First National Bank owns a data processing company that sells financially related data processing services to various businesses in the community. Daniel Tyler, a loan officer, is negotiating a loan to a local CPA firm. He would like to make the loan conditional on the CPA firm's use of the subsidiary data processing firm. May he do so?
No, it is an illegal tie-in. Conditioning a loan on the requirement that the borrower must use a specific service from another entity owned by the lender constitutes a tie-in arrangement. This practice is illegal because it restricts competition and limits consumer choice, potentially violating antitrust laws such as the Sherman Antitrust Act.
Daniel Tyler cannot make the loan conditional on the CPA firm's use of the subsidiary data processing firm. This would constitute an illegal tie-in, where the bank conditions the availability of one product or service (the loan) on the purchase of another product or service (data processing services from its subsidiary). Tie-in arrangements can violate antitrust laws, such as the Sherman Antitrust Act, by stifling competition and restricting consumer choice.