Applying Antitrust to Standards Development Organizations (SDOs) – A Two-Sided Market Framework for Assessing SDO Governance

Standards in the ICT sector are the backbone of our innovation-driven economies and societies. Cooperative standardization takes place within standards development organizations (SDOs), that provide the governance, structure and rules of standards development, including rules on intellectual property rights that are technically essential to implement a standard. As part of standards-related public policies, antitrust has played a major role in shaping the broader regulatory environment in the U.S. and internationally. However, the competitive significance of SDO governance has not always been fully recognized by antitrust authorities prescribing to an antitrust mainstream influenced by theories of patent holdup and royalty stacking. The prevailing antitrust approaches to standards and SDOs in the U.S. and internationally tend to display a narrow focus on SDO governance as a means to mitigate patent holdup risks, thus missing the importance of SDO governance for the competitive performance of markets for standards. This can lead to enforcement errors illustrated in the case of the IEEE-SA patent policy revision process.Drawing on insights from the economics of two-sided markets, the framework presented in this article examines SDOs as two-sided platforms bringing together the two sides of the market for standards: technology contributors and users. Under the proposed framework, SDO rules and governance reflect the continuous effort of the SDO two-sided platform to recalibrate the terms offered to the two sides of the market with the view to maximize platform output, i.e., innovative, high quality standards. However, because SDO rules are not set unilaterally as in the case of commercial two-sided platforms (e.g., digital platforms) but with input from SDO members that are occasionally competitors, collaborative decisions on SDO governance involve horizontal restraints that can lead to both procompetitive and anticompetitive outcomes. To distinguish between procompetitive and anticompetitive SDO rules, the proposed framework includes a structured, six-step assessment. The proposed framework and the six-step assessment of prima facie restrictive SDO rules are illustrated in the case study of membership restrictions in the bylaws of the O-RAN Alliance, an SDO that is aspiring to assume the leading role in standardization of promising Open RAN technologies in 5G radio access networks. The O-RAN Alliance case study demonstrates that SDO rules that do not necessarily relate to intellectual property and alleged risks of patent holdup can have anticompetitive potential that merits careful scrutiny. Mainstream antitrust approaches that view SDO governance through the prism of perceived patent holdup risks may miss the competitive significance of SDO restrictions such as those imposed on membership eligibility by the O-RAN Alliance. The proposed framework and the six-step assessment can assist in better focusing antitrust review on the output of the market for standards rather than on the commercial risks facing individual stakeholders