Opinion ID: 1363360
Heading Depth: 1
Heading Rank: 2

Heading: The affirmative defense sufficiently pleaded the elements of an illegal tying agreement.

Text: As previously stated, it was held by this court in Butler Enterprises v. Vanlandingham, supra, 264 Or. at 424, 505 P.2d 1149, that: A tying arrangement is defined as an agreement by a party to sell one product but only on the condition that the buyer also purchase a different or `tied' product, or at least agree that he will not purchase that product from any other supplier. This court went on in Butler to hold (at 425, 505 P.2d 1149) that: In order to establish that the tying arrangement is unlawful, the defendant must show: (1) that the scheme in question involves two distinct items and provides that one (the tying product) may not be obtained unless the other (the tied product) is also purchased; (2) that the tying product possesses sufficient economic power appreciably to restrain competition in the tied product market; and (3) that a `not insubstantial' amount of commerce is affected by the arrangement. This is in accord with decisions by the Supreme Court of the United States under federal antitrust statutes. See Fortner Enterprises, Inc. v. United States Steel Corp., 394 U.S. 495, 498-99, 89 S.Ct. 1252, 1256, 22 L.Ed.2d 495 (1969); Northern Pacific Railway Co. v. U.S., 356 U.S. 1, 5-6, 78 S.Ct. 514, 518, 2 L.Ed.2d 545 (1958). See also International Salt Company v. U.S., 332 U.S. 392, 396, 68 S.Ct. 12, 15, 92 L.Ed. 20 (1947). Plaintiff contends that there are two additional elements which must be pleaded and proved to establish such a defense: (1) evidence of actual coercion by the seller that in fact forced the buyer to accept the tied product and (2) anticompetitive effects in the tied market, citing Yentsch v. Texaco, Inc., 630 F.2d 46 (2nd Cir.1980). It is of significance to note that neither this court in Butler nor the Supreme Court of the United States in Fortner or Northern Pacific list these two additional elements of required pleading and proof, but instead list only the three requirements previously referred to. With respect to the contention that coercion must be pleaded and proved as a separate element we have reviewed Capital Temporaries, Inc. of Hartford v. Olsten Corp., 506 F.2d 658 (2nd Cir.1974), relied upon in Yentsch v. Texaco, Inc ., and find that it is more accurate to conclude that the court in Capital Temporaries, Inc. held, in effect, that coercion is not a separate element, but is included in the required element that the tying product possesses sufficient economic power appreciably to restrain competition in the tied product market, with the result that although coercion of the buyer to purchase the tied product is a fact which must be established in proving at trial the existence of an illegal tying agreement, coercion need not be pleaded as an element in addition to the three outlined in Butler Enterprises v. Vanlandingham, supra , in order to sufficiently allege an illegal tying agreement. In any event, it would appear that any requirement of coercion was satisfied by defendant's pleading in this case. As held in Moore v. Jas. H. Matthews & Co., 550 F.2d 1207, 1217 (9th Cir.1977): Coercion occurs when the buyer must accept the tied item and forego possibly desirable substitutes. Defendant pleaded in the case that under the terms of the list back agreement between the parties plaintiff required defendant to employ the plaintiff, then the real estate broker, as the selling agent if and when the property defendant was purchasing from the plaintiff was resold. In our opinion, this satisfied any requirement of coercion. As for a required element of anticompetitive effects in the tied market, it was held by the United States Supreme Court in Northern Pacific, supra, 356 U.S. at 6, 78 S.Ct. at 518, that: Where [tying] conditions are successfully exacted competition on the merits with respect to the tied product is inevitably curbed. With respect to the three requirements as stated by this court in Butler and by the Supreme Court of the United States in Fortner and Northern Pacific, it is significant to note that plaintiff does not challenge the sufficiency of defendant's pleading of the first and third of such requirements, namely, (1) that the scheme in question involves two distinct items and provides that one (tying product) may not be obtained unless the other (the tied product) is also purchased, and (3) that a `not insubstantial' amount of commerce is affected by the arrangement. Instead, plaintiff challenges only the sufficiency of defendant's pleading with respect to the second requirement, namely, (2) that the tying product possesses sufficient economic power appreciably to restrain competition in the tied product market. The Supreme Court of the United States in Fortner Enterprises v. U.S. Steel, 394 U.S. 495, 502-503, 89 S.Ct. 1252, 1258, 22 L.Ed.2d 495 (1969), Fortner I, held that: Our tie-in cases have made unmistakably clear that the economic power over the tying product can be sufficient even though the power falls far short of dominance and even though the power exists only with respect to some of the buyers in the market. See, e.g., International Salt; Northern Pacific; United States v. Loew's Inc., 371 U.S. 38, 83 S.Ct. 97, 9 L.Ed.2d 11 (1962). As we said in the Loew's case, 371 U.S. at 45, 83 S.Ct. at 102, 9 L.Ed.2d 11: `Even absent a showing of market dominance, the crucial economic power may be inferred from the tying product's desirability to consumers or from uniqueness in its attributes. ' (Emphasis added) Plaintiff contends, however, that mere uniqueness alone is not sufficient and that the Court in United States Steel Corp. v. Fortner Enterprises, Inc., 429 U.S. 610, 620-21, 97 S.Ct. 861, 867-68, 51 L.Ed.2d 80 (1977), Fortner II, held that: `   [T]he question is whether the seller has some advantage not shared by his competitors in the market for the tying product. `Without any such advantage differentiating his product from that of his competitors, the seller's product does not have the kind of uniqueness considered relevant in prior tying-clause cases.   .' In Fortner II, however, the Court stated (at 619, 97 S.Ct. at 867) that:    the unique character of the tying product has provided critical support for the finding of illegality in prior cases. Thus, the statutory grant of a patent monopoly in International Salt Co. v. United States, 332 U.S. 392, 68 S.Ct. 12, 92 L.Ed. 20, the copyright monopolies in United States v. Paramount Pictures, Inc., 334 U.S. 131, 68 S.Ct. 915, 92 L.Ed. 1260, and United States v. Loew's Inc., 371 U.S. 38, 83 S.Ct. 97, 9 L.Ed.2d 11; and the extensive land holdings in Northern Pacific R. Co. v. United States, 356 U.S. 1, 78 S.Ct. 514, 2 L.Ed.2d 545, represented tying products that the Court regarded as sufficiently unique to give rise to a presumption of economic power.  (Emphasis added) In this case the tying product is land  residential real property. Aside from the fact that defendant alleged that some of [the] lots are of unique quality and that plaintiff had a strong position in the market for residential lots because at the time of the contract, they controlled a substantial number of lots of those available, it is generally held that land is unique, at least for other purposes, such as specific performance. As this court stated in Robertson v. Jones, 280 Or. 507, 511, 571 P.2d 905, 907 (1977): Since every piece of land, and especially a home, is in some sense unique, purchasers under a valid contract are normally entitled to specific performance. (Emphasis added) In Connecticut v. Hossan-Maxwell, ___ Conn. ___, 436 A.2d 284, (Conn.Sup.Ct., 1980), it was held that residential real property is unique for the purposes of determining the validity of a tying arrangement, as in this case, and that the economic power in such a case would be presumed. We agree with the reasoning of the court in that case. Defendant alleges not only that the lots were unique, but also that plaintiff controlled a substantial number of lots of those available. Thus, there are two factual allegations to support the second element (sufficient economic power), i.e., uniqueness and control of supply of a commodity, whether unique or not. For these reasons, we reject plaintiff's contentions that defendant's affirmative defense failed to plead sufficiently the elements required to establish an illegal tying agreement.