Tying Arrangements May Violate Antitrust Laws

Unlawful tying involves an agreement between a buyer and a seller whereby the seller conditions the sale of a good or service in one market (the “tying” product) upon the buyer’s agreement to buy a second good or service (the “tied” product) from the seller, or refrain from buying that same good or service from a competing seller. Tying arrangements are subject to Section 1 of the Sherman Act and Section 3 of the Clayton Act (for goods only) and raise antitrust concerns because they can foreclose competitors from the market for the “tied” product. Tying arrangements can also raise entry costs of competitors of the seller, as competitors may have to provide both the tied and the tying product to be competitive in the market. Further, tying arrangements may force consumers to buy a product that they simply do not want or need. In short, tying arrangements are forbidden on the theory that, if the seller has market power over the tying product, the seller can leverage this power through tying arrangements to exclude other sellers of the tied product.

Despite these concerns, tying arrangements are not uncommon contractual requirements in the health care industry. Requirements that force a buyer to purchase some or all of a seller’s goods or services as a condition to making any purchase from the seller should be reviewed carefully, particularly if the seller has market power in the tying product.

For additional information about the issues discussed above, or if you have any other antitrust concerns, please contact the Epstein Becker Green attorney who regularly handles your legal matters, or one of the authors of this Antitrust Byte: