Remedies and Standard Setting
| Pages | 169-202 |
169
CHAPTER VI
R
EMEDIES AND STANDARD SETTING
As discussed in previous chapters, while standard-setting activity
may benefit consumers and promote economic efficiency, it can also
create entry barriers, raise rivals’ costs, facilitate collusion, retard
innovation, and entrench market power. Where these negative economic
effects are brought about by anticompetitive conduct, antitrust liability
may result. The question then becomes how to remedy the effects of the
violation.
The goals of remedies in antitrust law are primarily twofold
.
Antitrust remedies seek to deprive violators of the “fruits of their
illegality” and to “compensate victims of antitrust violations for their
injuries.”
1
Antitrust remedies also endeavor to deter future violations,
2
as
well as to restore
and ensure ongoing competition.
3
Remedies in standard-setting cases should therefore address the
anticompetitive effects of the conduct while accounting for any
procompetitive effects of the standard. In fashioning antitrust remedies,
therefore, courts and enforcement agencies look to the mechanism by
which the specific standard-setting conduct caused competitive harm,
while being cognizant of any procompetitive benefits of the standard
.
Through this analysis, antitrust remedies are designed to negate and
prevent the recurrence of harm without sacrificing the welfare-
enhancing
aspects of standard setting.
A.
Damages in Standard
-
Setting Cases
While also acting as a deterrent to illegal conduct, damages in
antitrust cases primarily compensate the victims of the violation.4 The
1.
Ill. Brick Co. v. Illinois,
431 U.S. 720, 746 (1977)
.
2.
Id
.
3.
See
Ford Motor Co. v. United States, 405 U.S. 562, 573
-
75 (1972)
.
4. Private litigants and state attorneys general (acting as parens patriae) may
obtain treble damages.
See
15 U.S.C. §
15c. Though trebled, some argue
that damages in antitrust cases effectively amount to less than treble
because of the effect of taxes, interest, and other factors.
See
generally
Robert H. Lande, Are Antitrust “Treble” Damages Really Single
Damages?
, 54 O
HIO
ST.
L.J.
115 (1993). The ability of state attorneys
general to recover damages on behalf of consumers has been viewed as
170
Handbook on the Antitrust Aspects of Standard Setting
appropriate damages measure in standard-setting cases, however, often
hinges on the means by which the standard adversely affected
competition.
1.
Who May Be Liable for Damages
In addition to firms that have engaged in a concerted restraint
of
trade or anticompetitive conduct with respect to a standard or standard-
setting activity,5 both standard-setting organizations (SSOs) and
individuals may be liable for damages stemming from antitrust violations
involving standards.
In
American Society of Mechanical Engineers v. Hydrolevel Corp.,6
the Supreme Court held that SSOs may be liable for treble damages
caused by antitrust violations committed by members acting under the
apparent authority of the SSO.7 The Court held that “the apparent
authority theory is consistent with the congressional intent to encourage
competition,”
8 and it reasoned that only the SSO “can take systematic
steps to make improper conduct on the part of all its agents unlikely, and
the possibility of civil
liability will inevitably be a powerful incentive for
[
the
SSO] to take those steps.”
9
In 2004, however, Congress limited the liability of SSOs to actual, as
opposed to treble, damages under the antitrust laws. The Standards
Development Organization Advancement Act of 200410 was enacted to
encourage the development and promulgation of standards by limiting
antitrust liability of those SSOs that notify the Federal Trade
Commission (FTC) and Department of Justice (DOJ) of their activities
.
The organization must be setting or maintaining “voluntary consensus
an a
dvantage of state enforcement of the federal antitrust laws.
See
Harry
First,
Delivering Remedies: The Role of the S tates in Antitrust
Enforcement
, 69 G
EO
. W
ASH
.
L.
R
EV
. 1004, 1005 (2001) (arguing that
state enforcement of the antitrust laws has a valuable role because state
enforcers can pursue monetary remedies that benefit consumers). The
Federal Trade Commission may obtain restitution and disgorgement in
suits brought in federal district court.
See
15 U.S.C. §
53(b).
492, 511 (1988) (holding that firms that conspired with others to stack
votes in an SSO could be liable for antitrust damages).
6.
456 U.S. 556 (1982)
.
7.
Id.
at 570
.
8.
Id.
9.
Id.
at 572
.
10
. Pub. L. No. 108-237, amending the National Cooperative Research and
Production Act of 1993, 15 U.S.C. §§ 4301-05. A full copy of the
amendment is found in the Appendi
x.
Remedies and Standard Setting
171
standards using procedures that incorporate the attributes of openness,
balance of interests, due process, an appeals process, and consensus.”11
The act explicitly excludes the parties participating in st
andard
-
setting
activities from its coverage.12
Individuals who participate in unlawful standard-setting activity may
also be held liable, but the individual must be more than a mere member
of the association.13 Rather, the individual must have actual know
ledge
of and
have
participat
ed
in the illegal activity.14
Even when individuals are held liable for damages, they may be
indemnified in accordance with the SSO’s bylaws. In American Society
for Testing & Materials v. Corrpro Co.,15 a member of the American
Society for Testing & Materials (ASTM) sued the society, as well as
certain corporate members and individual participants, for conspiring
with one another to unlawfully manipulate the standard-setting process
so as to promulgate their favored standard.16 After the individual
defendants settled the underlying litigation without admitting liability,
they requested indemnification from ASTM.17 The Third Circuit
affirmed the district court’s order of indemnification, holding that
ASTM’s bylaws unequivocally mandated indemnification in the absence
of any evidence that the individuals acted in bad faith.18
2.
Principles Limiting Damages in Standard
-
Setting Cases
Certain principles have limited damages in standard-setting cases.
First, a private plaintiff must demonstrate causation and antitrust injury.
11
.
Id. §
103(1).
12
.
Id.
13
.
See
, e.g.
,
Daniel v. Am. Bd. of Emergency Med., 988 F. Supp. 127, 236-
37 (W.D.N.Y. 1997); United States v. Am. Radiator & Standard Sanitary
Corp., 288 F. Supp. 701, 702 (W.D. Pa. 1 968) (trade association and
individual members indicted fo
r price fixing).
14
.
See
AD/SAT v. Associated Press, 181 F.3d 216, 233-34 (2d Cir. 1999)
;
Kline v. Coldwell, Banker & Co., 508 F.2d 226, 232 (9th Cir. 1974)
;
Marrese v. Am. Acad. of Orthopaedic Surgeons, 1991-1 Trade Cas.
(CCH) ¶ 69,398, at 69,603-04 (N.D. Ill. 1991)
;
see also
Alv
ord
-Polk, Inc.
v. F. Schumacher & Co., 37 F.3d 996, 1017 (3d Cir. 1994) (Stapleton, J.,
concurring in part and dissenting in part) (“members of the trade
association who neither participate nor knowingly acquiesce in the
association’s anticompetitive activity, unlike those who do, will not be
held liable along with the association”).
15
.
478 F.3d 557 (3d Cir. 2007)
.
16
.
Id.
at 563
.
17
.
Id.
at 564
-65.
18
.
Id.
at 575
-76.
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