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Tying - Time for a New Assessment

Bidgell, Susanne (1998)
Department of Law
Abstract
Tying arrangements have been controversial and regarded with suspicion for a long time both within the EC competition law and within the US antitrust law. Tying is a vertical restraint and can be described as an obligation to accept the purchase of an unwanted or unnecessary product or service in order to be able to purchase a wanted product or service. A tying arrangement presupposes an element of coercion being present between the buyer and the seller and that the purchase involves two distinct products. Tying arrangements are used by undertakings to maintain control over his product also after entering into a vertical agreement. The upstream undertaking has an incentive to control the downstream undertaking since the latter often... (More)
Tying arrangements have been controversial and regarded with suspicion for a long time both within the EC competition law and within the US antitrust law. Tying is a vertical restraint and can be described as an obligation to accept the purchase of an unwanted or unnecessary product or service in order to be able to purchase a wanted product or service. A tying arrangement presupposes an element of coercion being present between the buyer and the seller and that the purchase involves two distinct products. Tying arrangements are used by undertakings to maintain control over his product also after entering into a vertical agreement. The upstream undertaking has an incentive to control the downstream undertaking since the latter often transforms the product and/or markets it. By inserting a vertical restraint such as a tying arrangment, the upstream undertaking is able to exert the same control as it had integrated the downstream undertaking. The vertical control is important when explaining why tying is used, but the economical advantages are also prominent. Tying can be used to increase efficiency, create economies of scale and avoid price regulations. It can also be used to ensure the quality of the product and to meter usage of a machine. The traditional objection to tying arrangements is that they exclude competitors and potential entrants from the tied product market. The foreclosure of potential rivals thereby restricts competition. However a new approach towards vertical restraints is developing both within the EC and the US. In EC competition law the previous approach has been sharply criticised for being too formalistic and mechanistic. A more flexible analysis, which focuses on the facts of the case and reflects the commercial reality is wanted. Therefore the analysis must view tying arrangements in the agreement's legal and economical context. An assessment involving several factors must be accomplished to establish whether the tying creates anticompetitive effects and if so, if these can be outweighed by its procompetitive effects. The previous US approach was very liberal and now a more strict approach is expected to develop. The US and EC systems differs essentially in their underlying objectives and can therefore never become identical. However, the new approaches have in common that they both need to attain a more wellbalanced and flexible analysis of tying arrangements. (Less)
Please use this url to cite or link to this publication:
author
Bidgell, Susanne
organization
year
type
H3 - Professional qualifications (4 Years - )
subject
keywords
EG-rätt
language
English
id
1556255
date added to LUP
2010-03-08 15:55:19
date last changed
2010-03-08 15:55:19
@misc{1556255,
  abstract     = {Tying arrangements have been controversial and regarded with suspicion for a long time both within the EC competition law and within the US antitrust law. Tying is a vertical restraint and can be described as an obligation to accept the purchase of an unwanted or unnecessary product or service in order to be able to purchase a wanted product or service. A tying arrangement presupposes an element of coercion being present between the buyer and the seller and that the purchase involves two distinct products. Tying arrangements are used by undertakings to maintain control over his product also after entering into a vertical agreement. The upstream undertaking has an incentive to control the downstream undertaking since the latter often transforms the product and/or markets it. By inserting a vertical restraint such as a tying arrangment, the upstream undertaking is able to exert the same control as it had integrated the downstream undertaking. The vertical control is important when explaining why tying is used, but the economical advantages are also prominent. Tying can be used to increase efficiency, create economies of scale and avoid price regulations. It can also be used to ensure the quality of the product and to meter usage of a machine. The traditional objection to tying arrangements is that they exclude competitors and potential entrants from the tied product market. The foreclosure of potential rivals thereby restricts competition. However a new approach towards vertical restraints is developing both within the EC and the US. In EC competition law the previous approach has been sharply criticised for being too formalistic and mechanistic. A more flexible analysis, which focuses on the facts of the case and reflects the commercial reality is wanted. Therefore the analysis must view tying arrangements in the agreement's legal and economical context. An assessment involving several factors must be accomplished to establish whether the tying creates anticompetitive effects and if so, if these can be outweighed by its procompetitive effects. The previous US approach was very liberal and now a more strict approach is expected to develop. The US and EC systems differs essentially in their underlying objectives and can therefore never become identical. However, the new approaches have in common that they both need to attain a more wellbalanced and flexible analysis of tying arrangements.},
  author       = {Bidgell, Susanne},
  keyword      = {EG-rätt},
  language     = {eng},
  note         = {Student Paper},
  title        = {Tying - Time for a New Assessment},
  year         = {1998},
}