to Sprint Nextel, the Blackberry Storm is exclusive to Verizon Wireless and the Google G-1 is exclusive to T-Mobile. Two questions spring to mind. First, should the Justice Department break up these arrangements? Second, will it matter?

Superficially, the exclusive arrangements might seem to violate prohibitions against tying. A tying violation occurs if there are two separate products (a tying product and a tied product), a company conditions its agreement to sell the tying product on the consumer’s agreement to buy the tied product, and the seller has market power in the market for the tying product. Do these arrangements run afoul of this prohibition? If you want an iPhone — a tying product — you also have to sign up for wireless service with AT&T — a tied product. But does AT&T have market power, merely because it is the exclusive provider of the iPhone? Perhaps, if the iPhone has a market all to itself. But if the market is viewed more broadly, that argument becomes more difficult. The iPhone is one of about 600 handsets available from U.S. wireless carriers. Even if the market is narrowed to smartphones, the iPhone still competes with various models of BlackBerrys, the Pre and the G1, among others. It’s not clear that any one of these phones has a sufficient share of the market to give its carrier any sort of market power.

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