On Mar. 25, 2015, the U.S. Circuit Court of Appeals for the 6th Circuit upheld a preliminary injunction against Eastman Kodak Company's pricing policy for Versamark printer ink, finding that the plaintiff, Collins Inkjet Corporation, was likely to succeed on the merits of its claim that the pricing policy constitutes unlawful tying. Collins Inkjet Corp. v. Eastman Kodak Co., Case No. 14-3306, 2015 WL 1320675 (6th Cir. Mar. 25, 2015).
Kodak sells refurbished printer components for industrial printers, and also sells ink. Collins competes with Kodak for the sale of ink. In July 2013, Kodak announced that it would begin charging customers higher prices for refurbished printer components if the customers used non-Kodak ink—in effect offering customers a discount for purchasing both refurbished printer components and ink from Kodak. Collins sought and was granted a preliminary injunction preventing Kodak from implementing this price increase on the grounds that it amounted to unlawful tying in violation of Section 1 of the Sherman Act.
The 6th Circuit affirmed the grant of the preliminary injunction, in the process, clarifying the test for what it termed "non-explicit tying via differential pricing." Id. at *4. The district court had applied a standard that the 6th Circuit found unduly favorable to Collins. The court had examined only whether the pricing policy made it likely that all or almost all customers would switch to Kodak ink, without determining whether this would be the result of unreasonable conduct on Kodak's part.
The 6th Circuit clarified that "[a] tying arrangement enforced entirely through differential pricing of the tying product contravenes the Sherman Act only if the pricing policy is economically equivalent to selling the tied product below cost." Id. at *1. Because the available evidence suggested that under the new policy Kodak was in effect selling its ink at a loss, Collins was likely to succeed on its tying claim even under the more stringent correct standard. In adopting the below-cost requirement, the court followed the 9th Circuit's approach to bundled discounts in Cascade Health Solutions v. PeaceHealth, 515 F.3d 883 (9th Cir. 2008), and criticized the 3rd Circuit's approach in LePage's, Inc. v. 3M, 324 F.3d 141 (3d Cir. 2003).
The 6th Circuit's decision is available here.
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