What is tying? When does the practice of tying run afoul of the antitrust statut

Question

What is tying? When does the practice of tying run afoul of the antitrust statutes? The Supreme Court ruled in the Eastman Kodak v. Image Technical Services [ 504 U.S. 451 (1992)] that Eastman Kodak’s practice of withholding access to replacement parts for its volume copiers and micrographic equipment from independent service organizations (ISOs) gave its own service division an unfair, and illegal, advantage in the “after market for repair services.” Review the dissent of Justice Scalia in this case. Why did this case fail to meet the test for illegal tying, according to Justice Scalia?

Explanation / Answer

Tying is an illegal arrangement, to buy one product thee customer has to purcahse another product which is lying in seaprate market. It is done for competitive purposes.

Unlike other selling conditions like loyalty discounts, bundling and exclusive dealing per se create antitrust liability. The following elemnts show that tying is antitrust activity.

1. Two products or services are separate products;

2. Coercion like in case of bundling;

3. seller's market power;

4.Substaintiality;

5. Seller must have economic interest in both the products.

Justice Scalia disented and given an argument that Kodak summary judgement motion should be granted since Kodak is lacking power in the interbrand copier.

Because the Court recognized the information costs and lock -in prevented switching copying and micrographic equipment.

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