Eastman Kodak Co. v. Image Technical Services, Inc.
Citation and Court
504 U.S. 451 (1992)
Facts
Eastman Kodak sold photocopiers and micrographic equipment. Independent service organizations (ISOs) competed with Kodak to repair Kodak machines. Kodak adopted a policy of selling replacement parts only to buyers of Kodak service contracts or to end users who repaired their own machines, effectively locking out ISOs. The ISOs sued under §§ 1 and 2 of the Sherman Act, claiming Kodak illegally tied parts to service.
Issue
Whether a single brand’s aftermarket (replacement parts and service for that brand’s equipment) can constitute a relevant antitrust market, even where the brand competes in a competitive primary equipment market.
Holding
The Supreme Court held that genuine issues of material fact precluded summary judgment for Kodak. A single brand’s aftermarket can be a cognizable antitrust market when customers are locked in — i.e., when high switching costs prevent them from credibly threatening to defect to a competitor’s brand in response to aftermarket price increases.
Rule / Doctrine
Lock-in theory: where customers face high switching costs after purchasing durable equipment, the competitive discipline that the primary market ostensibly imposes on aftermarket pricing may be insufficient. A defendant’s argument that a competitive primary market necessarily disciplines aftermarket behavior fails when (1) information about lifecycle costs was unavailable or unclear at the time of purchase, or (2) switching costs are prohibitively high post-purchase. Under these conditions, a single brand’s aftermarket constitutes a legally cognizable market.
Significance
Establishes that the “one brand, one market” theory is viable when customers are locked in to a brand’s proprietary ecosystem. Aftermarket tying claims are cognizable even absent primary-market monopoly power. Limits the argument that competitive primary markets necessarily police aftermarket abuses. Frequently cited alongside FTC v. Whole Foods Market, Inc. and FTC v. Staples, Inc. for the proposition that market definition is a factual, context-specific inquiry. See also Brown Shoe Co. v. United States.