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

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,” in which 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 products, 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. (See CACI No. 3421, Tying—Products or Services—Essential Factual Elements.) Therefore, if products are the tying item and products or services the tied item, CACI No. 3421 should be used instead.

The example given in the instruction involving flour and sugar 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.

An unlawful tying arrangement may also be shown if 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, select the appropriate options in elements 2 and 3.

If 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 including this element may create confusion. In such a case, the court may recite this element and 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 if both items are land, as in these cases the separateness of the tying and tied land could be in dispute.

Sources and Authority

“Trust” Defined. Business and Professions Code section 16720.

“It is unlawful under California’s Cartwright Act, as relevant here, for a seller to use its market power in one market to force or coerce a buyer to purchase its product or service in a distinct market in which the seller does not have such market power or to refrain from buying from the seller’s competitor. The result of such coercion is called a tying arrangement, in which the market controlled by the seller consists of sales of the ‘tying’ product or service, and the market over which derivative power is exercised consists of sales of the ‘tied’ product or service. Where such an arrangement is found, it is illegal per se; that is, the seller’s justifications for the arrangement are not measured by a rule of reasonableness.” (UAS Management, Inc. v. Mater Misericordiae Hospital (2008) 169 Cal.App.4th 357, 368–369 [87 Cal.Rptr.3d 81].)

“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.)

“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.)

“Plaintiff alleged the conspiratorial agreement among defendants constituted an illegal tying arrangement per se pursuant to Business and Professions Code section 16720. ‘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.” ’ ” (SC Manufactured Homes, Inc. v. Liebert (2008) 162 Cal.App.4th 68, 86 [76 Cal.Rptr.3d 73], footnotes and 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 tied 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 (11th ed. 2017) Contracts, §§ 602–621
6 Antitrust Laws and 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, § 565.77 (Matthew Bender)
1 Matthew Bender Practice Guide: California Unfair Competition and Business Torts, Ch. 5, Antitrust, 5.09[4], 5.15, 5.81, 5.82