STANDARDS BODIES ONE VOTE AWAY FROM REDUCED ANTITRUST RISKS
Standards-setting bodies would face a reduced threat from federal antitrust suits under a bill that could go to the White House any day now. The House today (Wed.) is expected to approve the bill, its last hurdle before reaching President Bush for his expected signature. Beneficiaries would include CEA and the Telecom Industry Assn. (TIA). The legislation has bipartisan support in both houses but has taken 15 months to get through Congress.
Two of the bill’s many changes to antitrust laws -- which include tougher sentences for violators -- apply directly to standards development organizations (SDOs): (1) Awards in antitrust trials would be limited to actual damages, rather than the triple damages available now. In a floor statement during the Senate’s favorable consideration of the bill, Hatch said the threat of triple damages “deters SDOs from their pro-competitive standard-setting activities.” (2) Fewer challenged SDO activities would be subject to a “per se” analysis. According to an Arent Fox briefing, currently a challenger of an SDO need only show that the SDO’s activity could be an antitrust violation, eliminating the opportunity for an SDO to receive a detailed court review and challenge the initial claim. Under HR-1086, a “rule of reason” would apply to most challenges, meaning a court would have to take account of any pro-competitive rationales SDOs offered for their behavior. The bill applies only to federal challenges, and doesn’t change treatment of price fixing or market allocation allegations.
The bill defines an SDO as a domestic or international organization that has procedures to “incorporate the attributes of openness, balance of interest, due process, appeals process and consensus,” and the activities must be focused on establishing a voluntary consensus standard. Any SDO seeking protection under the law, if adopted, would have 90 days after beginning a standards proceeding to notify the Justice Dept. and the FTC. Companies developing a standard outside a recognized organization likely wouldn’t qualify. The American National Standards Institute (ANSI), a member group of standards bodies, has pushed for passage of the legislation, and it’s assumed ANSI members would qualify.
ANSI boasts many members that develop standards for the telecom, mass media, consumer electronics and IT industries, including CEA, TIA, the Electronic Industries Alliance (EIA) and the Institute of Electrical & Electronics Engineers (IEEE). TIA Senior Vp-Standards Dan Bart reacted to Senate passage of HR-1086 by saying “TIA, the American National Standards Institute, and many other ANSI-accredited SDOs have supported this updating of the National Cooperative Research and Production Act to encompass additional forms of cooperative activities that greatly benefit the public.” He said the bill “does not provide new exemptions from antitrust compliance, but rather helps in preventing some frivolous actions that could impact an SDO, which is typically a non- profit entity with limited financial means.”
HR-1086 by House Judiciary Committee Chmn. Sensenbrenner (R-Wis.) and ranking Democrat Conyers (Mich.) was introduced in March 2003 with the backing of top Republicans and Democrats in the Judiciary and House Science Committees. Portions of a Senate version, S-1799 by Senate Judiciary Committee Chmn. Hatch (R-Utah) and ranking Democrat Leahy (Vt.), were added to the bill at a Senate Judiciary markup last Nov., and cleared the Senate by unanimous consent in April. The House leadership agreed to take up the Senate- amended bill to avoid a conference or another Senate vote.
Bush is expected to sign the bill, although the White House hasn’t commented. The Commerce Dept. last month, however, released a report aimed at reducing standards- related barriers to U.S. exports. Commerce Secy. Don Evans praised ANSI for its involvement in the report, which accused countries such as China of using standards to protect their markets. China was criticized for seeking to develop a proprietary encryption standard for computer networks and then suspended the program.
Several House and Senate members involved in antitrust and technology issues have been involved in the bill’s crafting. Among the original House cosponsors were House Judiciary Courts, Internet & Intellectual Property Subcommittee Chmn. Smith (R-Tex.) and ranking Democrat Berman (Cal.), as well as House Science Committee Chmn. Boehlert (R- N.Y.) and then-ranking Democrat Hall (Tex.), who has since switched to the GOP. House Commerce Committee member Issa (R-Cal.), former CEA chmn., also is an original cosponsor. Senate Judiciary Antitrust Subcommittee Chmn. DeWine (R-O.) and ranking Democrat Kohl (Wis.) worked with Hatch and Leahy on the revised language.