California Civil Jury Instructions (CACI)

3421. Tying - Products or Services—Essential Factual Elements (Bus. & Prof. Code, § 16727)

[Name of plaintiff] claims that there is an unlawful tying arrangement in which [specify the particular product] is the tying product and [specify the particular 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, [name of plaintiff] must prove all of the following:

1. That [tying product] and [tied product or service] are separate and distinct;

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

3. That [insert one or both of the following]:

[[name of defendant] has sufficient economic power in the market for [tying product] to coerce at least some consumers into purchasing [tied product or service];] [or]

[the claimed tying arrangement has restrained competition for a substantial amount of sales, in terms of total dollar volume of [tied product or service];

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

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

Directions for Use

This instruction applies to claims under Business and Professions Code section 16727, which applies only where the tying product consists of "goods, merchandise, machinery, supplies, [or] commodities" and the tied product consists of "goods, merchandise, supplies, commodities, or services." Section 16727 does not apply if the tying product is land or services, nor does it apply if the tied product is land.

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.

Sources and Authority

Business and Professions Code section 16727 provides: "It shall be unlawful for any person to lease or make a sale or contract for the sale of goods, merchandise, machinery, supplies, commodities for use within the State, or to fix a price charged therefor, or discount from, or rebate upon, such price, on the condition, agreement or understanding that the lessee or purchaser thereof shall not use or deal in the goods, merchandise, machinery, supplies, commodities, or services of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such condition, agreement or understanding may be to substantially lessen competition or tend to create a monopoly in any line of trade or commerce in any section of the State."

"In sum, in order to prove an illegal per se tying arrangement there must be a showing that: (1) a tying agreement, arrangement or condition existed whereby the sale of the tying product was linked to the sale of the tied product; (2) the party had sufficient economic ower in the tying market to coerce the purchase of the tied product; and (3) a substantial amount of sale was effected in the tied product. Lastly, since the antitrust violation is a species of tort, (4) the complaining party must prove that he suffered pecuniary loss as a consequence of the unlawful act." (Suburban Mobile Homes v. AMFAC Communities (1980) 101 Cal.App.3d 532, 542-543 [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 tied product or if a not insubstantial volume of commerce in the tied product is restrained. Under the section 16720 standard, both conditions must be met." (Suburban Mobile Homes, supra, 101 Cal.App.3d at p. 549, internal citation omitted.)

"Case law construing Business and Professions Code section 16727 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.)

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)