February 20, 2018

Standards, or Collusion?

John T. Mitchell at InteractionLaw writes about the potential antitrust implications of backroom deals between copyright owners and technology makers.

If a copyright holder were to agree with the manufacturers of the systems for making lawful copies and of the systems for playing them to eliminate all trade in lawful copies unless each transaction (each resale, trade, gift or rental) has the consent of the copyright holder, there is of course no doubt that such agreement would constitute a naked restraint of trade. If, instead, the copyright holder agreed with the manufactures of copying and playing technologies to deploy a system which simply obeys the instructions of the copyright holder (including instructions which have the purpose and effect of eliminating the resale, trade, gift or rental of the copy, or of enlarging the copyright monopoly by charging for private performances), then the agreement to have technology automatically do the deed is certainly no better than the first. It is akin to a company saying to the prospective co-conspirator: “Listen, I can’t agree with you to do what you are asking because my lawyers tell me it would be illegal, so what I’ll do is program my machine to do what you tell it to do, but just don’t tell me.”

I understand that antitrust law is suspicious of backroom deals in which companies agree not to produce certain otherwise legal products, but that there are some exceptions for standard-setting. Perhaps that is why the various inter-industry groups try to dress up their agreements as “standards.” As I have written before, most of these agreements don’t look at all like technical standards, and to label them as such is misleading.

True technical standards are voluntary, and allow products to be more functional by giving them a way to interoperate (i.e., to work together). Most of the DRM “standards” are mandatory, and make products less functional by banning some kinds of interoperation.

Whether these agreements violate antitrust law is beyond my expertise, but I do know that a reasonable exemption for technical standard-setting ought not to apply to them.