Fair Trade Law Q&A - Other Restrictive Trade Practices

When determining whether a tying arrangement violates the Fair Trade Act, the following factors may be taken into consideration:

1. Factors for determining whether the elements of tying are established:
   1. The existence of at least two separate products or services- In analyzing a tying arrangement, it must first be established that the tying product and the tied product are distinct products or services. Relevant considerations include:
      (1) prevailing Trade practices within the relevant industry;
      (2) Whether each of the two products (or services) retains independent utility or value when separated;
      (3) Whether bundling packaging and selling of the two products (or services) reduces costs;
      (4) Whether the seller sets separate prices for the two products (or services);
      (5) Whether the seller has previously sold the two products (or services) separately;
   2. There must be an express or implied condition preventing the buyer from freely choosing whether to purchase both the tying product and the tied product from the seller simultaneously.
2. Factors for determining whether tying is unlawful:
   1. Whether the seller possesses a certain degree of market power in the tying product market-Market power in the tying product market is a critical factor in evaluating the legality of a tying arrangement. Without sufficient market power, it would be difficult for the seller to successfully implement the tying arrangement; even if implemented, the adverse impact on market competition would likely not be significant.
   2. Whether the arrangement is likely to restrain competition in the tied product market-A tying arrangement may raise antitrust concerns if it is likely to impede competition in the tied product market. For example, where competition in the tied product market is foreclosed to a certain extent, quantity, or proportion, illegality may arise.
   3. Whether legitimate justifications exist-For example, ensuring the seller's goodwill and quality control, or protecting the intellectual property rights of product creators, may constitute legitimate business justifications and therefore render the arrangement permissible.

Relevant Provisions: Article 20 of the Fair Trade Act; Article 28 of the Enforcement Rules of the Fair Trade Act