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

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

Covenants Prohibiting Dealing With Competitors Unlawful. Business and Professions Code section 16727.

“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].)

“[T]he specific elements of an unlawful tying cause of action have been stated as follows: ‘(1) a tying agreement, arrangement or condition … whereby the sale of the tying product [or service] 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 effected in the tied product; and (4) the complaining party sustained pecuniary loss as a consequence of the unlawful act.’ ” (UAS Management, Inc., supra, 169 Cal.App.4th at p. 369, internal citation 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 v. AMFAC Communities (1980) 101 Cal.App.3d 532, 549 [161 Cal.Rptr. 811], 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 (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