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Antitrust Law Journal

Volume 84, Issue 2

Balance and Standardization: Implications for Competition and Antitrust Analysis

Justus Baron, Jorge Contreras, and Pierre Larouche

Summary

  • Most technical standards-development organizations (SDOs) have adopted internal policies embodying “due process” criteria such as openness, balance of interests, consensus decision making, and appeals. These requirements arise from numerous sources including antitrust law, international trade law, public procurement requirements, and institutional norms. Yet balance criteria lack a generally accepted definition, and the manner in which SDOs implement these criteria varies, sometimes dramatically.
  • Recently, there has been a renewed interest in the principle that SDOs should ensure a balance of interests among their stakeholders, including in the development of intellectual property rights policies. This article explores the origins and meaning of the balance requirement for SDOs in the United States and Europe and identifies distinct modalities in which balance requirements are imposed, as well as existing antitrust and competition law requirements surrounding SDO balance.
Balance and Standardization: Implications for Competition and Antitrust Analysis
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Most technical standards development organizations (SDOs) have adopted internal policies embodying “due process” criteria such as openness, balance of interests, consensus decision making, and appeals. Contrary to popular belief, efforts to balance different interest categories in SDO deliberations did not originate in response to antitrust requirements. Rather, to achieve broad acceptance and legitimacy of their standards, SDOs have long sought some degree of “balance of interests” among different stakeholder groups, typically encouraging active participation by product manufacturers, product users, and unaffiliated experts. Accordingly, balance requirements are an accepted feature of SDO organization, and most stakeholders view them as desirable.

Similarly, a significant number of public regulations list balance among the procedural features of standards development that SDOs are expected to follow, e.g., for their standards to qualify for government use or to be regarded as authoritative expressions of the state of the art.

Until recently, relatively little scholarly research has considered the history, scope, and interpretation of SDO balance requirements. A series of recent events and disputes, however, has focused attention on this understudied area of SDO governance and policy, particularly as it pertains to policies concerning intellectual property rights (IPRs). The recent focus on balance requirements is rooted in a growing number of conflicts between firms (“patentcentric” firms) that seek to earn royalty revenue from licensing patents that are essential to an SDO’s standards (standards-essential patents or SEPs) and firms that primarily seek to earn revenue from sales of standardized products, faster time to market, and the broad availability of compatible products (“product-centric” firms).

For example, the revision of the patent policy of the Institute of Electrical and Electronics Engineers (IEEE) in 2015 sparked allegations of imbalance. Both the policy itself and the decision-making process that led to its adoption were criticized as being unbalanced to the detriment of patent-centric firms. The ensuing public debate involved multiple SDO participants, SDOs, and the U.S. Department of Justice Antitrust Division.

The DOJ also took an active interest in balance at the American National Standards Institute (ANSI), and in 2018 sent a letter urging ANSI “to have balanced representation in its decisional bodies” tasked with proposing changes to the implementation of ANSI’s patent policy.

In 2018, a software testing company, NSS Laboratories, filed an antitrust complaint against various software vendors and the Antimalware Testing Standards Organization (AMTSO), alleging that AMTSO’s standards development processes and standards were biased toward the interests of software vendors, to the detriment of software testing companies.

And in 2019, the DOJ concluded an investigation of the standards development processes of the GSM Association (GSMA), which establishes standards for mobile network operators, and issued a favorable business review letter after GSMA made significant changes to its processes. These changes addressed the DOJ’s concerns that GSMA’s previous processes had unfairly favored the interests of telecommunications network operators over the interests of other companies, such as vendors of telecommunications devices and equipment.

In each of these cases, it was suggested that SDOs may have violated (or were at risk of violating) antitrust laws by reaching decisions through processes that insufficiently balanced the interests of different commercial groups. But what does “balance of interests” mean in an SDO comprised of self-selected volunteer participants—both individuals and organizations—and when does absence of such balance constitute a violation of the antitrust laws?

The legality of joint standards development activities by competing firms under the antitrust laws hinges on weighing the proand anticompetitive effects that they produce. Following recognized and accepted standardization processes alone may not immunize an SDO and its members from antitrust liability, and failure to abide by such processes alone does not necessarily constitute a violation of antitrust laws. Nevertheless, the weighing of pro and anticompetitive effects is difficult, and in practice the general procedural quality of standards development processes has played an important role in indicating whether such processes are procompetitive. That is, in cases of alleged anticompetitive conduct by SDO participants, courts and enforcement agencies have taken note of SDOs’ emphasis on balance among participants in standard-setting activities and viewed this balance as a procompetitive feature. Legislation, general guidance by antitrust authorities, and court decisions thus reflect a presumption that standards development processes that follow certain due process principles—including balance—are less likely to create anticompetitive effects.

The existing case law and guidance, however, offer little assistance in understanding precisely how these due process principles translate into specific antitrust requirements that apply to standards development. Courts have not fully elucidated the conditions under which imbalances in standards development processes may constitute antitrust violations. Nor have they ruled on the specific balance requirements that SDOs must satisfy to qualify for certain protections from antitrust liability. Given the absence of specific guidance on the meaning and implications of balance requirements for SDOs under the antitrust laws, it is necessary to review the development of the laws, regulations, and institutional norms that have shaped balance requirements and their application by different SDOs more generally.

Accordingly, we begin our analysis with an extensive survey of the evolution of balance requirements. First, we describe the origins and evolution of balance requirements at the international level, leading to their inclusion in WTO and ISO/IEC instruments (Part I). In Part II, we describe how balance requirements went from a feature of SDOs to an element of rule of reason analysis under U.S. antitrust law, finding their way into related statutes as well. In Part III, we chart the parallel path of balance requirements in the European Union, from national SDO features to components of EU standardization policy and eventually factors in EU competition law analysis. Part IV explores the different notions of balance that have evolved and their application to antitrust analysis.

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