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Tying

From Academic Kids

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Tying is the anti-competitive practice of requiring de facto or de jure the customer to purchase a certain package of goods together. It is implied in this that one or more components of the package are sold individually by other businesses as their primary product, and thereby this packaging would hurt their business. It is also implied that the company doing this packaging has a significantly large market share so that it would hurt the other companies who sell only single components.

Tying is often used when the supplier makes one product that is critical to many customers. By threatening to withhold that key product unless others are also purchased, the supplier can increase sales of less necessary products.

Horizontal tying is the practice of requiring customers to pay for an unrelated product or service together with the desired one. For example, all of one company's toothbrushes come with the company's ice skates. Microsoft ties together Microsoft Windows, Internet Explorer, and Outlook Express.

Vertical tying is the practice of requiring customers to purchase related products or services from the same company. For example, a company's automobile only runs on its own proprietary gas and can only be serviced by its own dealers. In an effort to curb this, many jurisdictions require that warranties not be voided by outside servicing.

Tying may be the action of several companies, as well as the work of just one firm.

It was first made illegal in the United States by the Sherman Antitrust Act.

See also

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