US Antitrust law applicable to standards setting
Standards development can be misused for anti-competitive purposes. The basic objective of US antitrust laws is to preserve and promote competition and the free enterprise system. Standards processes are subject to these laws. The antitrust laws are premised on the assumption that private enterprise and competition is the most efficient way to allocate resources, produce the necessary goods at the lowest possible price and assure that high quality products are produced. The antitrust laws require that business people make independent business decisions without consultation or agreement with competitors. T
Anti Trust Law
Anti trust laws in the United States make illegal all contracts, combinations, and conspiracies which are deemed to be in restraint of trade A court will examine all the facts and circumstances surrounding any particular conduct in question in order to ascertain whether the contract or combination violates the the law by restraining trade unreasonably.
The antitrust laws are enforced by the Antitrust Division of the Department of Justice and the Bureau of Competition of the Federal Trade Commission, as well as by private suits for treble damages instituted by persons or firms injured by antitrust violations.
A company or person found liable of an antitrust violation in a civil suit brought by a private plaintiff may be forced to pay up to three times the actual damages suffered by the plaintiff, as well as all of the plaintiff's costs of litigation and attorney's fees.
The courts have elaborated certain practices that also apply to standards setting procedures.
No matter what the procedure or how much due process the standard-setting body affords a complaining party, if the standard is anticompetitive it is not justified by the reasonableness of the procedure used to implement it.
Competitors cannot use standards to facilitate otherwise anticompetitive activities. Wrapping otherwise anticompetitive acts in the clothing of a product standard cannot justify the restraint.
Standards that restrain trade, even if the standard-setting body has legitimate reasons for the restraint. Even a standard designed to achieve a socially desirable objective cannot do so through anticompetitive means.
Competitor manipulation of product standards may lead to antitrust liability even for the standard-setting body.
Standard-setting bodies cannot enforce product standards through anticompetitive means.
And finally, absent some sort of blatant violation, the courts will apply a rule of reason analysis to evaluate standard-setting activities. Since product standards offer a host of procompetitive effects, these benefits weigh heavily in the judicial balance.
The ENFORCEMENT GUIDELINES FOR INTERNATIONAL OPERATIONS contains an illustrative example “E” portraying how an inappropriate activity of a foreign trade association setting industry standards might be treated.
Situation: Companies P, Q, R, and S, organized under the laws of country Alpha, all manufacture and distribute construction equipment. Much of that equipment is protected by patents in the various countries where it is sold, including Alpha. The companies all belong to a private trade association, which develops industry standards that are often (although not always) adopted by Alpha's regulatory authorities. Feeling threatened by competition from the United States, the companies agree at a trade association meeting (1) to refuse to adopt any U.S. company technology as an industry standard, and (2) to boycott the distribution of U.S. construction equipment. The U.S. companies have taken all necessary steps to protect their intellectual property under the law of Alpha. Discussion: In this example, the collective activity impedes U.S. companies in two ways: their technology is boycotted (even if U.S. companies are willing to license their intellectual property) and they are foreclosed from access to distribution channels. The jurisdictional question is whether these actions create a direct, substantial, and reasonably foreseeable effect on the exports of U.S. companies. The mere fact that only the market of Alpha appears to be foreclosed is not enough to defeat such an effect. Only if exclusion from Alpha as a quantitative measure were so de minimis in terms of actual volume of trade that there would not be a substantial effect on U.S. export commerce would jurisdiction be lacking.
Given that this example involves construction equipment, a generally highly priced capital good, the exclusion from Alpha would probably satisfy the substantiality requirement for FTAIA jurisdiction. This arrangement appears to have been created with particular reference to competition from the United States, which indicates that the effects on U.S. exports are both direct and foreseeable.