Clayton Act - Tying Arrangements - Explained
When is Tying the Sale of One Product to Another Illegal?
If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.
- Marketing, Advertising, Sales & PR
- Accounting, Taxation, and Reporting
- Professionalism & Career Development
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Business Management & Operations
- Economics, Finance, & Analytics
When is a Tying Contract Illegal Under the Clayton Act?
A tying contract is one in which a product is sold or leased only on the condition that the buyer purchase a different product or service from the seller or lessor. A common type of tying, known as full-line forcing, is where a seller compels the buyer to take a complete product line from the seller. That is, the buyer cannot purchase just one product in the line. Another situation involves tying unpatented products to a patented product. Such a practices are per se illegal if the following elements are present:
Separate Products - The tying and tied product are two separate products;
Market Power - The defendant has substantial market power in tying the product market;
Forecloses Trade - The tying agreement prevents a substantial amount of trade in the relevant market;
Forced Sale - The defendant effectively forces a substantial number of customers to purchase the tied product under conditions where they may otherwise look to other sellers in the market;
Harm to Competition - There must be an identifiable lessening of competition in the market, and
No Competitive Justification - No legitimate pro-competitive justification exists.
The general defenses of maintaining company goodwill, pro-competitive or strategic objectives, and generating market efficiencies are available to combat a finding of anticompetitive effect.
Example: A common example of an illegal tying arrangement involves tying a patented drug to an unpatented medicine dispenser. This seeks to extend the monopolistic rights allowed to patent holders to non-patented items.
Next Article: Clayton Act - Reciprocal Dealing Arrangements Back to: ANTITRUST LAW
How do you feel about prohibiting tying goods from a single provider? Do you believe the above-listed elements are sufficient to identify anticompetitive practices? Why or why not? Should general, pro-competitive defenses be sufficient to justify tying contracts? Why or why not?
ABC Corp carries a line of products. One of its products is subject to a utility patent and is the only product of its type currently on the market. Lots of market competitors make accessories for this product. ABC, however, requires that any purchaser of this product also purchase several of ABCs accessory products? If the FTC challenges these sales agreements, what elements would a court use to determine whether the practice is anticompetitive?
- Antitrust Law (Intro)
- What is Antitrust Law?
- What are the Major Antitrust Laws?
- What government agency enforces antitrust law?
- What Sanctions are available under antitrust law?
- What is the Sherman Act of 1890 (Sherman Act)?
- What is a Contract, Combination, of Conspiracy in restraint of trade?
- What is Per Se Illegality and the Rule of Reason?
- What is a Monopoly?
- Herfindahl Hirschman Index (HHI) Definition
- What businesses are exempt from the Sherman Act?
- Horizontal Restraint Sherman Act?
- Sharing Information?
- Refusal to Deal?
- Territorial Agreement?
- Price Fixing?
- Resale restraint?
- Exclusive dealing?
- Tying products?
- Territorial agreements?
- What is Monopolization under the Sherman Act?
- What is the Clayton Act of 1914 (Clayton Act)?
- What is price discrimination under the Clayton Act?
- What are special arrangements prohibited under the Clayton Act?
- When are tying contracts an illegal restraint under the Clayton Act?
- When are reciprocal dealing contracts an illegal restraint under the Clayton Act?
- How does the Clayton Act regulate mergers and acquisition?
- FTC Act Antitrust Law