Tying is the sale of one product conditional upon the purchase
At a wholesale level, tying occurs if a supplier agrees to sell
one product to a distributor on condition that the distributor
purchases all of its requirements of a separate product from the
What is bundling?
Bundling is the sale of two products as a packaged discount. The
buyer is typically free to purchase one product separately, but at
a higher price.
At a wholesale level, bundling occurs when a supplier offers a
discount to a distributor for purchasing its requirements of two
separate products together.
What problems can arise from tying and bundling?
Tying and bundling are, more often than not, beneficial to
consumers. Selling related products together may result in costs
savings from packaging and marketing, which may be passed on to the
consumer. Both the seller and buyer may benefit from reduced
search, information and transaction costs, and increased product
Concerns may arise when a business with substantial market power
uses tying and bundling as means to leverage its market power from
the market in which it has substantial market power (the dominant
market) into a related market in which it does not have market
power (the secondary market).
By tying or bundling the secondary market to the dominant
market, a business with substantial market power may be able to
harm competing suppliers by reducing the number of willing buyers
available in the secondary market. As a result, competing suppliers
in the secondary market may become less effective or even exit the
market, potentially leading to higher prices for consumers.
Limited-duration tying or bundling, such as to promote the
introduction of a new product or to clear inventory or damaged
goods, is unlikely to cause anti-competitive effects.
Next week we will take a look at exclusive dealing by businesses
possessing a substantial degree of market power.
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This article provides information and comments on legal
issues and developments of interest. The foregoing is not a
comprehensive treatment of the subject matter covered and is not
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