What Is A Tying Agreement In Marketing

The concept of a commitment agreement refers to the practice of selling a product to a buyer with their consent, buying another product from the same seller. Link agreements can be considered anti-competitive practices when they limit trade or competition in a given market. The terms of engagement are regulated at both the national and federal levels. At the federal level, commitment agreements are governed by SHERMAN ANTITRUST ACT (15 U.S.C.A. No. 1) and CLAYTON ACT (15 U.S.C.A. No. 14. At the state level, the rules of engagement are governed by similar statutes and various general legal doctrines. At both levels, buyers and businesses aggrieved by illegal undertaking agreements have two remedies: criminal damages (compensation for damages) and termination action (a court injunction that deters a company from tying its products). Refers to situations where the sale of a property is conditional on the purchase of another property.

A variant is the complete assortment in which a seller presses (or force) a full range of products on a buyer who is primarily interested only in a particular product. Tied selling is sometimes a way to discriminate pricing. Competition concerns were raised that the commitment could prevent other companies from selling related products or increase barriers to entry for those who do not offer a full range of products. The contrary view is that these practices are efficiency-oriented, i.e. they are used to reduce the costs of producing and distributing the product line and to ensure that similar quality products are used to supplement the product sold. For example, a computer manufacturer may request the purchase of data media to avoid damage or loss of performance of its devices by using lower quality replacement data media. There is a growing recognition that related sales agreements may have a valid business rationale depending on market situation. In the management of competition policy, more and more economists are proposing to adopt a regulatory approach to tied sales.

© OECD The joint offer of products as part of a package can benefit consumers who like to buy several items at the same time. The joint product offering can also reduce the manufacturer`s costs for packaging, shipping and advertising products. Of course, some consumers prefer to buy products separately and, if they are only offered as part of a package, it may be more difficult for consumers to buy only what they want. Commercial practice of packaging the sale of one product to the purchase of another product. If the link is not objectively justified by the nature of the products or their commercial use, this practice may restrict competition. Economic theory suggests that a company with market power in a market (a constraining market) may, under certain conditions, be able to take advantage of that position or dominant position in another market (linked market), push its competitors out of that second market and then raise prices above the level of competition.