Tying Agreements and US Antitrust Law
When a seller requires buyers to purchase a second product or service as a condition of obtaining a first product or service, it may run afoul of the federal antitrust laws. This is called a tying arrangement or tying agreement.
Importantly, unlike other selling conditions like loyalty discounts, bundling, and exclusive dealing, for example, tying arrangements may, under certain situations, create per se antitrust liability. This departure from these other “vertical” agreements is due largely to the coercive aspect of tying that creates an all-or-nothing proposition for customers and may successfully foreclose competitors from competing to serve those customers.
Classifying an antitrust claim as a per se antitrust violation is significant because the plaintiff need not show anticompetitive harm as the law presumes that per se antitrust violations create anticompetitive harm with no redeeming competitive value. Per se antitrust violations are typically limited to price-fixing, market allocation, bid-rigging, and, as explained here, certain forms of tying.
A typical tying arrangement is when a seller with market power for a product (the “tying” item) requires any customer buying that item to also purchase a second item (the “tied” item). The market for the tied item is usually competitive and the seller is using its market power for the first item to increase sales in the competitive market for the second item.
This tying arrangement may present competitive problems because alternative sellers of the second item—the tied product—may find themselves foreclosed from competing because buyers are coerced into buying a product from the first seller because the buyers may need the product in which the seller has market power (the first product). It is the only way buyers can obtain it—by also buying the first product from the seller.
Although the explanation above refers to products, tying arrangements may include either products or services.
You can read the rest of this article, which includes a list of elements for a tying claim, by following the link below.
- Article on Tying and Antitrust
- Bona Law PC
- The Antitrust Attorney Blog
- Antitrust Attorney Blog article on Tying and Antitrust