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Competition and Anti-competitive Practices

Anti-competitive tying and bundling

Tying occurs when a supplier makes the sale of one product (the tying product) conditional upon the purchase of another (the tied product) from the supplier (i.e. the tying product is not sold separately). Bundling refers to situations where a package of two or more products is offered at a discount.

Tying and bundling are common commercial practices and rarely raise competition concerns.

However, in limited cases an undertaking with a substantial degree of market power can harm competition through tying or bundling.

For example, in the context of bundling, an undertaking with a substantial degree of market power in the market for one of the products that forms part of the bundle may use bundling to harm competitors in the markets for the other products that are part of the same bundle. This may give rise to foreclosure in the latter markets, leading potentially to higher prices for consumers.

For further information, please refer to Guideline on the Second Conduct Rule (in particular, paragraphs 5.8 to 5.12).

Hypothetical example

The leading supplier of medical devices to Hong Kong hospitals and clinics stipulates in its sales contracts that the consumable medical products used with the devices must be purchased exclusively from it. These contractual requirements significantly limit the customer base available to competing manufacturers of consumables. If the medical devices supplier has a substantial degree of market power in the relevant medical devices markets, the contractual arrangements (which cause harm to competition in the market for consumable medical products) may amount to an abusive tie in contravention of the Second Conduct Rule.

The analysis might be similar with respect to the tying of a service. For example, if the medical devices supplier imposed a condition requiring customers to use the supplier (or an affiliate of the supplier) for the purposes of obtaining maintenance and repair services for the devices, this could raise concerns under the Second Conduct Rule.

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