A tying arrangement is 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. 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 arise when such arrangements 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. When unlawful, tying arrangements 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 of sufficient economic power by the seller with respect to the tying product to restrain free trade in the market for the tied product;
- The arrangement affects a substantial 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.
Tying arrangements can raise antitrust concerns because they can restrict competition and limit consumer choice. See: Antitrust Law for more information.
[Last updated in June of 2024 by the Wex Definitions Team]