Tying

The practice of tying entails conditioning the sale of one product (the tying product) on the sale of another product (the tied product). "Tying is a form of marketing in which the seller insists on selling two distinct products or services as a package" [Justice O'Connor, Jefferson Parish Hospital District v. Hyde, 1884].

Issue: What is the relevant antitrust statute with respect to tying?

Answer: § 1 of the Sherman Act (though enforcement agencies have claimed at various times that tying also was covered under § 3 of the Clayton Act).

Issue #2: If § 1 is the relevant statute, is tying illegal per se?

Answer: NO.

The Supreme Court established a 3 part test for illegal tying in the Jefferson Parish Hospital District et al. v. Hyde [466 U.S. 2 (1984)].

1. "[T]he seller must possess power in the tying product market." Effective tying entails leveraging a dominant position in the tying product market to achieve a dominant position in the tied product market.
2. "[T]here must be a substantial threat that the tying seller will acquire market power in the tied-product market. If . . . the tying arrangement is likely to erect significant barriers to entry into the tied product market, the tie remains suspect."
3. "[T]here must be a coherent basis for treating the tying and tied product as distinct." Click here for a discussion of the relevance of the Jefferson Parrish case to the Microsoft suit. Also read C. Brown's article on the Microsoft case
   
   Question: What rule-of-thumb might be set down to determine is products are "distinct." Read Justice O'Connor's opinion. 

  International Salt v. U.S. [332 U.S. 392 (1947)]