Tying the Sales of Two Products: Do Antitrust Laws Prohibit This?
If you go to the pharmacy to buy some Nyquil, you might see it packaged with Dayquil as well. If you go to buy a household cleaning product, you might find it packaged together with a scrubbing sponge. Packages like these might be a convenience and cost savings to the consumer, but what if you only want the Nyquil but can’t find it sold separately? What if you like the cleanser offered by Company A but prefer to buy your scrubber from Company B? Tied sales sometimes force consumers to buy products they don’t want, or they stifle competition by driving newer or smaller companies out of the market.
Tied sales can be unlawful and violate antitrust laws. Learn more about tied sales below, and call an experienced California consumer protection and antitrust attorney if you’ve been harmed by a company’s unlawful sales practices.
When tying sales of two products is allowed, and when it isn’t
Tying the sales of two products together can be good for the manufacturer and good for the consumer too. The manufacturer lowers its packing and shipping costs and gets two-for-one pricing on its advertising and marketing. Consumers can benefit from the convenience of getting two items at once rather than having to buy them separately – often at a cost savings.
Sometimes, however, tie-in sales, also known as forced buying, is a monopolistic practice that can run afoul of consumer protection and antitrust laws. In these situations, the company is tying products together for the express purpose of forcing sales of certain products to shut out competition and dominate the market for those products. This tactic typically does not benefit the customer, and it might be unlawful as well. Consumers suffer when they are forced to buy a product they wouldn’t otherwise purchase, or when they are made to buy a tied-in product from one manufacturer that they would prefer to get from another brand.
The worst case for consumers is when a tie-in not only limits competition, but the customer has no choice but to buy the tied-in product. One such example concerns a drug maker that is the only manufacturer of a particular medicine and ties its product to a blood-monitoring service. Consumers normally have many options to choose blood monitoring services, but if they need that one specific medicine, they have no choice but to also purchase the tie-in blood monitoring service whether they want to or not. This particular example is a real-world situation that was challenged as an unlawful practice by the Federal Trade Commission. Another example of unlawful tying might be a bank that offers to finance a customer’s home mortgage, but only if the customer opens up and maintains an investment account with the bank.
It’s important to distinguish the practice of tying versus bundling. Bundling is often beneficial to the consumer, such as buying a combo meal at a fast-food restaurant at a reduced price, so long as the customer is not forced to buy the bundle to get any one particular item. Tying, on the other hand, is often a form of unlawful price discrimination, where the same product is sold at different prices to different buyers in different markets.
In the past, tie-ins have been ruled illegal by the United States Supreme Court. However, the legal landscape is changing, and many lower courts across the country have been more willing to look at each case individually to determine what effect the tied sale has on competition. This “rule of reason” approach is likely to lead to a confusing situation where some tied sales are allowed, and others aren’t. The bottom line is that if a particular practice of tying products together results in less competition without providing a true benefit to consumers, it is probable that the practice violates consumer protection and antitrust laws.
Don’t be a victim of unfair business practices that harm consumers
For help pursuing a consumer protection claim in California or nationwide, including false advertising, fraud, antitrust violations and more, call the Kalfayan Law Firm in Del Mar (San Diego) for a free consultation. Our seasoned class action law firm serves local residents and nationwide classes with diligence and passion. We’ll see your case through to the end and seek both justice and compensation for all the victims of corporate misconduct.