The following is provided for educational purposes, and not meant to be legal advice.
Tying arrangements are defined as agreements by a party to sell one product but only on condition that the buyer also purchases a different (or tied) product, or agrees that it will not purchase that product from another supplier. The availability of one item (the “tying” item) is conditioned upon purchase of another item (the “tied” item) or agreeing not to purchase the tied item from the seller’s competitors.
In the United States, tying arrangements that substantially lessen competition or tend to create a monopoly in any line of commerce are prohibited.
Example: Company launches a swap program whereby Company offers customers of its competitors the ability to swap their licenses to the competitive products to the Company’s products for free provided that the customers agree never to use the competitive products again.
Tying arrangements do not require the customer to be contractually bound to purchase the tied item. It is enough when a customer prefers to purchase the tied item on the basis of price, technical reasons, etc.
Factors considered in whether tying arrangements are illegal:
(a) seller has market power in the tying product;
(b) arrangement has an adverse effect on competition in the relevant market for the tied product;
(c) efficiency justifications for the arrangement do not outweigh the anticompetitive effects.
To prevent unlawful tying arrangements in the United States:
(a) Do not condition the licensing of a product or service on an agreement that the customer will not purchase or use the products or services of a competitor.
(b) Do not condition the availability of a company product or service on an agreement that a customer will use another company product or service, or a product or service of a Company partner (i.e. package licensing), if such arrangement would result in an anticompetitive effect.
(c) Offer package or bundle pricing only when the components of the package or bundle are separately available on reasonable terms.
Comment Preview