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“Washington money” 2012 Robert Silvers

Today we pick through a few tax-free bond offerings that finance education community construction with a eye toward reducing construction cost and life-cycle maintenance through building codes and standards.   Use the login credentials at the upper right of our home page.

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The Sherman Antitrust Act of 1890, which prohibits anticompetitive practices and monopolies, has an indirect but significant relationship with voluntary consensus standards (VCS). VCS are industry-developed standards created through collaborative, open processes to ensure interoperability, safety, or efficiency in products and services.

1. Antitrust Concerns in Standard-Setting: The collaborative nature of VCS development, where competitors work together to set industry standards, can raise antitrust concerns under the Sherman Act. If standard-setting organizations (SSOs) or participants engage in practices like price-fixing, market allocation, or excluding competitors, they could violate Section 1 of the Act, which prohibits agreements that unreasonably restrain trade. For example, if an SSO excludes certain firms from participating in standard-setting to suppress competition, it could face scrutiny.

2. Procompetitive Benefits: Courts and regulators generally recognize that VCS, when developed transparently and inclusively, promote competition by fostering interoperability, reducing costs, and encouraging innovation. The Sherman Act supports such procompetitive activities as long as they don’t involve collusion or exclusionary tactics. Guidelines from bodies like the U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC) emphasize that SSOs should adopt open, fair processes to avoid antitrust violations.

3. Legal Precedents: Cases like Allied Tube & Conduit Corp. v. Indian Head, Inc. (1988) illustrate the Sherman Act’s application to VCS. In this case, the Supreme Court found that manipulating a standard-setting process to exclude a competitor’s product violated the Sherman Act. This underscores the need for SSOs to ensure their processes are not abused to suppress competition.

4. Patent and FRAND Issues: VCS often involve patented technologies, requiring fair, reasonable, and non-discriminatory (FRAND) licensing terms. If patent holders abuse their position by demanding excessive royalties or refusing to license, this could be seen as monopolistic behavior under Section 2 of the Sherman Act, which addresses unilateral conduct that harms competition.

The Sherman Act ensures that VCS processes remain competitive and do not become vehicles for collusion or monopolistic behavior. SSOs must design their procedures to comply with antitrust laws, balancing collaboration with the prevention of anticompetitive practices.