Trade associations frequently engage in standard-setting programs. Most often, these programs involve the setting of standards or specifications for certain manufactured products. Such programs can benefit consumers and enhance competition by providing necessary information that would otherwise be difficult for consumers to obtain and by improving the quality of the products brought to market. However, arrangements of this type can also reduce competition on both price and non-price terms. Because of this, and since trade associations are, by their nature, made up of groups of competitors, standard-setting programs have the potential to create significant antitrust problems.
Where a trade association’s adoption of a standard appears to have some potential to benefit consumers or enhance competition, it will be evaluated under the rule of reason, rather than being deemed per se illegal. The rule of reason will also generally be applied where certain standards are necessary for the industry in question to function at all. In other words, the analysis will weigh the procompetitive benefits of an arrangement against its anticompetitive effects. Only those arrangements that, on balance, are anticompetitive would be prohibited by the antitrust laws.
When competitors, usually through a trade association, establish some type of standard that certain competitors cannot meet, those competitors may effectively be excluded from certain business opportunities. Such an exclusion alone is not determinative as to the legality of the established standard, but legal counsel should be consulted to ensure that the standard can be objectively justified and that it was established in a reasonable and objective manner.