Setting the Standards High

Last week, Neelie Kroes, European Commissioner for Competition Policy, spoke on Setting the standards high at the Harvard Club of Belgium. She said some good things.
In essence, standards are good because they create the level playing field on which all can compete. [...] We are also currently revising the guidelines for horizontal agreements in which we plan to improve the existing chapter on standardisation to provide more guidance on standard setting. [...] If standardisation processes are open and transparent, then standards can bring significant benefits to consumers by ensuring compatibility between products, which will generate competition on price and innovation. I see an important pro-competitive rationale to having standards bodies require the disclosure of patents and, where relevant, patent applications, in the early stages of standard-setting. Ex ante disclosure helps those involved make a properly informed decision, and competition law should not stand in the way. [...] This will almost always entail ex ante disclosure of the existence of essential patents. But it could also entail unilateral ex ante disclosure of maximum royalty rates and the most restrictive licensing terms that would apply should a company's technology be made the standard. If the ex post royalty is significantly and unjustifiably higher than the ex ante price, then we may have an excessive pricing case. [...] Standards may facilitate economies of scale, but it is with interoperability that they really add value to the economy. Standards are the foundation of interoperability - they create the level playing field needed for interoperability, where all can compete. When good standard-setting allows everyone to interoperate, it is also more likely that consumers will get the sort of high-quality and innovative products that work in a wide range of situations. [...] If I may summarise my thinking: Standards can greatly affect the fortunes of both individual companies and the wider economy. As such standardisation must occur through open and transparent processes. Ex ante price disclosure schemes will generally not raise competition issues. Standards should be as open as possible. This is not a black and white choice but a question of degree, and it is in society's best interest that standards should be as open as possible. In many industries de facto standards are just as beneficial and valuable as de jure ones. And that requires that the creation and availability of de facto standards are held to a similarly high level of scrutiny by market participants and competition authorities. And of course, any standards body should see the Commission as a partner. We have an open door to discuss these issues. It is in the interests of all parties that we work together toward openness, and towards high standards.
The learning curve of a Commissioner is long, as European policy issues are complex, and it is not likely that the next Competition Commissioner will start out with such a deep understanding of standardization issues. Let's hope these ideas become firmly embedded in the Commission's approach. Luckily, the bureaucracy stays, and they seem to have understood standardization, too.
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Trond Undheim, Ph.D, Director of Standards Strategy and Policy at the Oracle Corporation, speaker, entrepreneur, blogger, and author, is one of the world’s leading experts on technology and society. LinkedIn profile

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