A. Definitions
I. General
In general, tying and bundling refer to sales strategies where firms offer a combination of distinctive products.
If employed by a dominant firm, such sales strategies may be regarded abusive and prohibited under Art 102 of the TFEU. Tying and bundling have common elements and they are associated with the same competition concerns (in particular, leverage of market power and market foreclosure) but they are understood to be to two different sales strategies.
Tying is explicitly mentioned in Art 102 of the TFEU as an abusive conduct. According to Art 102(d) abuse may in particular consist in “conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.” This describes the nature of tying, i.e. the practice of supplying something on the condition that the customer purchases something else from the supplier as well.Even though bundling is not explicitly mentioned in Art 102 of the TFEU it is an established notion in EU competition law. Tying has been discussed e.g. in the case Hilti:
Hilti was a supplier of a nail gun protected by a patent. Hilti did not have any patent on the nails used in the nail gun and there were independent manufacturers who produced Hilti-compatible nails. According to the independent manufacturers Hilti employed several selling practices which required the customers who bought the Hilti nail gun to purchase also nails from Hilti and these selling practices excluded other manufacturers from the nail market. The ECJ ruled that Hilti infringed Art 102 of the TFEU (then Art 82) because the selling practices that tied the Hilti nail gun to the “Hilti nails” limited the entry of the independent manufacturers of Hilti-compatible nails into the market.
It is important to bear in mind that not every case where two or more products are sold together constitutes an abusive conduct under Art 102(d) of the TFEU. Tying and bundling are in fact common business practices and they are routinely engaged in by both dominant and non-dominant firms.
For instance, selling shoes together with shoelaces or a car with tyres as one product can be regarded as a normal selling practice that merely serves the needs and preferences of the consumers. Furthermore, tying and bundling of two or more components into one product is a fundamental part of several economic activities and they can lead to substantial savings in production, distribution and transaction costs as well as to quality improvements.This can in turn be reflected in the prices for which the products are offered for sale and in the more attractive products made available for the consumers. Other justified reasons for tying and bundling products together may be e.g. ensuring the optimal production performance, maintaining the supplier´s reputation or ensuring safety of the product.
However, it can be noted on the basis of case law that the ECJ and the Commission have not always accepted product safety as a proper justification for tying and bundling.
II. Tying
As already mentioned, tying refers to a sales strategy where distinctive products are offered for sale as a combination. According to the Commission, tying occurs when a dominant firm makes the sale of one product (the tying product) conditional upon the purchase of another distinct product (the tied product) from the dominant firm or someone designated by it. In such a case only the tied product could be bought separately by the customers.The tying effect deprives the customers of choice of alternative products and it can take place on technical or contractual basis.Thus contractual tying refers to situations where the customers who purchase the tying product undertake also to purchase the tied product (and not the alternatives offered by competitors). Respectively, technical tying refers to situations where the tying product is designed in such a way that it only works properly with the tied product (and not with the alternatives offered by competitors). In such cases the tied product is typically physically integrated in the tying product. Alternatively, the customers can be deprived of choice of alternative products in less direct ways. The dominant firm may e.g. impose selling conditions under which it refuses to acknowledge guarantees unless the customers use the firm´s components, consumables or services.
III. Bundling
Bundling refers to the way products are offered and priced by a dominant firm.
According to the Commission, bundling occurs on where a package of two or more goods is offered for sale.A distinction between two different types of bundling can be made: Pure bundling refers to cases, where only the bundle (i.e. products jointly) is available and not the products separately.
In such a case the products are only sold jointly in fixed proportions.
Mixed bundling on the other hand refers to cases where the products are available separately but they are offered for sale at a discount price if bought as a bundle (i.e. the price is lower than the aggregate price of the separate products). Therefore mixed bundling can also be described as
multi-product rebatebecause the price of the separate products is higher than the bundled price.
Mixed bundling (sometimes referred also to as
commercial tying) is an indirect measure to achieve the same result as through contractual tying by inducing the customers to purchase the tied product through granting bonuses, rebates, discounts or other commercial advantage for such a purchase.
However, as the Commission has pointed out, the distinction between mixed bundling and pure bundling is not necessarily clear-cut because mixed bundling may come close to pure bundling if the prices charged for the individual offerings are high.B. Underlying economic principles
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