Fair, Reasonable And Non-Discriminatory (Frand) Terms: A Challenge For Competition Authorities

Standards contribute to increase welfare to the extent that they reduce production costs and increase products' value to consumers. The adoption of a standard can, however, raise competition concerns. After the adoption of the standard, the chosen technology may lack effective substitutes. The owner of an intellectual property (IP) right essential to the technology may indeed use the additional market power that may be gained through standardization (competitors being absent ex-post) to charge higher prices to “locked-in” licensees. To mitigate such a hold-up risk, standard setting organizations usually require patent holders to disclose their relevant IP rights ex-ante and/or to commit to license IP on fair, reasonable and non-discriminatory (FRAND) terms. This article suggests a methodology to assess whether FRAND commitments are violated, from a competition perspective. The proposed methodology extends the framework proposed by Cecilio Madero and Nicholas Banasevic by outlining four necessary conditions for an ex-post licensing behavior to be considered anticompetitive, in violation of FRAND commitments.