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Tying arrangement

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Definition Edit

A tying arrangement is

an agreement by a party to sell one product but only on the condition that the buyer also purchases a different (or tied) product, or at least agrees that he will not purchase that product from any other supplier.[1]

Overview Edit

A tying arrangement "will violate section 1 of the Sherman Act if ‘the seller has appreciable economic power in the tying product market and if the arrangement affects a substantial volume of commerce in the tied market.'"[2]

The evil of tying "lies in the seller's exploitation of its control over the tying product to force the buyer into the purchase of the tied product." The tied product market is thereby distorted. Four essential elements must be established to prove an illegal tying arrangement under either a per se or rule of reason theory. They are:
(1) The existence of two separate products;
(2) An agreement conditioning purchase of the tying product upon purchase of the tied product or upon agreement not to purchase;
(3) Seller's possession of sufficient economic power in the tying product to restrain competition in the tied product market; and
(4) A not insubstantial impact on interstate commerce."[3]

References Edit

  1. United States v. IBM Corp., 163 F.3d 737, 738 n.1 (2d Cir. 1998) (citations omitted) (full-text) citing Northern Pac. Ry. Co. v. United States, 356 U.S. 1, 5-6 (1958) (full-text).
  2. Id., citing Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 462 (1992) (full-text).
  3. Advanced Computer Serv. v. MAI Sys. Corp., 845 F. Supp. 356, 368 (E.D. Va. 1994) (full-text) cert. dism., 510 U.S. 1033 (1994).

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