The Antitrust Risks Associated With Manipulating The Standard-Setting Process

David S. Bloch, and Scott S Megregian

1/01/2005
(Original Publish Date: 10/13/2004)

In many technology-related markets, an industry standard will emerge to provide a common framework or format to ensure interoperability among related products and to foster the development of ancillary or peripheral devices. Some standards will develop as a result of open market competition. In other cases, however, standards are created from voluntary consensus or by government prescription.Both voluntary consensus standards and government prescribed standards can be pro-competitive. They can ensure interoperability, connectivity and product safety. Indeed, many argue that industry standards are essential to the functioning of a modern economy. But they also can arouse significant antitrust concerns. A number of recent cases have considered allegations that participants have manipulated the standard-setting process in order to create a structure where they had patent coverage over certain aspects of the standard. In such cases serious anticompetitive effects, such as market foreclosure, higher prices, reduced innovation and the unlawful creation of a dominant market position, can result. Trying to balance these pro- and anticompetitive tendencies, lawmakers have attempted to carve out a specific antitrust immunity for standard-setting organizations (SSOs). However, a number of recent court decisions also have provided important guidance on the antitrust risks arising from "strategic" participation in SSOs. Reviewing these cases should help companies to better understand the ground rules for participating in the standard-setting process.