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Addressing Anticompetitive Behavior in Internet Standards Bodies

A significant focus is emerging today on the anticompetitive behaviour of Silicon Valley companies directed at dominating critical sectors of the on-line marketplace, and a U.S. Congressional hearing is scheduled. Such practices can be pursued in many ways. One of the more elusive, but very effective anticompetitive playbooks — known legally as the "antitrust conspiracy” — can occur in internet standards bodies. Where dominating markets with running code is a way of life, internet standards bodies are invaluable strategic instruments.

Concerns about antitrust conspiracies have been around a long time and part of the fabric of most modern economies. In the U.S., the origins of antitrust conspiracy law extend back to the Sherman Act passed in 1890 which makes it illegal for competitors to make agreements with each other that would limit competition. The U.S. Dept. of Justice recognizes three sub-types: price-fixing, bid-rigging, and market allocation. It is the antitrust market allocation conspiracy playbook that typically gets manifested in standards bodies and treated as an economic crime that harms innovation and the dynamics of a free market economy.

All internet standards setting organizations potentially have this kind of antitrust exposure. As the ITU 2014 Manual on competition law and standards notes, "competition law, also referred to as 'antitrust' or 'anti-monopoly' law, is a form of market regulation that aims to create a competitive business environment through the prohibition of conduct that restricts access to a market or otherwise negatively affects domestic or international trade." The most prominent provisions and active enforcement arise under treaty instruments and Directives in Europe and several Antitrust Acts in the U.S. In addition, judicial determinations emerging from litigating antitrust "cases in controversy" help amplify and clarify the statutory and regulatory provisions. A landmark U.S. Federal case arose almost a decade ago and dealt squarely with antitrust market allocation conspiracies in internet standards bodies.

Standards making activities are, by definition, aimed at agreeing on specifications where implementation will exclude non-compliant parties. However, as a practical matter, only certain kinds of standards making conduct is unlawful, such as 1) prohibitions on adopting competing standards, 2) excluding technologies and marketplace participants, or 3) colluding on dominating the marketplace. All the parties engaged in the activity, whether companies or individuals, can be culpable in abetting the restraints — notably including the standards body itself.

This article is the first in a series and describes the relevant antitrust conspiracy law, how it appeared and evolved in internet standards bodies, the ensuing litigation, and steps that have been taken to diminish the risk of the behavior occurring. It also suggests the need for a global dialogue on the topic.

1. Evolution of Standards Bodies and Relevant Antitrust Law

In the U.S., antitrust conspiracies to restrain trade within industry standards groups have been prohibited for many decades through Federal Trade Commission Act provisions. Some of the most famous cases involved company strategies to create standards groups whose sole purpose was to specify and approve only the company's products.

However, anticompetitive conspiracy conduct in internet standards bodies was never relevant until the 1990s. Until that point in history, the network services and products offered to the public were commonly provided through national monopoly arrangements — in many cases by agencies of government that provided the product or service. The associated standards bodies were governmental or intergovernmental in nature. In other cases, the activities were undertaken through national governmental organizations that effectively provided antitrust liability protection for industry participants.

It wasn't until the mid-1990s that internet standards bodies free from government oversight emerged that even enabled antitrust conspiracies to occur. One of the earliest and most prominent of the new bodies was the Internet Engineering Task Force (IETF), which was divested from its previous U.S. government agency educational and research sponsorship. The IETF's origins, combined with the lack of definitive participant affiliations which had previously served it well as an academic activity, gave rise to potential antitrust conspiracy behavior as the work became increasingly valuable in the commercial marketplace. At that point, the Internet Society purchased substantial antitrust litigation insurance protection for those engaged in IETF standards decision-making activities in conjunction with the Society assuming IPR responsibility for its standards.

The IETF was among dozens of new private internet industry standards bodies that emerged during the 1990s driven by two powerful factors: 1) a rapidly expanding marketplace that necessitated more highly specialized industry standards bodies, and 2) targeted "strategic participation" by companies in those specialized markets. Unfortunately, such strategic participation has often led to decision-making positions in standards bodies being held by funded technical assets — increasing the risk of antitrust conspiracies.

The landmark decision of the U.S. Patent and Trademark Office in 2000 that declared the term "internet" generic and available for anyone to use, also helped propel a broad diversity of standards activities.

A realization of these fundamental changes in internet standards activities during the 1990s led to the creation of the Global Standards Collaboration (GSC) organization — which met annually to treat major issues before internet standards bodies. It also brought together the legal counsel from the different bodies to treat growing concerns such as antitrust behavior.

As the specialized standards bodies continued to expand along with the ICT market, a series of high-profile anticompetitive abuses gave rise to an array of FTC actions and judicial decisions that revealed the antitrust risks associated with manipulating standards-setting processes. However, it was not until 2011 that the world of antitrust conspiracy law and internet standards bodies changed forever.

2. Non-profit Standards Bodies Culpable for Antitrust Conspiracies

In 2011, a small provider of wireless internet-based location solutions sued several network technology giants and the supporting non-profit standards body in U.S. Federal Court. TruePosition Technologies alleged that three large equipment companies plus the standards bodies "conspired to exclude its positioning technology...from standards promulgated" by the bodies. Three years and ten days later, after 313 filed documents in the case, and millions of dollars of legal fees, the action ended with a settlement agreement. The court's TruePosition Decision found that the ETSI (European Telecommunications Standards Institute) incorporated in France as a non-profit body, by supporting the 3GPP standards work had plausibly "joined the alleged [antitrust] conspiracy."

A summary of the key mandates of the TruePosition Decision are:

  1. Standards bodies must actively police the actions of their committees to prevent legitimate, pro-competitive standard setting from being subverted to private agendas of their participants
  2. Standards Bodies should adopt antitrust and intellectual property policies to be signed by authorized signatories of all participants and reiterated at every meeting
  3. Nonprofit standards associations are liable when members act in their name, even if the organization is not involved in standard setting
  4. When volunteers are placed in standards leadership positions, nonprofit organizations must establish clear terms of reference for all leadership positions and make it clear where the leader's authority begins and ends
  5. It is essential to formulate — and to train leaders regarding — policies governing conflicts of interest, ethics, gratuities, anti-corruption principles, and related matters

After the TruePosition Decision, most internet standards bodies began working to implement the five mandates as best practices to identify and stop antitrust conspiracies.

3. Antitrust Conspiracy Law Best Practices

In 2014, the Director of the ITU Telecommunication Standardization Bureau which assumed responsibility for the Global Standards Collaboration activity, commissioned a compendium drawing from the TruePosition DecisionUnderstanding patents, competition & standardization in an interconnected world. It perhaps remains as the most comprehensive treatment of the subject. The document notes that there are more than 800 organizations "developing, promoting or supporting ICT standards," and articulates the basic purpose of competition law applicable to them.

Competition law and its associated monitoring and enforcement activities serve three main purposes: 1) prohibiting agreements, collaborations or practices between market players which may restrict free trading or competition between businesses; 2) prohibiting abusive conduct by a dominant market player; and 3) monitoring market concentration and mergers.

The Manual points to ETSI's Guidelines for Antitrust Compliance as a particularly useful model for standards organizations. In addition to dealing with anticompetitive IPR practices, the Guidelines proscribe discussions concerning:

  • "preventing anybody from gaining access to any market or customer for goods and services;
  • refusals to deal or do business with competitors, vendors or suppliers
  • [and that] even the appearance of any discussion, communication or exchange of information that appears to be leading to restraints on competition of any kind should be carefully avoided."

The Guidelines — which are prominent on ETSI's website and referenced in every meeting agenda and by chairs at the outset of every meeting — also contain two specific, related mandates for participants:

C.4.3 In the event that a participant becomes aware of any discussion, communication or exchange of information that appears to be leading to restraints on competition of any kind, such participant should raise the issue, seek to terminate such discussion, communication or exchange of information or separate from it.

CC.5.3 Nobody should be coerced to adopt any ETSI document produced as the result of an ETSI Work Item (i.e., ETSI Standard, European Standard, ETSI Group Specification, ETSI Technical Specification, ETSI Technical Report, ETSI Guide or ETSI Special Report), nor should any efforts be undertaken that are intended to prevent the manufacture, sale, or supply of any product or services not conforming to any such adopted ETSI document.

In addition to the ITU and ETSI, most other internet standards bodies have dedicated antitrust conspiracy related materials and include, for example: 3GPP, Bluetooth SIG, Broadband Forum, CA/Browser Forum, CableLabs, GSMA, IEEE, ISO, MEF, OASIS, OMA, OMG, W3C, ZigBee Alliance. Taken as a whole, this material effectively constitutes best practice for internet standards bodies for this kind of antitrust behaviour.

Almost all internet standards bodies have taken definitive steps to implement the five TruePosition mandates to avoid antitrust conspiracy culpability. Notable exceptions are the Internet Engineering Task Force (IETF), the IETF Trust LLC, the IETF Administration LLC, the Internet Architecture Board (IAB), and the Internet Assigned Numbers Authority (IANA). Although all of these bodies have treated IPR and other conduct with a Note Well, there are no apparent policies or requirements dealing with antitrust conspiracy anywhere in their organizational materials except for an IAB Conflict of Interest Policy — which is not the same. The IETF antitrust conspiracy risk is also significantly amplified by the ability of any party to participate in its standards making processes — especially the lists which drive much of the work — without any disclosure of who they represent or how they are funded or consideration of the anticompetitive effects. The one time that treatment of the antitrust conspiracy topic was considered by the IETF in 2012, it consisted of a short email discussion list, a Birds of a Feather (BOF) session, and a slide presentation. Although a web page for continuing education and material was proposed, nothing further was done.

4. Focus on Antitrust Conspiracy in the Internet Marketplace Has Significantly Increased

Over the past several years, significant developments have occurred in both technical and legal domains. The developments are game-changers worth significant consideration by all internet standards bodies.

Competition authorities in the U.S. and Europe have voiced increasing concern about anti-competitive conduct and concentration in the network services industry — including the behaviour of individual actors. The concern is more than just hypothetical. The legal scholar and counsel who produced the IETF 2012 BOF presentation has recently amplified on new antitrust concerns and needs. The European Commission has become especially active over the past several years. The respected law firm of Skadden Arps, recently published a special publication on the subject, noting:

Antitrust enforcers in the United States and European Union (EU) remained active in 2019, and recent developments at the Department of Justice (DOJ), Federal Trade Commission (FTC), state attorneys general (AG) offices and EU agencies signal even greater levels of activity in 2020. The common theme is increased attention to high-tech industries and digital markets, which are expected to face heightened scrutiny.

The IETF cluster of bodies is especially vulnerable because of inattention to process transparency, conflicts of interest, and anticompetitive effects. The Glassey Complaint in U.S. Federal Court several years ago emerged from these concerns and noted that even the simple inclusion of a product specification in an IETF standard was worth 2 to 4 million dollars.

Recently, the critical internet standards venues such as the CA/Browser Forum have substantially increased their attention to antitrust conspiracy exposure by adopting revised bylaws and statements which are read at each meeting similar to ETSI. Concerns over the need for the IETF to address this kind of antitrust behaviour were raised at a Nov 2019 meeting BOF and repeated at the March 2020 meeting open mike session. However, when the question "what is the IETF LLC doing to ensure it complies with antitrust laws" was asked, the reply was, "we have looked at whether we want to do anything about antitrust...but there was nothing to do." Today, no internet standards body can afford to dismiss the TruePosition mandates on antitrust behavior with "nothing to do." Simply proffering a Mission Statement is not enough.

5. Reducing Antitrust Conspiracy Risks

There is now a very significantly increased focus by competition authorities worldwide on antitrust conspiracies in internet standards activities to constrain market competition. The challenges are being faced by everybody today.

Hundreds, if not thousands of companies and ad-hoc non-profit organizations, have emerged in the ecosystem who are strongly incentivised to pursue antitrust conspiracy tactics in and among internet standards bodies to advance diverse agendas. Internet standards bodies are potentially being pitted against another to prevent competition. As the TruePosition court admonished — standards bodies must actively police the actions of their committees to prevent legitimate, pro-competitive standard setting from being subverted to private agendas of their participants.

There is an urgent need for global collaboration among internet standards bodies to: 1) bring together experiences among all the interested parties, 2) better understand the steps and status being taken by different internet standards bodies to implement and update the TruePosition mandates, and 3) get agreement on specific, actionable antitrust conspiracy mitigation guidelines for everyone in all the diverse internet standards bodies today.

By Anthony Rutkowski, Principal, Netmagic Associates LLC – The author is a leader in many international cybersecurity bodies developing global standards and legal norms over many years. Visit Page

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Comments

Thank you for this erudite and useful By Greg Thomas  –  Jul 13, 2020 8:18 am PST

Thank you for this erudite and useful summary of the history, current state, and areas of concern regarding Internet standards bodies.  I am very familiar with the use of standards-making for anticompetitive purposes, having led Microsoft’s successful global effort for ISO/IEC adoption of the Office OpenXML document formats (ISO/IEC 29500) in response to anticompetitive efforts by Sun and others to create public sector procurement preferences that would have disadvantaged MS Office.  It’s unfortunate, but not surprising, that IETF, ISOC, and IANA have yet to get with the program and do their part to help ensure an equitable and fair competitive environment for Internet technologies. But as we have seen so often, and especially recently, with respect to Internet infrastructure — it’s all about the dollars. I’m looking forward to reading your forthcoming posts on this subject.

I Thank You By Carlton Samuels  –  Jul 16, 2020 2:57 pm PST

You filled a lot of holes in my knowledge base with this article.  I always felt there were a few holes in the back story of the internet standards making bodies.  Now I know for sure there were.

Many thanks.
Carlton

Glassey Complaint By John Levine  –  Jul 30, 2020 7:13 am PST

For reference, the Glassey complaint was completely without merit, and the court dismissed all of its claims against ISOC and the IETF with prejudice.

https://iaoc.ietf.org/documents/Proposed-Order-Granting-Anti-SLAPP-Motion-To-Strike-29Aug16.pdf

Better link here:https://iaoc.ietf.org/documents/Order-Dismissing-Claim-Against-ISOC-With-Prejudice- By John Levine  –  Jul 30, 2020 7:15 am PST

Better link here:
https://iaoc.ietf.org/documents/Order-Dismissing-Claim-Against-ISOC-With-Prejudice-20Oct16.pdf

Actually By Anthony Rutkowski  –  Jul 30, 2020 9:00 am PST

The order only dealt with the Internet Society as a party and the claim against it.  The merits of Glassey's cause of action appear never to have been reached.  The collective costs of the litigation were certainly very significant.  The point here is that steps should be taken to reduce antitrust conspiracy risks potentially leading to litigation.

Nope By John Levine  –  Jul 30, 2020 9:47 am PST

I will agree that dealing with Glassey's pro se suits was expensive. The court dismissed because there was no cause of action, i.e. no merits, which you know because you have read the filings.

They are different By Anthony Rutkowski  –  Jul 30, 2020 10:13 am PST

The bases for a cause of action largely revolve around procedural and process issues.  Merits are substantive issues - factually and legally.  It is not apparent that the court ever got to merits. 

Again, this paper is directed at the reality that competition and enforcement authorities today are increasingly investigating and pursuing parties and facilitative standards making venues who are advancing anticompetitive agendas.  The IETF has long facilitated anticompetitive agendas by its failure to implement transparency and due diligence practices followed by most ICT standards organisations.  Simple steps can be taken to reduce the risks.

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