Tying. Tying is when the supplier makes the purchase of one product conditional upon the purchase of another product which, by their nature or according to commercial usage, are not part of one system or have no connection with each other. The first product is referred to as the tying product and the second is referred to as the tied product. It is indifferent whether the tying product and tied products are supplied by the supplier or by someone designated by the supplier.
Bundling. Bundling is when two or more distinct products are only supplied together in fixed proportions (i.e. ‘pure bundling’) or if the products are also sold separately but the aggregate price when sold separately is higher than the bundled price (i.e. ‘mixed bundling’).
Tying. If tying is not objectively justified by the nature of the products or commercial usage, such practice may constitute an abuse of a dominant position. Agreements, which effectively (contractually or de facto) make the sale of one product conditional upon the purchase of another distinct product, may therefore violate competition law.
Prohibitions related to ‘tying’. A tying clause is prohibited if the supplier is dominant in one of the products or services offered. Examples of prohibited acts of tying include:
The sale of testing materials required in connection with (testing) instruments or equipment;
- The sale of toner cartridges required for selling printer brands;
- Requiring a bookstore to buy unpopular titles before allowing it to purchase a bestseller;
- The automatic installation of an internet browser in connection with a software operating system.
It is generally prohibited to make the supply of a product:
- Conditional upon the purchase of another product (although there may be exceptions);
- Subject to the obligation to enter into a service agreement.
However, it may be possible to tie:
- A full range of products including accessories;
- Instruments or equipment and a service agreement for reasons of product safety;
- Materials or tools (in licence agreements), which are necessary for a technically satisfactory exploitation of the licence.
Bundling. Bundling adversely affects competition if at least one of the bundled products is dominant. The bundle might foreclose the market for products competing with the single products in the bundle. The prohibitions in the EU include:
- Strategic bundling of two or more products with the sole purpose of excluding competitors and without pursuing innovative, scientific or medical aims;
- Setting a predatory price for a product bundle resulting in foreclosing the market against competitors.
In the EU, it is permitted to bundle two (or more) products:
- When there are strong scientific or medical reasons for the bundle;
- If they are part of a system.