Legal Definitions - Tying arrangement

Tying arrangement

A tying arrangement occurs when a seller makes the sale of one product or service (the "tying" product) conditional on the buyer also purchasing a different, separate product or service (the "tied" product) from the same seller.

Alternatively, it can also be a tying arrangement if the seller requires the buyer, as a condition of purchasing the desired product, to agree not to buy the separate "tied" product from any other competitor.

While not all tying arrangements are illegal, they become a concern under antitrust laws when they are used by a seller with significant market power to unfairly extend that power into another market or to stifle competition for the "tied" product.

Here are some examples:

• Example 1: Specialized Business Software and Cloud Storage

  A software company develops a highly specialized accounting software that is essential for businesses in a particular niche industry. When companies purchase a license for this software, the vendor requires them to also subscribe to its proprietary cloud storage service for data backup, even if the businesses already have preferred cloud providers or could use a more cost-effective third-party solution.

  How it illustrates the term: The essential accounting software is the tying product, which businesses strongly desire. The proprietary cloud storage service is the tied product, which buyers are forced to purchase as a condition of getting the software.

• Example 2: Unique Industrial Equipment and Exclusive Maintenance

  A manufacturer produces a unique, patented machine critical for a specific stage in automotive production. To purchase this machine, car manufacturers are required to sign an exclusive five-year maintenance and parts contract directly with the machine manufacturer, even though several independent service providers could offer similar maintenance at a lower cost.

  How it illustrates the term: The unique industrial machine is the tying product, indispensable for the buyers. The exclusive maintenance and parts contract is the tied product, which the buyers are compelled to acquire solely from the seller of the machine.

• Example 3: Exclusive Live Sports Broadcasts and Streaming Bundles

  A major media corporation secures exclusive streaming rights to a highly popular international sporting event that millions of fans want to watch live. To access this specific event, viewers are required to subscribe to the corporation's entire premium streaming bundle, which includes numerous other channels and on-demand content that many viewers may not want or intend to watch.

  How it illustrates the term: The exclusive live sporting event is the tying product, highly desired by consumers. The full premium streaming bundle (or the unwanted components within it) acts as the tied product, which consumers must purchase to gain access to the desired event.