California Civil Jury Instructions (CACI)

3420. Tying - Real Estate, Products, or Services—Essential Factual Elements (Bus. & Prof. Code, § 16720)

[Name of plaintiff] claims that there is an unlawful tying arrangement in which [specify the particular real estate, product, or services] is the tying product and [specify the particular real estate, product, or services] is the tied product. A "tying arrangement" is the sale of one product, called the "tying product," where the buyer is required or coerced to also purchase a different, separate product, called the "tied product." For example, if a supermarket sells flour only if its customers also buy sugar, that supermarket would be engaged in tying. Flour would be the tying product and sugar the tied product.

To establish this claim against [name of defendant], [name of plaintiff] must prove all of the following:

1. That [tying item] and [tied item] are separate and distinct;

2. That [name of defendant] will sell [tying item] only if the buyer also purchases [tied item], or that [name of defendant] sold [tying item] and required or otherwise coerced buyers to [also purchase [tied item]] [agree not to purchase [tied item] from any other supplier];

3. That [name of defendant] has sufficient economic power in the market for [tying item] to coerce at least some buyers of [tying item] into [purchasing [tied item]] [agreeing not to purchase [tied item] from a competitor of [name of defendant]];

4. That the conduct involves a substantial amount of sales, in terms of the total dollar value of [tied item];

5. That [name of plaintiff] was harmed; and

6. That [name of defendant]'s conduct was a substantial factor in causing [name of plaintiff]'s harm.

Directions for Use

This instruction is written for claims brought under Business and Professions Code section 16720. A claim under this section may involve roducts, land, or services as the tying item and products, land, or services as the tied item. Section 16720 applies a stricter test for unlawful tying than does Business and Professions Code section 16727. Therefore, if products are the tying item and products or services the tied item, the following instruction, pertinent to section 16727, should be used instead.

The example given was used in two federal cases, Northern Pacific Railway Co. v. United States (1958) 356 U.S. 1, 5-6 [78 S.Ct. 514, 2 L.Ed.2d 545] and Jefferson Parish Hospital District No. 2 v. Hyde (1984) 466 U.S. 2, 12 [104 S.Ct. 1551, 80 L.Ed.2d 2], but also can help explain the Cartwright Act. The terms "product," "sell," and "purchase" used in this instruction may need to be modified to reflect the facts of the particular case, since tying arrangements challenged under Business and Professions Code section 16720 may involve services, real property, intangibles, leases, licenses, and the like.

Also, an unlawful tying arrangement may be shown where the buyer agrees not to purchase the tied product or service from any other supplier as a condition of obtaining the tying product. If the tying claim involves such a "tie-out" agreement, this instruction must be modified accordingly.

Where the "tying product" is land and the "tied product" is a service or a commodity, logic suggests that the first element, i.e., their distinctness, is beyond dispute and that trying to adapt the bracketed language to such an alleged tie-in may create confusion. In such a case, the court may recite this element, then advise the jury that it has been established by the plaintiff or is undisputed by the defendant. The word "parcels," "lots," or similar terms should be used where both items are land, as in such cases the separateness of the tying and tied land could be in dispute.

Sources and Authority

Business and Professions Code section 16720 provides: A trust is a combination of capital, skill or acts by two or more persons for any of the following purposes:

(a) To create or carry out restrictions in trade or commerce.

(b) To limit or reduce the production, or increase the price of merchandise or of any commodity.

(c) To prevent competition in manufacturing, making, transportation, sale or purchase of merchandise, produce or any commodity.

(d) To fix at any standard or figure, whereby its price to the public or consumer shall be in any manner controlled or established, any article or commodity of merchandise, produce or commerce intended for sale, barter, use or consumption in this State.

(e) To make or enter into or execute or carry out any contracts, obligations or agreements of any kind or description, by which they do all or any or any combination of any of the following:

(1) Bind themselves not to sell, dispose of or transport any article or any commodity or any article of trade, use, merchandise, commerce or consumption below a common standard figure, or fixed value.

(2) Agree in any manner to keep the price of such article, commodity or transportation at a fixed or graduated figure.

(3) Establish or settle the price of any article, commodity or transportation between them or themselves and others, so as directly or indirectly to preclude a free and unrestricted competition among themselves, or any purchasers or consumers in the sale or transportation of any such article or commodity.

(4) Agree to pool, combine or directly or indirectly unite any interests that they may have connected with the sale or transportation of any such article or commodity, that its price might in any manner be affected.

"Antitrust laws against tying arrangements seek to eradicate the evils that (1) competitors are denied free access to the market for the tied product not because the seller imposing the tying requirement has a better or less expensive tied product, but because of the seller's power or leverage in the market for the tying product; and (2) buyers are forced to forego their free choice between competing tied products. Tying arrangements are illegal per se 'whenever a party has sufficient economic power with respect to the tying product to appreciably restrain free competition in the market for the tied product' and when 'a total amount of business, substantial enough in terms of dollar-volume so as not to be merely de minimis, is foreclosed to competitors by the tie.' " (Freeman v. San Diego Assn. of Realtors (1999) 77 Cal.App.4th 171, 184 [91 Cal.Rptr.2d 534], internal citations omitted.)

"Case law construing Business & Professions Code section 1627 defines a tying arrangement as 'an agreement by a party to sell one product but only on the condition that the buyer also purchases a different (or tied) product, or at least agrees that he will not purchase that product from any other supplier.' Tying arrangements are illegal per se if the party has sufficient economic power and substantially forecloses competition in the relevant market. Even when not per se illegal, a tying arrangement violates the Cartwright Act if it unreasonably restrains trade." (Morrison v. Viacom, Inc. (1997) 52 Cal.App.4th 1514, 1524 [61 Cal.Rptr.2d 544], internal citations omitted.)

"The threshold element for a tying claim is the existence of separate products or services in separate markets. Absent separate products in separate markets, the alleged tying and tied products are in reality a single product." (Freeman, supra, 77 Cal.App.4th at p. 184, internal citations omitted.)

"The elements of a per se tying arrangement violative of section 16720 are: '(1) a tying agreement, arrangement or condition existed whereby the sale of the tying product was linked to the sale of the tied product or service; (2) the party had sufficient economic power in the tying market to coerce the purchase of the tied product; (3) a substantial amount of sale was affected in the tied product; and (4) the complaining party sustained pecuniary loss as a consequence of the unlawful act.' " (Morrison v. Viacom, Inc. (1998) 66 Cal.App.4th 534, 541-542 [78 Cal.Rptr.2d 133], internal citations omitted.)

" ' "[T]ying agreements serve hardly any purpose beyond the suppression of competition." They deny competitors free access to the market for the tied product, not because the party imposing the tying requirements has a better product or a lower price but because of his power or leverage in another market. At the same time buyers are forced to forego their free choice between competing products. For these reasons "tying agreements fare harshly under the laws forbidding restraints of trade." ' " (Suburban Mobile Homes v. AMFAC Communities (1980) 101 Cal.App.3d 532, 542 [161 Cal.Rptr. 811], internal citations omitted.)

"[T]he burden of proving an illegal tying arrangement differs somewhat under section 16720 and section 16727. Under section 16727 the plaintiff must establish that the tie-in substantially lessens competition. This standard is met if either the seller enjoys sufficient economic power in the tying product to appreciably restrain competition in the ied product or if a not insubstantial volume of commerce in the tied product is restrained. Under section 16720 standard, both conditions must be met." (Suburban Mobile Homes, supra, 101 Cal.App.3d at p. 549, internal citation omitted.)

"The alleged antitrust violation need not be the sole or controlling cause of the injury in order to establish proximate cause, but only need be a substantial factor in bringing about the injury." (Saxer v. Philip Morris, Inc. (1975) 54 Cal.App.3d 7, 23 [126 Cal.Rptr. 327], internal citation omitted.)

Secondary Sources

1 Witkin, Summary of California Law (9th ed. 1987) Contracts, §§ 575- 590

2 Antitrust and Trade Regulation Law Section, State Bar of California, California Antitrust Law (2d ed. 2001), § 10.06

6 Antitrust Laws & Trade Regulation, Ch. 105, California, § 105.04 (Matthew Bender)

3 Levy et al., California Torts, Ch. 40, Fraud and Deceit and Other Business Torts, § 40.168[4] (Matthew Bender)

49 California Forms of Pleading and Practice, Ch. 565, Unfair Competition (Matthew Bender)

(New September 2003)