DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

VISAKHAPATNAM, A.P., INDIA

TITLE OF THE PROJECT

TYING AND BUNDLING

SUBJECT

COMPETITION LAW

NAME OF THE FACULTY

VARSHITA MADAM

Name of the Candidates U.UPENDRA,

Roll No. 2016112

Semester VIII
 ACKNOWLEDGEMENT

I would sincerely like to put forward my heartfelt appreciation to our respected professor,
Varshita madam for giving me a golden opportunity to take up this project. I have tried my best
to collect information about the project in various possible ways to depict clear picture about the
given project topic.
 RESEARCH METHODOLOGY

This project is purely Doctrinal and based on primary and secondary sources such as websites,
books, journals and internet sources. The referencing style followed in this project is BLUE
BOOK 19th Edition's format of citation. This Research process deals with collecting and
analyzing information to answer questions. The Research is purely descriptive in its boundaries
of the topic
INTRODUCTION

Since attaining independence in 1947, India for the better part of half a century thereafter
adopted and followed policies comprising of what are known as “Command-and Control” laws,
rules, regulations and executive orders. The then competition law in India was the Monopolies
and restrictive Trade Practices Act, 1969 (MRTP Act in brief). It was in 1991 that there was
widespread economic reform and consequently an economy based on free market principles
came into force. Economic liberalization in India was seeing the light of the day and the need for
an effective competition regime was recognized. The new competition Act, 2002 was introduced
in replacement of the MRTP Act. The repeal of the MRTP Act was on the ground that the act
was not suited to deal with issues of competition that may be expected to arise in the new liberal
business environment.

In the MRTP Act, tie-up sales were dealt under Restrictive Trade Practices (RTP). It was
considered as a practice which had the effect of preventing, distorting or restricting competition
or as a practice which tends to obstruct the flow of capital or resource into the stream of
production. An entity, body or undertaking charged with the practice of RTP had to plead for
gateways provided in the MRT Act to avoid being indicted.

Under the Competition Act, Tie-in arrangement is dealt with under the head Vertical Anti-
Competitive Agreement. A tie-in arrangement, under this Act, is not illegal per se but if it has an
appreciable adverse effect on the competition, then it becomes illegal. Tie-in arrangements have
both good and bad effects on the competition. On one hand tie-in arrangements may result in
price discrimination, barriers to new entry in the market, monopolization of the tied and tying
products. On the other hand tie-in arrangement may benefit the consumers by providing them
with goods or services in a bundle which are required and at lower price. But tie-in arrangements
are more likely to adversely affect the economy than being beneficial to the economy
TYING

Tying exists when the seller of a product requires his purchasers to take another product as well.
The most robust statement one can make about tying is that it is ubiquitous. Consider the
following examples: shoes are sold in pairs; hotels sometimes offer breakfast, lunch or dinner
tied with the room; there is no such a thing as an unbundled car; and no self-respecting French
restaurant would allow its patrons to drink a bottle of wine not coming from its cellar.

In a certain sense, as Robert H. Bork noted in his famous book,

Every person who sells anything imposes a tying arrangement. This is true because every
product or service could be broken down into smaller components capable of being sold
separately, and every seller refuses at some point to break the product down any further1

Tying may result in lower production costs. It may also reduce transaction and information costs
for consumers and provide them with increased convenience and variety. The pervasiveness of
tying in the economy shows that it is generally beneficial.

Tying may also cause harm. According to the leverage theory, tying “provides a mechanism
whereby a firm with monopoly power in one market can use the leverage provided by this power
to foreclose sales in, and thereby monopolize, a second market" (Whinston 1990)2

Tying can be classified into two types. They are:-

Static Tying – Static tying can be thought of as an exclusive arrangement. In a static

tied-sale, the buyer who wants to buy product ‘A’ must also purchase product ‘B’. It is possible
to buy product ‘B’ without product ‘A’ which explains why it is a tie. Thus, the items for sale are
product ‘B’ alone or an ‘A-B’ package.

For example: the video game Halo is exclusive to the Xbox format. A buyer who wants to buy
halo must also purchase the Xbox hardware. The tie could arise from the manufacturer’s power
in the market of the Xbox hardware

Dynamic tying – In case of this type of tying, in order to purchase product ‘A’ the customer is
also required to purchase product ‘B’. In dynamic tying the quantity of product ‘B’ vary from

1
Robert H. Bork, The Antitrust Paradox 378-79 (1978).
2
Product bundling and tying in competition, Eugen Kovac, Bonn University, June 2006.
customer to customer. Thus, the item for sale are a package of ‘A-B’, ‘A-2B’, ‘A-3B’ etc.
for example: A seller of a photocopy machine (product A) may require the purchaser of the
machine to use a specific brand of paper i.e. (product B). The paper sales occur over time and
vary across users, based on their demand for the copies. A customer would not need to determine
how much paper to buy at the time the machine was bought. But under the tying contract,
whatever paper was required would have to be bought from the machine seller. 3

General Essentials

Two Separate Products

There must be two items that the vender can integrate. For instance a dealer of shoes offers a
couple of shoes together. The vender could offer each shoe independently and require the
purchaser of a left shoe to buy a correct shoe with a specific end goal to get the left shoe. Do the
left and right shoes constitute two particular, isolate items? And therefore do the actions of the
seller who is selling two shoes together amount to a tie-in arrangement? This where the difficulty
arises, in finding the difference in products itself, and the importance of having two separate
distinct products is clear.

Coercion or Conditioning

The second very crucial element to proving that a tie-in arrangement exists, is coercion. Until
and unless a person is forced into buying product B, even though he only wanted product A, a tie
in arrangement cannot exist. Thus, a bike seller offering a helmet lock or the gas pipeline service
provider, offering to sell a gas stove cannot amount to tie-in arrangements. The position of law in
the case of discounts offered is not absolute. If say the gas pipeline service provider were to club
the gas stove in the deal, and a cumulatively cheaper rate, that does not necessarily make it
illegal by itself, but in the same will have to be done through a subjective analysis.

3
ANALYSIS OF TIE IN AGREEMENTS UNDER COMPETITION LAW by Alan Prince
BUNDLING

A firm may sell two or more products together as a bundle and charge more attractive prices for
the bundle than for the constituent parts of it. Bundling may have the same effect as a tie-in-
agreement.

Pure bundling: In a pure bundle, two goods, A and B, are only sold together. They are not
available for individual purchase. Furthermore, in a pure bundle, the goods A and B are offered
only in some fixed proportion, such as one steering wheel and four tyres as part of a car.

Most often, when consumers are interested in purchasing two goods A and B separately the
market makes this available, even if the price is not always attractive. Thus Microsoft Word and
Excel can be purchased separately rather than through the Microsoft Office bundle, even if this is
typically not at an attractive price. Many goods are sold only as a bundle and this has become so
common that we do not even notice it. An airplane ticket often includes a meal and the customer
cannot buy the trip and the meal separately. A university offers a bundle of courses, etc.4

Mixed bundling: In mixed bundling, goods A and B are sold as an A-B package in addition to
being sold individually. The package is sold at a discount to the individual prices. (If the price of
the A-B package simply equals the individual prices of A and B then this is not classified as
bundling).

The key part of the definition of bundling is that the A-B package is sold at a discount to the
components. If one thought of this as ordering in a restaurant, the prix fixé menu is a bundle that
will typically offer a discount compared to ordering à la carte. In some cases, we will see that the
A-B package is not sold at any discount at all. In these cases, there is no strategic impact of the
package offering and thus we do not consider this to be bundling

4
Barry Nalebuff (Yale University),“Bundling, Tying and Portfolio Effects”, DTI Economics Paper No. 1, Part 1,
February 2003, at pg.13
Distinction between tying and bundling

Bundling is not tying because “forcing is absent”. In "bundling" there are two or more products
and there are inducements to take the whole bundle, or more than one product. The inducement
is usually a discount that only applies when multiple products are purchased. The two products
are available separately so there is no compulsion to buy product B along with product A.5

The difference between tying and (pure) bundling is that the tied product is available on a stand-
alone basis under tying, but not under (pure) bundling. The difference between (mixed) bundling
and tying is that under (mixed) bundling both goods are also available on a standalone basis
while under tying only the tied good is available separately but not the tied good. This distinction
is however inconsequential if, the tied product is valueless without the tying product.6

The term “tying” refers to a practice whereby the seller of a product or service (”Tying Product”)
requires some or all purchasers of it to also purchase a separate product (“Tied Product”).
“Bundling” is somewhat different from tying. Here, the two products are sold by the seller as a
package at one price.

In a tying arrangement, the tied product is available independently of the tying product. The
tying product, on the other hand, is not available independently i.e. the tied product has to be
purchased along with it. Since the two products are sold as a package in a bundling arrangement,
they are not available independently i.e. the customer is compelled to buy the entire package as a
whole.

Interestingly, bundling and tying are dealt with as different practices in India, unlike some other
foreign jurisdictions, viz. the European Union (EU), the United States (US) and the United
Kingdom (UK) which treat the two practices similarly. This divergence in approach can be
attributed to the presence of slight distinctions in terms of the nature and manner of practice
between bundling and tying, despite the two arrangements being essentially the same.

5
“Antitrust in distribution-Tying, Bundling and Loyalty Discounts, Resale Pricing Restraints, Price Discrimination-
Part I,” The Metropolitan Corporate Counsel, April 2006, at p. 11.
6
The analysis of tying cases: a primer, jean Tirol, December 9, 2004.
Article 101 of the Treaty on the Functioning of the European Union (“TFEU”) prohibits
horizontal and vertical agreements that adversely affect competition in the European Market.
Further, Article 102 of the TFEU prevents dominant undertakings from abusing their position
and thereby affecting the competition in the market.

Articles 101(1) (e) and 102(d) of the TFEU deals with tying and bundling arrangements. It is
pertinent to note that these two clauses are worded in the same manner and prohibit: “making the
conclusion of contracts subject to acceptance by the other parties of supplementary obligations
which, by their nature, or according to commercial usage,         have no connection with the
subject of such contracts.”

Thus, Article 101 is attracted where a non-dominant entity indulges in tying or bundling by way
of a vertical agreement. Article 102, instead, comes into the picture only where an entity
dominant in the relevant market, i.e. market for the dominant product, abuses its position to force
tying and bundling arrangements upon the buyers.

Though there is a subtle difference between tying and bundling, a closer analysis shows that the
nature of these two practices is essentially the same.

Firstly, in both the practices, a second product is forced upon the consumer along with the
dominant product by way of a mandatory separate purchase or a package. Moreover, various
competition law authors do not distinguish bundling and tying in their works owing to the same
legal assessment of these two practices. In other words, the distinction between tying and
bundling is merely a technical one. Even forms of bundling such as pure bundling are held to be
synonymous with tying. This approach is further supported by the way in which the European
courts have dealt with the two practices.

Secondly, the root of both the arrangements lies in the restricting the consumer choice in terms
of the type and the number of products to be purchased. As a result, both the arrangements lead
to consumer harm and produce similar anti-competitive effects such as foreclosure, creating
barriers to entry, and the like.7

US LAW ON TYING

7
https://indiacorplaw.in/2018/05/tying-vs-bundling-arrangements-attempt-resolving-lacuna-indian-law.html,last
accessed on 25th April,2020
Section 1 of the Sherman Act, 1890 and Section 3 of the Clayton Act, 1914 deal with the
concepts of Tying. A tying agreement is subject to both these provisions and although the
wording in the two sections differs, both of them apply a similar substantive standard. Section 1
of the Sherman Act prohibits “every” agreement in “restraint of trade” depending upon the
“unreasonableness” of such a restraint. Section 3 of the Clayton Act forbids tying agreements
when “the effect....may be to substantially lessen competition or tend to create a monopoly.”
Though there appears to be no difference between these two laws, the Courts, in their approach
have pointed out the difference between the two statutes and standards applied therein. One point
of difference that was pointed out was that while the Clayton Act requires only showing that the
challenged conduct “may tend” to substantially lessen competition, the Sherman Act requires
proof of an actual effect on competition. Also, the Clayton Act’s coverage is more limited than
the Sherman Act, since the Clayton Act applies only when both the tying and the tied products
are tangible goods and commodities, rather than real estate or intangibles such as franchises or
services. Apart from these slight differences, it was maintained that the analysis applied under
the Clayton Act to tying arrangements is very much like the analysis typically used under
Section 1 of the Sherman Act.

Tying under U.S. law has been defined 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”.

The assessment of tying arrangements under U.S. Antitrust law has undergone significant
changes over the time. There are three periods describing the change.

First, the early period of the per se approach: early cases reflect a strong hostility towards tying
arrangements that were regarded as having hardly any purpose beyond the suppression of
competition.”

Second, the modified per se illegality approach: Jefferson Parish8 moved to an approach in
which the criteria for tying are used as proxies for competitive harm and, arguably, efficiencies.

8
Jefferson Parish Hospital Dist. No. 2 et al. v. Hyde,[ 466 U.S. 2 (1984)]
Third, the rule of-reason approach: Microsoft III9 introduced a rule-of-reason approach
towards tying; recognizing that, at least in certain circumstances, even the modified per se
approach would lead to an overly restrictive policy towards tying arrangements. In the early
cases the per se approach played an important role. In United States Steel v. Fortner, the court
held that tying arrangements “generally serve no legitimate business purpose that cannot be
achieved in some less restrictive way.”

In Northern Pacific Railway v. United States,10 the railroad was the owner of millions of acres
of land in several North western States and territories. In its sales and lease agreements regarding
this land, Northern Pacific had inserted “preferential routing” clauses. These clauses obliged
purchasers or lessees to use Northern Pacific for the transportation of goods produced or
manufactured on the land, provided that Northern Pacific rates were equal to those of competing
carriers.

The Supreme Court took the view that Northern Pacific had significant market power. The court
declared that the Per-Se rule applies “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 a ―not insubstantial ‘amount of interstate commerce is affected. In this case, the
facts “established beyond any genuine question that the defendant possessed substantial
economic power by virtue of its extensive land holdings”

In the International Salt Co., Inc. v. United States11 case it was held by the court that
“sufficient economic power” could be established in a number of ways, not all of which were
related to the concept of “market power”. Sellers forcing customers to accept unpatented
products in order to be able to use a patent monopoly, and the patent rights were deemed to give
the seller “sufficient economic market power”

In the second period of modified per se rule, the hostile approach towards tying was revised. In
the Jefferson Parish Hospital Dist No. 2 v. Hyde case Supreme Court accepted that tying could
have some merit and struggled to devise a test that distinguished “good tying” from “bad tying”.
The US Supreme Court observed that the essential characteristic of an invalid tie-in arrangement
lies in the seller‘s exploitation of its control over the tying product to force the buyer into the
9
United States v. Microsoft Corp., [253 F.3d 34 (D.C. Cir. 2001)]
10
United States v. Microsoft Corp., [253 F.3d 34 (D.C. Cir. 2001)]
11
International Salt Co., Inc. v. United States, [332 U.S. 392, 395-96 (1947)]
purchase of a tied product that the buyer either did not want at all, or might have preferred to
purchase elsewhere on different terms. Under the modified per se rule it is per se unlawful
whenever the seller has sufficient economic power with respect to the tying product to restrain
appreciably free competition in the market for the tied-in product.

The Rule of Reason co-exists with a per se rule in two senses. Firstly some courts have declined
to find two products tied together when the challenged arrangement seems reasonable, either
because it served legitimate functions or because threats to competition seemed fanciful. Most
frequently, the courts have ended up classifying a practice as exclusive dealing rather than tying,
with the result that it is made subject to the rule of reason. Secondly, the per se rule do not
exhaust the concerns of antitrust law. A refusal to condemn a particular restraint per se does not
necessarily mean that antitrust law is indifferent to that restrain or affirmatively approves it, the
rule of reason remains applicable.

Tying arrangements that do not meet all of the elements of a per se tying claim may still be held
unlawful as unreasonable restraints of trade under a rule of reason analysis. Unlike a per se
analysis, where the focus of the inquiry is on the tying product, a rule of reason inquiry looks at
the competitive effect of the arrangement in the relevant market for the tied product. However, it
is unlikely that a tying arrangement that passes muster under the strict per se standard will be
found to violate the less rigorous rule of reason test

Although Jefferson Parish still represents the general position in the U.S. with respect to tying,
the Court of Appeals’ judgment in Microsoft III indicates a preference, in some circumstances at
least, for a rule of reason approach, noting the Supreme Court’s warning in Broadcast Music v.
CBS that “it is only after considerable experience with certain business relationships that courts
classify them as per se violations.”

In Microsoft III, the Court of Appeals concluded that a per se rule was inappropriate, due to the
fact that the circumstances in Microsoft III differed from previous cases, and that the “separate
products” approach used in Jefferson Parish was not a suitable approach given that it was
backward looking. The case was therefore referred back to the District Court with a direction to
conduct a rule of reason analysis which balanced the anticompetitive effects and efficiencies.
THE INDIAN LAW ON TYING

One of the objects of the Competition Act in India was to prevent practices having adverse effect
on competition. They seek to achieve these by various means. Agreement for price fixing,
limited supply of goods or services, dividing the market etc. is some of the usual modes of
interfering with the process of competition and ultimately, reducing or eliminating competition.
The law prohibiting agreements, practices and decisions that are anti-competitive is contained in
Section 3(1) of the Act.

Section 3(1) of the Competition Act, 2002 states: “Anti-competitive agreements.–No enterprise
or association of enterprises or person or association of persons shall enter into any agreement in
respect of production, supply, distribution, storage, acquisition or control of goods or provision
of services, which causes or is likely to cause an appreciable adverse effect on competition
within India.”

Section 3(2) says that “Any agreement entered into in contravention of section 3(1) shall be
void.

Section 3(4) says that “Any agreement amongst enterprises or persons at different stages or
levels of the production chain in different markets, in respect of production, supply, distribution,
storage, sale or price of, or trade in goods or provision of services, including-- (a) tie-in
arrangement.......shall be an agreement in contravention of sub-section (1) if such agreement
causes or is likely to cause an appreciable adverse effect on competition in India.‖

The Explanation to Section 3(4) defines “tie-in arrangements” as “any agreement requiring a
purchaser of goods, as a condition of such purchase, to purchase some other goods.”

There are two important issues to be noted at this stage:

1) That tying is not an infringement of section 4, i.e. it is not an abuse of dominant position in
the Indian law.
2) That the definition excludes services since the word “goods” is explicitly defined in
section2(i).

The law extends sub-section 4 of section 3 of the competition act 2002 to vertical agreements by
the usage of the expression “agreements amongst.....at different stages or levels of production
chain in different markets.”

Vertical restraints are subject to the Rule of Reason test. So, the benefits and the harm have to
be weighted before an act of tying can be declared anti-competitive or to have an appreciable
adverse effect on competition, in terms of the language of the law.

Under section 19(3) of the competition act, 2002 six factors are provided for consideration of
competition by the authority before coming to any conclusions.

Section 19(3) states that... “The Commission shall, while determining whether an agreement has
an appreciable adverse effect on competition under section 3, have due regard to all or any of the
following factors, namely- a) Creation of barriers to new entrants in the market; b) Driving
existing competitors out of the market; c) Foreclosure of competition by hindering entry into the
market; d) Accrual of benefits to the consumer e) Improvements in production or distribution of
goods or provision of services f) Promotion of technical, scientific and economic development
by means of production or distribution of goods or provision of services.”

Three of these factors are indicative of the harm to competition while the remaining three are
pro-competitive and enhance welfare. The scheme of law is clearly for the application of the
12
Rule of Reason Test.

Sonam Sharma v. Apple Inc. and others, [Case No. 24 of 2011]

Facts:

12
ANISHA GUPTA ,CONCEPT OF TYING AND BUNDLINGAND ITS EFFECT ON COMPETITION: A CRITICAL
STUDYOF IT IN VARIOUS JURISDICTIONS
The informant Shri Sonam Sharma has accused Apple Inc. USA, an electronic manufacturer and
its Indian subsidiary Apple India Pvt. Ltd. to have secretly entered into exclusive selling
agreements with Vodafone Essar Ltd. (OP3) and Bharti Airtel Ltd.(OP4) in selling its iPhone
3G/3GS. The usage of iPhone which is an internet embedded mobile phone requires an internet
connection. Exclusive selling rights were given to OP3 and OP4 for several years which meant
iPhone did not operate with any other network and it became operational only when its lock is
decoded by the mobile service provider. In lieu of this exclusive right, OP3 and OP4 (leading
mobile service providers with over combined 52% of their share in market) charged high
package rates of internet for iPhone users as they had monopoly in the market. The informant
accused the above four opponents of abuse of dominant position.

Company's view:

Airtel (OP4) submitted that this case is outside the purview of Competition Act and fall under
Telecom Regulatory Authority of India (TRAI).

The opponent (OP4) also submits that this practice was discontinued from June 2011 and this
case is only academic in nature.

Vodafone alleges that the informant has not purchased any iPhone from its store and thus has
not faced any discriminatory practices in respect of tariff charges for internet usage.

Vodafone also affirmed that there were various other distributors of iPhone in India and also it
offers same internet packages both for iPhone and other users. The charge of both types of
internet usage plans are approved by TRAI regulations.

In response to informant's allegation that OP3 and OP4 jointly occupy over 52% of the market
share, Vodafone states that Sec 4 of Competition Act does not recognize combined dominance

Findings of Director General:

The Director General, finds as under: That CCI has jurisdiction over any competition issues
arising out of competition activities of the entities. That even if the alleged practices of the
opponents do not operate today but abuse of dominance needs to be investigated for the period
when such activity was followed. That the informant did use iPhone in India and also used the
services of telecom service providers. However, the informant is not under the obligation to use
the product to report any violation of any section of Competition Act. That Apple entered with
agreements with Airtel and Vodafone. Though Airtel agreement was renewed but Vodafone did
not get this agreement renewed. That Apple contacted other telecom service providers operating
in India like Aircel, Reliance, Idea, Tata DoCoMo but the agreements did not materialize. That
tie-in arrangements restricted the iPhone users in switching over to other service provider but on
a whole Apple did not hold a major share in the market (1-2.4% only market share) and thus tie-
in- arrangement did not cause appreciable adverse effect. It was concluded that Apple did not
enter into exclusive selling contracts with Airtel and Vodafone. However, it did enter into tie-in
arrangements with the above two telecom service provider to unlock the phones but this did not
cause any adverse effect.

Court's Verdict:

Apple in India does not occupy a dominant position. Airtel and Vodafone cannot be termed as
dominant entities which occupy only 27.68% and 22.44% respectively and their market share
cannot be combined as they are horizontal competitors. The agreement between Apple, Airtel
and Vodafone should not be seen as a tie-in-arrangement but as bundled service wherein the
consumer has a choice to go in for any other network provider as well. Further, tie-in-
arrangements would not come into any role as the entities do not have a dominant share in the
market. No appreciable affect has been caused to the competition in Smartphone market.

In Consumer online foundation v Tata sky Ltd & Ors 13 it was said by the Director General
(DG) that “DTH service providers are forcing the consumers to get into a tie-in arrangement with
them. They require the purchaser of their DTH Services to also buy/take on rent the STBs
procured by them. They are not giving DTH services to those who are not willing to buy/ take on
rent their STBs. This is a clear violation of section 3(4) of the Act under which a tie-in
arrangement would prime facie be considered violative of section 3 if it has an appreciable
adverse effect on competition in India. Further, as these four DTH service providers control more
than 80% of the market, any anticompetitive practice would definitely have an appreciable
adverse effect on the market. Hence, this is a clear case of a tie-in arrangement which is having
not only an appreciable but a „significant adverse effect on competition in the market. The
13
Case no. 2 of 2009, Competition Commission of India, March 2011.
supplementary report was considered by the Commission, in its meeting held on 05.01.2010.
After having gone through the supplementary report, the Commission, vide its order dated
08.01.2010, sought additional supplementary report with regard to the issue of DTH service
providers forcing the consumers to enter into a tie-in arrangement.

This issue of tie-in sales of the consumer premises equipment (Set Top Box, Smart Card and
Dish Antenna) was examined by the DG in detail including the reasons for the continuance of
this practice.

The said report focused on two major interfaces related to „tie-in arrangement.

These are:

 Interface between the DTH service provider and STB manufacturer

 Interface between the customer and DTH service provider

On examination of the agreement between the DTH service provider and the customer, it was
noted by the DG that no such clause which directly restricts or forces the customer to enter into
tie-in arrangement is there. However, on account of the lack of customer awareness and lack of
availability of Set Top Boxes and other equipments in open market, the customer does end up
buying all the related equipments from the DTH service providers only. The sale of Set Top Box,
Smart Card and Dish Antenna is tied-in as all the three equipments are provided in one package
and are not readily available for sale in open market-independent of each other. These three
components are technically essential as each performs a specific function for availing the DTH
service transmission. Owing to the lack of practical interoperability and lack of consumer
awareness, the customer has no alternative but to purchase these three equipments from the DTH
service provider whose service he is availing. This ultimately results in tie-in arrangements of the
Consumer Premises Equipment from the DTH service provider. Except Dish TV, no other DTH
service provider, under investigation, has specifically and clearly mentioned in its agreement
with the customer that a customer can avail or procure compatible Set Top Box from any other
source. This offer of Dish TV is also of no benefit to customer as neither the compatible Set Top
Box is commercially and readily available in the open market, nor the consumer is really aware
of this possibility
Summing up the findings, the DG concluded as under: ―

The entire forgoing discussion and the recent developments indicate that the ‗tie-in‘ sale of the
Customer Premises Equipment is happening on account of non-availability of Conditional
Access Module (CAM), Set Top Box etc. in the open market, lack of consumer awareness as
well as lack of enforcement of licensing conditions by any regulatory authority. The recent
development of the news of the likelihood of availability of Conditional Access Module (CAM)
in open market will be a positive step towards achieving interoperability. This can be further
enhanced and fully interoperability, which is technically possible, can be achieved by the
availability of nonproprietary Set Top Boxes in the open market and enforcement of the clause
7.1 of the DTH licensing agreement relating to achieving interoperability among the DTH
Service providers.
Conclusion

After critically analysing the concept of tying and bundling, the researcher is of the view that the
initial Per-Se Illegality Approach in respect of tying and bundling is not a correct stand. Every
case of tying and bundling should be judged on its own merits and demerits and not in regard
with straight- line jacket formulae. There are established theories both in support of the notion of
tying and bundling as resulting predominantly in pro-competitive effects, as well as supporting
the counter-notion that more anti-competitive effects result in the end from such practices. Both
schools of thought are, however, not waterproof and a number of problems are always
encountered whenever applying one or the other. A Per Se Approach prohibits certain acts
without regard to the particular effects of the acts, i.e. no investigation into the question of
possible pro-competitive effects. According to researcher‟s view Per-Se prohibition is justified
for types of conduct that have manifestly anti-competitive implications and a very limited
potential for procompetitive benefits. A Rule of Reason Approach on the other hand is about
investigating the effects of the challenged conduct, taking into account the particular facts of the
case. The Courts decide whether the questioned practice imposes an unreasonable restraint on
competition taking into account a variety of factors. The Rule of Reason Approach which
considers the pros and cons of each case is more favourable to the Indian legal system