The Sixth Circuit will soon be clarifying its standard for so-called “non-explicit” unlawful tying in Collins Inkjet Corp. v. Eastman Kodak Co., Case No. 14-3306, currently awaiting submission to a panel. Kodak and Collins both make Versamark products, including ink and printer parts, but only Kodak refurbishes printheads. After Collins terminated its relationship as a supplier to Kodak, Kodak announced that it would charge more to refurbish the printheads of Collins’s ink users than to refurbish the printheads of Kodak’s ink users. On a motion for a preliminary injunction, the district court found that Collins was likely to succeed on the merits of its claim that Kodak unlawfully tied the price of its printhead refurbishment services to the purchase of its ink. See Collins Inkjet Corp. v. Eastman Kodak Co., No. 1:13CV664 (S.D. Ohio Mar. 21, 2014).
Unlawful tying requires—among other things—that the purchase of one product or service be conditioned on the purchase of another, distinct product or service. In the Sixth Circuit, if circumstances indicate that “all rational buyers” of one product would buy the other product, that fulfills the element of “conditioning” in the unlawful tying analysis, even if a buyer is technically able to buy one without the other. The district court’s analysis in this case emphasized the price differential in refurbishment, viewing it as great enough to sway all rational buyers towards Kodak ink and rejecting Kodak’s argument that a rational buyer could still choose Collins’s ink based on the ink’s quality and Collins’s customer service. The district court declined to consider whether Collins could have offset the refurbishment price differential by lowering the price of its ink, stating that this would only be relevant in a predatory pricing case. Although the district court acknowledged that Collins retained many customers and that this actual buyer behavior could potentially demonstrate a lack of coercion, it attributed the customers’ behavior to Kodak’s inconsistent enforcement of its price-differentiation policy, holding that the policy itself was still sufficiently coercive to constitute conditioning.
In deciding Kodak’s interlocutory appeal, the Sixth Circuit will have an opportunity to clarify what evidence is and is not relevant to determining the behavior of “all rational buyers.” In the meantime, companies considering similar strategies ought to carefully consider the potential antitrust implications. Even if the Sixth Circuit chooses to focus less heavily on the price difference and more on other factors, the “all rational buyers” standard suggests a fact-intensive, case-by-case analysis that can lead to time-consuming and expensive litigation.
