Did an obscure remark in a recent regulatory publication signal a new interpretation of the anti-tying rules?

As discussed in this Orrick alert, federal bank regulators recently issued guidance to financial institutions concerning leveraged lending practices (the “Lending Guidance”). In most respects the Lending Guidance was anticipated, but it contains a surprising statement about the anti-tying provisions of the Bank Holding Company Act, which we hope signals a long-awaited change of view at the Federal Reserve.

The Lending Guidance states that “[t]he intent behind Section 106(b) [of the Bank Holding Company Act Amendments of 1970] is to prevent financial institutions from using their market power over certain products to obtain an unfair competitive advantage in other products.” The reference to “market power” was also included in the draft Lending Guidance released in March 2012 and it may be significant, because the Federal Reserve has previously declined to interpret that market power is a necessary element of an illegal tying arrangement under Section 106. In its 2003 proposed interpretation of Section 106 of the Bank Holding Company Act (the “Proposed Interpretation”), the Federal Reserve specifically determined, based on its review of the legislative history of the section, that economic power and anticompetitive effects are not necessary elements of a Section 106 claim.