Competition Commissioner Neelie Kroes told a Brussels forum that
companies involved in negotiations to set standards should declare
their interests and set maximum royalty rates so that others
involved in the process can make informed decisions about which
technologies to use.
This should happen as ex ante disclosure, or before the
standard is set, she said.
Standards are agreed technical specifications to ensure that
technology from different manufacturers work together. The
structure of European mobile phone systems, for example, is based
on the GSM standard.
"If we are to include proprietary technology in a standard, then
ex ante disclosure may help those involved make a properly informed
decision," said Kroes. "This will almost always entail ex
ante disclosure of the existence of essential patents. And it
may increasingly entail ex ante disclosure of maximum
royalty rates."
Kroes said that this would enable those setting standards to
make a decision based on predictable technology licensing costs.
She also said that such co-operation should not fall foul of
competition legislation which usually forbids industry
collaboration of the setting of competitors' prices.
"Both [patent and maximum royalty disclosure] can increase the
effectiveness of the standard setting process, lead to more
competitive solutions and reduce the risk of later antitrust
problems. Standards bodies could very often require disclosure
without fear of competition law intervention," she said.
Kroes has battled with Microsoft over the degree to which its
ubiquitous operating system conforms to industry standards and is
interoperable with other technologies. Though she did not mention
the company by name this week she did refer to the fines the
European Commission has imposed on it in a series of long-running
regulatory and legal battles.
She also outlined the problems that can occur when one company's
technology is dominant.
"When a market develops in such a way that a particular
proprietary technology becomes a de facto standard, then
the owner of that technology may have such power over the market
that it can lock-in its customers and exclude its competitors," she
said.
"Where a technology owner exploits that power, then a
competition authority or a regulator may need to intervene. It is
far from an ideal situation, but that it is less than ideal does
not absolve a competition authority of its obligations to protect
the competitive process and consumers."
Kroes said that in such situations of market dominance, which
most observers would agree to be likely to include Microsoft in the
operating system market, the regulator must treat that technology
as if it were a standard.
"The de facto standard could be subject to the same
requirements as more formal standards," she said. "In addition,
where equivalent open standards exist, we could also consider
requiring the dominant company to support those too."
Kroes warned that the standards setting process was open to
abuse, and that unscrupulous companies could attempt to have their
technology included in a standard so that they could charge high
licence fees to all the subsequent users. Competition law should be
used to counter that behaviour, she said.
