The term tying arrangement refers to the practice of selling a product to a buyer with their agreement to buy another product from the same seller. Tying arrangements can be considered an anticompetitive practice if it restricts trade or decreases competition in a given market.
In a typical tying arrangement, a company sells a product or service to a buyer that is explicitly or implicitly tied to the purchase of another product or service from that same seller. For example, a company might establish a walled garden, or closed platform, whereby a smart device is sold and applications, media, and other content can only be purchased through the provider of the smart device. In the past, both Microsoft and Apple have been accused of tying arrangements.
Generally, these arrangements take one of the following forms:
- Vertical Tying: requires consumers to purchase a related product or service from the same company. For example, Apple could require customers to service their iPhones through their brick and mortar stores or risk voiding their warranty.
- Horizontal Tying: requires consumers to pay for an unrelated product or service from the same company. For example, 3M could require customers to purchase a thermometer when buying a bandage.
Under the Sherman Act of 1890, a tying arrangement is deemed illegal of it results in an unreasonable restraint on trade; while under the Clayton Act of 1914, such arrangements are illegal if they result in substantial lessening of competition.
In addition to tying arrangements, anti-competitive practices may include dividing markets, boycotts, bid rigging, dumping, exclusive dealing, price fixing, disparagement, as well as the unethical collection of business intelligence.
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