Tying is the sale by a firm of one product (the tying product) only on condition that the customer also purchase a second product (the tied product) from the same firm. Manufacturer restrictions on aftermarket parts or services may give rise to a claim of illegal tying. For example, a tying claim might allege that a manufacturer unlawfully tied the availability of replacement parts to the purchase of its repair service. The tie can be explicit (you must buy Product A in order to get Product B), with the manufacturer refusing to sell the products separately, or implied, such as when products are offered only as part of a bundle and not independently.[1]
In many cases prior to the U.S. Supreme Court decision in Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451 (1992), discussed in detail below, courts applied a per se rule of liability to allegations of tying under Sherman Act § 1 or Clayton Act § 3.[2] Since Kodak, however, courts have imposed a number of requirements for a finding of liability in connection with tying restraints, reflecting cases in which the Court has eliminated per se analysis for all other vertical restraints.[3] While some decisions continue to describe tying as a potential per se violation,[4] courts now routinely require a showing of cognizable harm in the tying product market or the tied product market, leading to an extensive inquiry into market power and economic affects more akin to a rule of reason analysis.[5]
Kodak is the leading case to address aftermarket issues.[6] ISOs challenged Kodak’s policies restricting ISOs’ ability to service and provide replacement parts for Kodak copiers and micrographics equipment. The ISOs serviced Kodak equipment in competition with Kodak itself. Because Kodak refused to sell parts directly to ISOs, many ISOs found it impossible to stay in business. Many equipment owners that preferred ISO service were also forced to obtain service from Kodak. The case focused on the allegation that Kodak refused to sell parts to equipment owners that obtained service from ISOs. In their suit, ISOs alleged that Kodak unlawfully tied the availability of Kodak parts to the purchase of Kodak service in violation of
- ↑ Suture Express v. Owens & Minor Distribution, Inc., 851 F.3d 1029 (10th Cir. 2017), cert. denied, 138 S. Ct. 146 (2017).
- ↑ See N. Pac. Ry. Co. v. United States, 356 U.S. 1, 5–6 (1958); Int’l Salt Co. v. United States, 332 U.S. 392, 396 (1947) (“It is unreasonable, per se, to foreclose competitors from any substantial market.”).
- ↑ See, e.g., Illinois Tool Works v. Independent Ink, Inc., 547 U.S. 28, 35 (2006) (“Over the years … this Court’s strong disapproval of tying arrangements has substantially diminished.”). See also Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877, 907 (2007) (holding that “[v]ertical price restraints are to be judged according to the rule of reason.”).
- ↑ See, e.g., Suture Express, 851 F.3d at 1037; Cox Enterprises, Inc. v. Cox Communications, Inc., 871 F.3d 1093, 1098–1102 (10th Cir. 2017) (discussing the “evolution of tying law” and collecting circuit caselaw).
- ↑ See, e.g., Town Sound & Custom Tops, Inc. v. Chrysler Motors, 959 F.2d. 468, 477 (3d Cir. 1992) (“[t]he rule in tying cases is not, however, like other truly per se rules in antitrust law.”); Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 26 (1984) (holding that analysis of a tying claim still requires inquiry into market power and economic effects of the arrangement). See also NCAA v. Bd. of Regents, 468 U.S. 85, 104 n.26 (1984) (“Indeed there is often no bright line separating per se from Rule of Reason analysis. Per se rules may require considerable inquiry into market conditions before evidence justifies a presumption of anticompetitive conduct.”)
- ↑ Kodak, 504 U.S. 451 (1992).
products are “goods, wares, merchandise, machinery, supplies, or other commodities,” and thus does not apply when tying arrangements involve intangibles such as services, trademarks, or franchises, among other things. Id.
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