Portfolio 39-2nd: Tying Arrangements: Practice Under Federal Antitrust, Patent, and Banking Law

I. Introduction

II. Statutory and Historical Background
A. The Rule in a Nutshell
B. The Statutory Foundation
1. Clayton Act, §3
2. Sherman Act, §1
3. Federal Trade Commission Act, §5
4. Special federal or state anti-tying laws
5. State antitrust laws
C. The Risk—Treble Damages and Class Actions
D. A Short History of Tying Law

III. The Prohibition Against Tying
A. Tying as a ‘Per Se’ Offense
1. What are the essential elements of a tying violation?
2. When are there two different products?
a. Pre-Hyde cases
b. The Hyde case
c. Post-Hyde cases
d. The Kodak case
e. Post-Kodak cases
f. The Microsoft case
3. What constitutes a ‘tie’?
a. Express tying agreements
b. Implied tying arrangements
c. Recent decisions on ‘ties’
d. The so-called ‘economic tie’
4. Market power in the tying product
a. Hyde's impact on principles of market power
b. Kodak's contribution to the issue of market power
c. Pre-Hyde rules
d. Post-Hyde cases
e. Post-Kodak cases
f. Queen City Pizza and after
5. Foreclosure of the tied product market
6. Anti-competitive consequences in the tied market
7. Is there a ‘single purchaser’ rule?
8. Economic interest in the tied product
9. Other required elements
a. Antitrust injury
b. Proof of damage
10. Defenses to the plaintiff's per se case
a. The business necessity defense
b. The fledgling industry situation
B. Rule-of-Reason Analysis in Tying Cases
C. Attempts to Promulgate Governmental Guidelines
1. DOJ Vertical Restraint Guidelines
2. The NAAG Vertical Restraints Guidelines
3. The DOJ Statement on Section 2 of the Sherman Act

IV. Particular Business Practices
. Introductory Material
A. Package Sales
1. Separate availability
2. Two-products
3. Availability elsewhere
4. Business justification
B. Service and Maintenance Requirements
C. Distribution Practices
1. Full-line forcing
2. Mandatory stocking and sale of complementary goods
3. Mandatory promotions
D. Franchising and Licensing of Trademarks
1. Two-products issue: Is a franchise a product?
2. Market power of the franchisor
3. Goodwill considerations
4. Requiring the use of an approved source
5. Reemergence of class actions in franchise tying suits
E. Licensing of Patents and Copyrights
1. Does a patent or copyright confer ‘market power’?
a. The Patent Misuse Reform Act of 1988
b. Market power under the DOJ/FTC intellectual property guidelines
2. Arrangements involving patents
a. Tie-ins under the DOJ/FTC intellectual property guidelines
b. Use of nonpatented products
i. Patent misuse
ii. Contributory infringement
c. Mandatory package licensing of patents
d. Patent law immunity: The Xerox case
3. Packaging wanted and unwanted patents
4. Royalties on the sale of unpatented products
a. Grant-back provisions
b. Extended royalties
5. Copyrights
a. Block-booking
b. Music libraries
F. Reciprocal Dealing

V. Special Problems with Respect to Certain Tying Goods
A. Insurance Tie-Ins
B. Real Estate as a Tying Product
1. Land
2. Condominiums
a. Management contracts
b. Recreational leases

VI. Special Problems for Banks and Other Lending Institutions
A. Introduction
1. The Bank Holding Company Act
2. The Home Owners' Loan Act
3. Jurisdiction, damages, and remedies
B. Who Is Subject to the Anti-Tying Provisions?
1. What is a ‘bank’ or ‘savings association’?
2. Who is protected by the anti-tying provisions?
3. What transactions are covered?
C. Essential Terms and Elements
1. What does it mean to ‘extend credit’?
2. What does the term ‘condition or requirement’ mean?
3. Must a plaintiff prove ‘anti-competitive effects’?
D. Exemptions and Safe Harbors
1. What is the ‘traditional banking practice’ exemption?
2. Can a bank offer a discounted package of services?
3. Do the anti-tying statutes reach ‘attempted’ ties?
E. Conclusion

VII. A Counselling Summary—Keeping it Legal
. Introductory Material
A. Package Pricing and Separate Availability
B. The Single-Product Characterization
C. Antitrust Compliance Programs