US Antitrust law applicable to standards setting 

Introduction

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 Federal Trade Commission has prepared and made available various guidelines for business applicable to activity of standards setting organizations.  

Antitrust Guidelines
for the Licensing of Intellectual Property 

Antitrust guidelines for Collaboration among competitors issued jointly by the FTC and US Department of Justice  

ANTITRUST ENFORCEMENT GUIDELINES  FOR INTERNATIONAL OPERATIONS ISSUED BY THE U.S. DEPARTMENT OF JUSTICE AND THE FEDERAL TRADE COMMISSION  

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.