Respond to DISCUSIION below by: Ask a probing question. Share an insight from having read the discussion. Offer and support an opinion. Validate an idea with your own experience. Make a suggestion. Expand the discussion

DISCUSSION: I.0 INTRODCUTION Competition is healthy for both the producers and consumers. Competition enables the producers to evolve and apply effective leadership and management skills that will guarantee a smooth running of an organization to the long run. Consumers too get several benefits like high quality products and good prices.[1] The problem that comes in when an organization becomes dominant in the industry, bur abuses the position with anti-competitive practices. These include abusing of a dominant position; formation of anti-competitive mergers, vertical restraints responsible for lessening competition or collusions.[2] The one discussed in this post is an abuse of dominance. Competition law protects these kinds of behaviors which is a threat to both consumers and other firms in the market. Although the post talks about tying and bundling, the content will focus on contractual tying. 2.0 CONTRACT TYPING Contractual tying is a behavior practiced by dominant organizations where a consumer is not able to purchase a key commodity without purchasing another good tied together. A consumer will therefore buy two products at a price that is lower than the individual sum of the products.[3] Even though the strategy is not aimed to scare away competition, it has been criticized as an anti-completive mishandling of a dominant position.[4] This has several efficiency benefits like saving costs for consumers when searching other items, to assure quality and to tie complementary goods like a camera and lens.[5] Tying and bundling can however be abused by firms in a dominant position to leverage market power, price discriminating the customers and to foreclose any entry within the tied market. 3.0 HOW CONTRACT TYPING CAN HARM COMPETITION Contractual tying is both healthy and unhealthy for the market. When used alongside anti-competitive behaviors, it can harm the market and especially new entrants. Organizations in a dominant position have a guarantee that their product is the best favored in the market. When trying a new product, the suppliers wont incur any additional costs in advertisements.[6] This therefore shall beat the competition as the product will enter the market the lowest cost. The dominant firm is able to set a low price that no other firm in the market or preparing to enter the market can manage. Contractual tying can also be harmful to consumers. Consumers are forced to buy two products tied together and are denied the option to have a choice. It also results to impulse buying making a consumer unable to effectively utilize his or her budget to buy prioritized goods. Low quality goods may also take a wider share in the market because the dominant firm will have sold many units to their customers. In the long run, consumers will spend more due to poor quality goods they were unable to avoid from the dominant market strategies. [7] 4.0 EXAMPLES OF CONTRACT TYPING The case of Eastman Kodak where the company tied their photocopier with respective spare parts is one instance of contractual tying. Their spare parts were not compatible with any other competitors devices, forcing their customers to buy them though with a high price. The Supreme Court found this a contractual tying, as the consumers were denied opportunity to explore other cheaper options. The court also found Kodak guilty of price discrimination due to the high prices of the spare parts.[8] With Kodaks argument, consumers would rather choose cheaper spare parts with shorter life cycle that would lead to higher costs in the long run. The Supreme Court however declined to accept this line or argument suggesting that Kodak restriction to sell the spare parts to ISO had led to increased prices of services. Another case involved Terra Pak II that had a dominant position in cartons and antiseptic packaging machines. In an attempt to increase the market position, it tied the machines with the cartons. The court however declined to uphold their line of argument which naturally linked the machines and the cartons.[9] 5.0 CONCLUSION Use of contractual tying can both be beneficial to the market and be harmful when mishandled by a dominant player through anti-competitive practices. The dominant firms may supply a low-quality commodity to the market making consumers less well-off of in the long run. New entrants and existing firms may also have less competitive power when the dominant firms use contractual tying. To enable healthy competition in the market, the competition law provides shield that ensures dominant firms do not abuse the position through anti-competitive policies. BIBLIOGRAPHY Bradford A Chilton, ‘COMPETITION LAW AROUND THE WORLD FROM 1889 TO 2010: THE COMPETITION LAW INDEX’ [2018] Journal of Competition Law & Economics Cetinkaya C, ‘The Evolution of Turkish Competition Law–Close To European Law?’ (2014) 5 Journal of European Competition Law & Practice Edwards J, ‘Accounting For Fair Competition Between Private And Public Sector Armaments Manufacturers In Victorian Britain’ (2015) 51 Abacus Harris M, ‘Snapping Up Kodak’ (2014) 51 IEEE Spectrum Maher I, ‘Competition Law Fragmentation In A Globalizing World’ (2015) 40 Law & Social Inquiry Parsons CX de Vanssay, ‘Detecting Market Competition In The Japanese Beer Industry’ (2013) 14 Journal of Industry, Competition and Trade Raff HJ Wagner, ‘Intra-Industry Adjustment To Import Competition: Theory And Application To The German Clothing Industry’ (2010) 33 The World Economy Rautela M, S PrajapatS Sharma, ‘Choice Of Law Contractual & Non Contractual Perspective’ [2018] SSRN Electronic Journal Tai C, ‘Intra-Industry Competition: Exchange Rate, Cross-Country Industry-Specific And Global Industry-Specific Shocks’ [2012] SSRN Electronic Journal
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