Tying arrangement

Definition

An agreement in which the seller conditions the sale of one product (the "tying" product) on the buyer's agreement to purchase a separate product (the "tied" product) from the seller.   Alternatively, it is also considered a tying arrangement when the seller conditions the sale of the tying product on the buyer's agreement not to purchase the tied product from any other seller.  See Eastman Kodak v. Image Technical Services, Inc., 504 U.S. 541 (1992).

Overview

Tying arrangements are not necessarily unlawful.  Antitrust concerns are raised by tying arrangements to the extent that they are used to maintain or augment the seller's pre-existing market power or impair competition on the merits in the market for the tied product. 

Where a tying arrangement is unlawful, it may be illegal per se or illegal under the rule of reason.  The requirements for a per se violation are: the forced purchase of one commodity in order to obtain a separate desired commodity or service; possession by the seller of sufficient economic power with respect to the tying product to restrain free trade in the market for the tied product; and that the arrangement affects a not insubstantial amount of commerce in the market for the tied product.  If the requirements for a per se violation are not met, a tying arrangement may be illegal under the rule of reason if: it results in an unreasonable restraint on trade in the relevant market under § 1 of the Sherman Act; or its probable effect is a substantial lessening of competition in the relevant market under § 3 of the Clayton Act.

See Antitrust Law for more information.

 

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