Opinion ID: 398076
Heading Depth: 2
Heading Rank: 1

Heading: Two Distinct Products

Text: 26 Appellant argues that the sale of cemetery lots and the foundation preparation for grave memorials represent two separate and distinct products. While it should be noted that § 3 of the Clayton Act is inapplicable to tie-ins involving services, Advance Business Systems & Supply Co. v. SCM Corp., 415 F.2d 55, 61 (4th Cir. 1969), cert. denied, 397 U.S. 920, 90 S.Ct. 928, 25 L.Ed.2d 101 (1970), the installation and maintenance of a product have been found to be subject to the prohibitions against ties under the Sherman Act. Miller v. Granados, 529 F.2d 393, 396-97 (5th Cir. 1976) (condominium sale tied to management service contract held to be distinct products and services under § 1 of the Sherman Act). 27 Appellant asserts that the analysis in Moore, supra, 550 F.2d at 1212, 1214-18, is persuasive. We agree. The facts in Moore are analogous to those presented, and the conclusion reached by the Ninth Circuit concerning the existence of two distinct products is well reasoned. In Moore, the plaintiff, a retailer and installer of grave memorials, commenced a private antitrust action against a group of cemetery owners in Oregon. The cemeteries required that the buyer of a cemetery lot use the installation service of that cemetery. Some of the cemeteries required the buyer of a cemetery lot to purchase a grave marker from or through the cemetery. The plaintiff alleged that the exclusive installation policy represented tying arrangements prohibited under the Sherman Act. The district court entered judgment for all defendants. On appeal, the Ninth Circuit vacated the judgment and remanded the case for further proceedings. Id. at 1218. An application of the factors in Moore leads inescapably to the conclusion that separate products and services are involved. Id. at 1215. 28 Separability is based not only upon the physical characteristics of the items involved but also on the business justification for selling the two products. Unless a cost savings results from the tying arrangement or the tied and tying products are typically used as a unit in fixed proportions, the tied product is often regarded as generically different. Id. Appellees have failed to show that the business justifications here result in a cost savings to consumers. See text at pp. 1144-1145 infra. The evidence tends to show that by entering into the exclusive foundation preparation agreement appellees reduced competition rather than price. 29 The rules dealing with tie-ins are designed not to prohibit the sale of physically separable products or services, but rather to prohibit using a product in strong demand to compel the purchase of a second distinct commodity or service. Moore, supra, 550 F.2d at 1214. The public's demand for the ultimate product is often closely related to but legally separable from its demand for the installation of the product. Id. The installation of a cable television antenna system has been found to be a separate market from the sale of the components in the antenna system. United States v. Jerrold Electronics Corp., 187 F.Supp. 545, 550-59 (E.D.Pa.1960) (Jerrold Electronics ), aff'd, 365 U.S. 567, 81 S.Ct. 755, 5 L.Ed.2d 806 (1961) (per curiam). The installation of avionics equipment has been viewed as separate from the sale of the equipment. Fontana Aviation, Inc. v. Cessna Aircraft Co., 460 F.Supp. 1151, 1154 n.8 (N.D.Ill.1978), rev'd on other grounds, 617 F.2d 478 (7th Cir. 1980). Separate markets also exist for the assembly of automobile parts and the servicing and delivery of those parts. Anderson Foreign Motors, Inc. v. New England Toyota Distributors, Inc., 475 F.Supp. 973, 982 (D.Mass.1979). 7 30 Appellees argue that because no companies in the market area provide foundation preparation services for cemeteries, no separate market for that service exists. Their argument fails because the exclusive foundation preparation policy virtually forecloses the existence of companies which would otherwise solely provide foundation preparation services. Further, a separate demand for a product or service may exist although no commercial entities exist that supply that service. This is especially true where a tying arrangement precludes entrance into the underserved market. 31 A separate market exists for the preparation of foundations for grave memorials. If given the opportunity to purchase the service separately, consumers would likely be drawn to the company offering foundation preparation services at the least expensive price. 32 Thus, we hold that a cemetery lot and the preparation of the foundation for grave memorials are two generic products. We next inquire whether appellees have sufficient economic power in the tying product market to impose sufficient restrictions in the tied product market.