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3.2 Antitrust Sherman Act (Section 1, Per Se Violation) Tying Agreement Defense Of Justification In this case the Plaintiff claims that the Defendant violated Title 15, United States Code, Secti on 1, commonly known as Section 1 of the Sherman Act, which is a part of the antitrust laws of the United States. The purpose of the antitrust laws is to preserve our system of free and open competition, the most important part of our private enterprise system. The law promotes the concept that free competition yields the best allocation of economic resources; but the law does not guarantee success to all of those who enter into business because it also recognizes that in the natural operation of our economic system some competitors are going to lose business, or even go out of business, while others gain and prosper. Acts become unlawful, therefore, only when they constitute an unreasonable restraint on interstate commerce. The specific conduct that the Plaintiff claims violated Section 1 of the Sherman Act is an alleged "tying" arrangement arising out of the business dealings between the Plaintiff and the Defendant. A "tying" arrangement is an agreement by one party to sell a primary product or service (known as the "tying" product) but only on the condition that the buyer must also purchase a different or secondary product (known as the "tied" product) from the seller, or from a supplier designated by the seller. Such agreements are inherently anti-competitive and are automatically unlawful under Section 1 of the Sherman Act because a seller with market dominance in one product is able to force the purchase of another product in a different market thereby foreclosing competition in that second market for the second or "tied" product. There are four specific facts that the Plaintiff must prove by a preponderance of the evidence in order to establish its antitrust claim: First: That there was a contract or agreement whereby the Defendant agreed to sell one item (the "tying" product) only on the condition that the Plaintiff also purchase a separate and distinct item (the "tied" product) from the Defendant or a supplier designated by the Defendant; Second: That the "tying" product had sufficient economic power or market leverage in the [describe relevant geographic or product market] to appreciably restrain or foreclose free competition in the market for the "tied" products; Third: That the alleged tying arrangement involved a "not insubstantial amount of commerce;" and Fourth: That the Plaintiff suffered injury or damage to its business or property as a "proximate result" of the Defendant's violation of the antitrust laws in making the alleged illegal "tying" agreement.[In the verdict form that I will explain in a moment, you will be asked to answer a series of questions concerning each of these factual issues.] With regard to the first fact the Plaintiff must prove - - that there was a contract for the sale of two products, one of which was "tied" to the other - - the Plaintiff contends that the [franchise and the method of doing business that it represents, including the right to use the Defendant's trademark, is, in and of itself, a product that is capable of 2 being bought and sold, and was the "tying" product in this case. The Plaintiff further contends that the merchandise and other items manufactured or sold by the Defendant constituted the second or "tied" products. The Defendant contends, on the other hand, that its franchise or license agreement with the Plaintiff was merely a system for distributing its trademarked products, that the sale of trade marked products was the primary purpose of the business to be operated under the franchise, and that such franchise or license agreement did not itself constitute a "product" that can be separated or distinguished from the distribution and sale of the trademarked goods]. [You are instructed with regard to this issue that a franchise or licensing agreement may be a separate product or "tying" item under the antitrust laws. Whether the franchise or licensing agreement involved in this case was such a separate "tying" product is for you to decide after considering all of the testimony and evidence including the terms of the written documents, the purposes and intentions of the parties, and the other evidence demonstrating what the general business practices and procedures are concerning the technique of franchising as a method of distributing goods for sale.]With regard to the second fact the Plaintiff must prove - - that the "tying" product had sufficient economic power or leverage to appreciably restrain or foreclose free competition in the market for the "tied" products - - you are instructed that the existence of a registered trademark in association with the alleged "tying" product gives rise to a presumption under the law that such product does possess economic power or significant market leverage since, under the trademark laws, no one else may sell the goods bearing that trademark without permission of the owner of the trademark. The Defendant contends, however, notwithstanding such presumption, that the trademark did not in fact enjoy any economic power or significant market leverage in the [describe relevant geographic or product market] enabling the Defendant to use or employ the trademark as an effective means of foreclosing competition in the market for the "tied" products. In order to overcome the presumption favoring the Plaintiff on this issue, you are instructed that the Defendant must prove its contention in this respect by a preponderance of the evidence. With regard to the third fact that the Plaintiff must prove - - that the alleged tying arrangement involved a "not insubstantial amount of commerce" - - you must look to the total dollar volume of sales in interstate commerce by the Defendant to the Plaintiff of the products, if any, that you find to have been tied to the alleged "tying" product. Finally, as to the fourth fact that must be established, the Plaintiff must prove that its injury or damage was appreciable, that is, sufficient to be recognized as having occurred; and, such injury or damage must have been a proximate result, that is, a direct and natural consequence, of the illegal "tying" arrangement. Now, if you find that the Plaintiff has failed to prove any of these essential facts, then, of course, your verdict will be for the Defendant. On the other hand, if you find that the Plaintiff has proved the antitrust claim, you must then consider the Defendant's defenses to that claim. In other words, even if you find that an illegal "tying" agreement existed, the Defendant will not be liable for such violation if the Defendant has established, by a preponderance of the evidence, the affirmative defense of "justification." The law recognizes that, in some circumstances, there may be a legitimate reason or justification for an otherwise illegal "tying" arrangement. [One such possible justification arises from the duties imposed upon a trademark owner by the United States trademark laws. As the owner of the trademark [insert name of trademark] the Defendant had a duty to the public to assure that, in the hands of its licensee, the trademark continued to represent that which it purported to represent. In other words, for the owner of a trademark, in licensing its use, to permit inferior or non-genuine products to be presented to the public under the registered trademark might well constitute a mis-use of the trademark under the law. On the other hand, the use of a "tying" arrangement as an alleged means of protecting a trademark and preventing its mis-use is justified only in the absence of any other, less restrictive, alternative method or means of accomplishing the same objective. Also, an otherwise illegal "tying" arrangement may be justified when it is used as a necessary tool in establishing a new business. That is to say, a franchisers may be warranted in imposing restrictions on purchasing and other practices by its franchisees at the inception of the business, and for a reasonable time thereafter, to establish good will and gain customer recognition in the market. Here again, however, the utilization of a "tying" arrangement for this purpose may be justified only if it is shown to be necessary to accomplish that purpose and that there was no other, less restrictive, alternative method or means of accomplishing the same objective. If you find, therefore, that the Defendant has proved by a preponderance of the evidence that the Plaintiff was required to purchase the trademarked goods from the Defendant because of an honest and reasonable desire and purpose on the part of the Defendant to guard against and prevent any mis-use of the Defendant's trademark; or, that such requirement was the result of an honest and reasonable desire and purpose on the part of the Defendant to establish good will and customer recognition incident to the establishment of a new business; and if you further find, as to either of these alleged justifications, that there was no other less restrictive, alternative means of accomplishing the same objectives, then your verdict will be for the Defendant on this issue.] If you find for the Plaintiff on the antitrust claim, and against the Defendant on the affirmative defense to that claim, you will then consider the issue of the amount of monetary or pecuniary damages to be awarded to the Plaintiff. You are instructed that a violation of the anti- trust laws does not give rise to a right of recovery unless the Plaintiff has established, by a preponderance of the evidence, that the Plaintiff was injured or damaged in its business or property as a direct and proximate result of such violation. That is, the Plaintiff is not entitled to recover any losses it may have sustained as a result of poor business practices or management, unfavorable business conditions generally, or other such causes, if any. With regard to the amount of damages, in dollars, it is not necessary that the Plaintiff prove the exact or precise extent of such damages with arithmetic certainty. On the other hand, the Plaintiff is not entitled to an award of damages based upon speculation or conjecture. Rather, you should award an amount shown by a preponderance of the evidence in the case to be a just and reasonable sum sufficient to fairly and adequately compensate the Plaintiff for the injury or damages sustained. 3.2 Antitrust, Sherman Act Section 1, Per Se Violation Tying Agreement Defense of Justification SPECIAL INTERROGATORIES TO THE JURY Do you find from a preponderance of the evidence:1. That there was a contract or agreement whereby the Defendant agreed to sell one item (the “tying” product) only on the condition that the Plaintiff also purchase a separate and distinct item (the “tied” product) from the Defendant or a supplier designated by the Defendant?Answer Yes or No2. That the “tying” product had sufficient economic power or leverage in the [describe relevant geographic and product market] to appreciably restrain or foreclose free competition in the market for the “tied” products?Answer Yes or No3. That the alleged tying arrangement involved a “not insubstantial amount of commerce?”Answer Yes or No4. That the Plaintiff suffered injury or damage to its business or property as a “proximate result” of the Defendant’s violation of the antitrust laws in making the alleged illegal “tying” agreement?Answer Yes or No[Note: If you answered No to any of the preceding questions you need not consider any of the remaining questions.]5. That the alleged “tying” agreement was justified under the law [as a means of protecting, or preventing misuse of, the Defendant’s trademark on the “tied” goods] [as a means of promoting a new business, establishing customer good will and recognition in the market]?Answer Yes or No[Note: If you answered Yes to Question No. 5 you need not consider the remaining question.] 6. That the Plaintiff should be awarded $ as damages for the injury it suffered to its business or property. SO SAY WE ALL.ForemanDATED:ANNOTATIONS AND COMMENTSThe formulation of the elements of an illegal tying agreement under the Sherman Act was derived from Integon Life Ins. Corp. v. Browning, 989 F.2d 1143, 1150 (11th Cir. 1993); Tic-X-Press, Inc. v. Omni Promotions Co. of Georgia, 815 F.2d 1407, 1414 (11th Cir. 1987); Amey, Inc. v. Gulf Abstract & Title, Inc., 758 F.2d 1486, 1502-03 (11th Cir. 1985), cert. denied, 475 U.S. 1107, 106 S.Ct. 1513, 89 L.Ed.2d 912 (1986). “For service and parts to be considered two distinct products, there must be sufficient consumer demand so that it is efficient for a firm to provide service separately from parts.” Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451, 462, 112 S.Ct. 2072, 2080, 119 L.Ed.2d 265 (1992); Jefferson Parish Hospital Dist. No. 2 v. Hyde, 466 U.S. 2, 21-22, 104 S.Ct. 1551, 1563, 80 L.Ed.2d 2 (1984). “To establish that two products are in fact ‘tied,’ a plaintiff must show something more than just that two products were sold together in the same package.” Tic-X-Press, 815 F.2d at 1415. Jefferson Parish, 466 U.S. at 11-12, 13-15, 104 S.Ct. at 1558. “If only a single purchaser were ‘forced’ with respect to the purchase of a tied item, the resultant impact on competition would not be sufficient to warrant the concern of antitrust law.” Jefferson Parish, 466 U.S. at 16, 104 S.Ct. at 1560; Tic-X-Press, 815 F.2d at 1419; Amey, 758 F.2d at 1503. “Sellers in an illegal tying arrangement must possess some special ability to force a purchaser to do something that he would not do in a competitive market, which is usually called ‘market power.’” Tic-X- Press, 815 F.2d at 1420; Jefferson Parish, 466 U.S. at 13-14, 104 S.Ct. at 1558- 59; Eastman Kodak, 504 U.S. at 464 n. 9, 112 S.Ct. at 2081 n.9. “Economic or market power over the tying product can be sufficient even though the seller does not dominate the market or the seller only exercises the power with respect to some of the buyers in the market.” Tic-X-Press, 815 F.2d at 1420; Fortner Enterprises, Inc. v. United States Steel Corp. (Fortner I), 394 U.S. 495, 503, 89 S.Ct. 1252, 1258, 22 L.Ed.2d 495 (1969). “The Supreme Court has held that for purposes of determining whether the amount of commerce foreclosed in the tied market is ‘insubstantial,’ the volume of commerce must be ‘substantial enough in terms of dollar-volume so as not to be merely de minimus.’” Tic-X-Press, 815 F.2d at 1419 (quoting Fortner Enterprises, 394 U.S. at 501, 89 S.Ct. at 1257-58).