dmt@mtgzz.UUCP (d.m.tutelman) (08/28/85)
> Re: legality of bundling with hardware. > > It is indeed illegal to refuse to sell software w/o the hardware, but that > does not deter people from doing it. Would someone who knows please take a crack at this? I was under the impression that "bundling" was an anti-trust offense. That is, it's not illegal per se, but is illegal for those whose "market power" makes them a monopoly. Thus IBM couldn't do it, but the small turnkey system vendor is perfectly legal. Dave Tutelman Physical - AT&T Information Systems Holmdel, NJ 07733 Logical - ...ihnp4!mtuxo!mtgzz!dmt Audible - (201)-834-2895
doc@cxsea.UUCP (Documentation ) (08/31/85)
> > Re: legality of bundling with hardware. > > > > It is indeed illegal to refuse to sell software w/o the hardware, but that > > does not deter people from doing it. > > Would someone who knows please take a crack at this? > > I was under the impression that "bundling" was an anti-trust offense. > That is, it's not illegal per se, but is illegal for those whose > "market power" makes them a monopoly. Thus IBM couldn't do it, > but the small turnkey system vendor is perfectly legal. "Product tying" is illegal per se, by virtue of decisions under the Sherman Act. To have a case of product tying, the vendor must be selling two products, the tied product (the one everybody wants) and the tying product (which nobody wants, but has to buy anyway in order to get the one they really want). The tied product must have market power; that is there must be substantial demand for it. IBM could probably get away with making you buy a PC to get IBM software, but not the other way around. Look at it this way: product tying is normally illegal because it produces an artifical demand for a product (the tying product) by linking it to a product for which there is an organic demand (the tied product). So, the crucal distinction here is that the tied product be the dominant product in it's particular market. This was the rule articulated in the Data General antitrust litigation. A number of companies were selling DG-NOVA clones, but DG would not sell to end-user the OS (RDOS) unless the end-users also purchased a NOVA. The competitors sued and prevailed. The court decided that the relevant market (for the purpose of deciding whether or not DG's RDOS had market power) was NOVA-compatible operating systems, that would run RDOS applications, not computers in general. Similarly, the IBM PC has all kinds of market power (PC compatible cpu's), while IBM software has almost none. Requiring you to buy a PC in order to buy IBM software is not per se product tying (but is sheer stupidity from a business standpoint; why make an unpopular product that much more difficult to obtain). Requiring you to buy their software in order to buy a PC, however, is a different situation, because the PC is popular enough to leverage artificial demand for the software. See the difference?