Tying Agreement Distribution

In a commitment agreement, the product that Vendeee actually wants to buy is referred to as a “binding product,” while the additional product that the Vendee must purchase to complete the sale is referred to as a “linked product”. Typically, the binding product is a desirable commodity, which is in high demand by Vendees in a particular market. The bound product is generally less desirable, of lower quality or otherwise difficult to sell. For example, film distributors often link the sale of popular video cassettes to the purchase of second films that, due to lack of demand, pile up in their warehouses. 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 business practices to condition the sale of a product for 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.

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