Classifying an antitrust claim as a per se antitrust violation is significant because the plaintiff need not show anticompetitive harm as the law presumes that per se antitrust violations create anticompetitive harm with no redeeming competitive value. Per se antitrust violations are typically limited to price-fixing, market allocation , bid-rigging , group boycott in some instances and, as explained here, certain forms of tying. The market for the tied item is usually competitive and the seller is using its market power for the first item the "tying" item to increase sales in the competitive market for the second item.
This tying arrangement may present competitive problems because alternative sellers of the second item—the tied product—may find themselves foreclosed from competing because buyers are coerced into buying a product from the first seller because the buyers may need the product in which the seller has market power the first product. It is the only way buyers can obtain the second item—by also buying the first product from the seller. Although the explanation above refers to products, tying arrangements may include either products or services.
Below are the elements that a plaintiff must prove to prevail on a tying claim as a per se antitrust violation:. You can find additional information about tying arrangements at The Antitrust Attorney Blog. If you are considering offering products or services together or are a customer or competitor of a company with a tying arrangement, please call us at Bona Law PC if you have any questions.
Older case law, with its per se rule and presumption of market power, contends with the current analysis of the Agencies and some more recent lower court decisions that embody, in essence, a rule of reason approach. Moreover, the Supreme Court recently eliminated its rule presuming market power based on intellectual property. Panelists noted that, although intellectual property bundling may have anticompetitive potential in certain circumstances, there may also be significant efficiency justifications for such bundling in some cases.
Thus, as a matter of their prosecutorial discretion, the Agencies will apply the rule of reason when evaluating intellectual property tying and bundling agreements. When the Agencies do identify anticompetitive situations, however, they will pursue them. Dennis W. Perloff, Modern Industrial Organization 4th ed. A "requirements tie-in" sale occurs when a seller requires customers who purchase one product from the seller e.
Such tying allows the seller to charge customers different amounts depending on their product usage. See id. See, e. United States , U. Business practices merit treatment as per se illegal if "their pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable. Jefferson Parish Hosp. Hyde , U. Tool Works Inc.
Ink, Inc. Tool , S. See infra notes and accompanying text discussing United States v. Microsoft Corp. Lipsky, Jr. Gregory Sidak, F. They were joined by C. Edward Polk, Jr. Patent and Trademark Office. May 14, Hr'g Tr. Panelists stated that such tying and bundling do not meet the standard for per se analysis of always or almost always being harmful to competition. Nat'l Collegiate Athletic Ass'n v. Antitrust Law Developments at ; 1 Hovenkamp et al. United States v. Jerrold Elecs.
Mercedes-Benz of N. Smith Corp. Wells Real Estate, Inc. Greater Lowell Bd. Mazda Distribs. Gulf , Inc. An example would be a razor and razor blade cartridge. Microsoft , F. Activity, Microeconomics , May 14 Tr.
This panelist also cited Microsoft's bundling of a browser with its operating system and suggested that the mechanism through which viable and independently-owned complementary products may facilitate competitive entry into each other's markets is imperfectly understood and deserving of more careful economic analysis.
The intuition behind this result is that bundling allows the monopolist to sell more units to customers which increases total welfare, but also allows the monopolist to charge higher average prices which extracts surplus from customers.
Depending on the parameters of the model, the latter effect could be either greater or less than the former effect. For example, one panelist argued that a successful challenge both eliminates the mark-up attributable to intellectual property and also reduces potential innovators' expectations of how much they might earn on the basis of intellectual property in the future.
MCA Television Ltd. Interest Corp. In deciding a tying patent misuse claim, the U. Court of Appeals for the Federal Circuit recently rejected a per se approach and applied tying case law to find that a package license combining alleged "essential" with "nonessential" patents did not constitute patent misuse because there was no separate demand for the "nonessential" patents, and, thus, no separate product market in which competition could have been foreclosed. Philips Corp. Int'l Trade Comm'n , F.
The court rejected a per se approach "[i]n light of the efficiencies of package patent licensing and the important differences between product-to-patent tying arrangements and arrangements involving group licensing of patents. Jonathan M. May 14, Hr'g R. Warren S. Circuit] imposed a rule of reason to measure Microsoft's software bundling practices.
Int'l Econ. Offering products together can also reduce the manufacturer's costs for packaging, shipping, and promoting the products.
Of course, some consumers might prefer to buy products separately, and when they are offered only as part of a package, it can be more difficult for consumers to buy only what they want. For competitive purposes, a monopolist may use forced buying, or "tie-in" sales, to gain sales in other markets where it is not dominant and to make it more difficult for rivals in those markets to obtain sales. This may limit consumer choice for buyers wanting to purchase one "tying" product by forcing them to also buy a second "tied" product as well.
Typically, the "tied" product may be a less desirable one that the buyer might not purchase unless required to do so, or may prefer to get from a different seller. If the seller offering the tied products has sufficient market power in the "tying" product, these arrangements can violate the antitrust laws.
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