Tying & bundling as a competition concern under EU competition law & US antitrust law

Abstract

Tying and bundling practices essentially involve the sale of a primary (tying) product being made conditional upon the sale of a second (tied) product. Published evidence from economics sources demonstrates that these endemic business practices often generate substantial economic efficiencies which may be passed on to consumers in the form of lower prices, reduced transaction costs and improved product quality. On the other hand, some economists argue that a company holding a position of strength in the tying/bundling product market may strategically employ these practices in order to foreclose or exclude its competitors from the tying and/or tied product market and thereby hamper competition. This study asserts that since tying and bundling practices may either have a pro-competitive or an anti-competitive overall effect, a detailed assessment of the actual and potential effects a given practice is likely to cause upon competition, is crucial. The Courts (both in the EU and the US) have, for a considerable time period, assumed that tying and bundling practices are generally anti-competitive and have failed to appreciate any economic efficiencies these practices may generate. This thesis examines how the Courts' rather unsympathetic attitude towards tying and bundling practices resulted in a number of false-positive rulings. Benign or pro-competitive tying practices were frequently (unjustly) condemned because of the Courts' failure to embark upon a meticulous technical assessment of the pro- and anti-competitive effects of the tying practice under investigation. More recently, antitrust authorities have confirmed that not all ties are intrinsically negative in nature, and have thus influenced a more flexible approach towards these practices; essentially one that This thesis proposes a simple and effective test which would help the Courts to identify whether a given tying practice should be rightfully condemned because of its overall harmful effect upon competition or whether the tying practice should be allowed because of its overall pro-competitive effect.