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Trento University March 16, 2011

Competition Issues in Standard Setting: The New Horizontal Guidelines Simonetta Vezzoso , Trento University. Trento University March 16, 2011. Standards everywhere, but mostly unnoticed. Some Basics. Standards: de jure , de facto, open, proprietary …

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Trento University March 16, 2011

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  1. Competition Issues in Standard Setting: The New Horizontal Guidelines SimonettaVezzoso, Trento University Trento UniversityMarch 16, 2011

  2. Standards everywhere, but mostly unnoticed

  3. Some Basics • Standards: de jure, de facto, open, proprietary… • Anticipatory, Enabling and Responsive Standardization • Standard Setting Organizations- International Telecommunications Union (ITU) 1865- International Organization for Standardization (ISO) 1947- Institute for Electrical and Electronics Engineers (IEEE) - Worldwide Web Consortium (W3C)- Internet Engineering Task Force (IETF)- etc. • Safety, Health, Compatibily (etc) Standards

  4. Economic significance of standards • Economies of scale (reduction of variety) • Reduction of information asymmetry (less adverse selection) • Reduction of transaction (e.g. search costs) and communication costs • Network externalities • Lock-in avoidance • Part of the institutional infrastructure relevant to incremental innovation • Etc.

  5. Hindrances to effective standard adoption • Users’ reluctance to move to new standard (alsobecause of switchingcosts) • Inappropriate timing of standardization (tooearly or toolate relative to the stage of technologymaturity) • Opportunism of market participants

  6. “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty or justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.” Adam Smith, The Wealth of Nations (1776)

  7. Classification Societies • Register Society (1760) • IACS - International Associationof Classification Societies (1968) • - more than 90% the world's cargo carrying tonnage COMMISSION DECISION of 14/10/2009 relating to a proceeding under Article 101 TFEU (ex art. 81 ECT) Case 39416 - SHIP CLASSIFICATION

  8. Competition Assessment: Relevant Markets • product or service market or markets to which the standard relates • relevant technology market (inter-technology competition) • Market for standard-setting

  9. T3 T4 T2 T1 T5 S SSO P SSO P SSO P SSO P P LICENCE M M M M

  10. Standards: Art. 101 Issues • promotion of horizontal price fixing • exclusion of competitors • allocation of markets and territories Anticompetitive SSO policies should prevent collusivebehaviour among SSO members

  11. Standards: Art. 102 Issues • SSO’scontext • Patent Ambush • Patent hold-up: breach of FRAND obligations • Patent infringement cases • e.g. German Supreme Court, Standard-Spundfass, 2004

  12. ART.102 TFEU ART. 101TFEU

  13. COMMUNICATION FROM THE COMMISSION Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements (O.J. 14.1.2011)

  14. Key Points • Prevention of collusive behaviourandofart. 102 abuses • «safeharbour» • FRAND commitment • ex-ante IPR disclosure («good faith»; «reasonableendevours» • pro-competitiveness of ex-ante disclosure maximum royalty rates

  15. Conclusion • Standards and Art.101 issues: guidance really helpful? • Effective prevention of IPR ambush and/or hold-up? • Effective guidance on difficult economic and legal issues? • Need for a new, «holistic» approach to standardization • SSO rendered increasingly «necessary» in high-tech industries also by an inadequate IPR policy

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