Statement of
David L. Karmol
Vice President of Public
Policy and Government Affairs
American National
Standards Institute
Hearing before the House
Judiciary Committee, Task Force on Antitrust
“Standards Developing
Organizations Advancement Act of 2002”
Good morning, Mr. Chairman and members of the Committee. My name is David Karmol and I am the Vice President of Public Policy and Government Affairs at the American National Standards Institute, usually referred to as ANSI.
It
is with great pleasure that I appear before you today to discuss the merits of
H.R. 1086, a bill “to encourage the development and promulgation of voluntary
consensus standards…by providing relief under the antitrust laws to standards
development organizations” (SDOs).
Voluntary consensus standards are documents intended to improve the
utility and safety of products and services, stimulate competition for products
by facilitating interchangeability and interoperability, and enhancing
international trade. Standards that are
approved as American National Standards are created by accredited organizations
that focus on reaching consensus among all affected stakeholder groups that may
include industry, government, organizations, consumers/labor interests, and other
experts. These standards provide
technical guidance on the production and operation of a wide array of
materials, products, and services across a multitude of industry sectors.
Beyond
their use as a means of enhancing consumer safety, standards provide a method
for creating products that are interoperable in spite of being manufactured by
different corporations. Wide acceptance
of a standard offers a benchmark of basic product characteristics, which allows
consumers to compare products. This not
only benefits large corporations, but also small businesses that are able to
market products that can be independently certified as having equivalent
functionality, safety characteristics or other common factors.
The
voluntary standardization system in the
ANSI
accredits various standards developers to develop American National
Standards. Thousands of individuals from
companies, organizations (such as labor, consumer and industrial groups),
academia, and government agencies voluntarily participate and contribute their
knowledge, talent and efforts to the standards development process.
ANSI
determines whether standards developed by ANSI-accredited standards developers
meet the necessary criteria to be approved as American National Standards. ANSI’s approval of these standards is
intended to verify that the principles of openness and due process have been
followed and that a consensus of all interested parties has been reached. In addition, ANSI considers any evidence that
the proposed American National Standard is contrary to the public interest,
contains unfair provisions or is unsuitable for national use.
The
voluntary consensus standards development process has proven its effectiveness
across a diverse set of industries and in federal, state and local government
processes. These industries include
telecommunications, safety and health, information technology, petroleum,
banking and household appliances. There
are now approximately 11,000 ANSI-approved American National Standards that
provide dimensions, ratings, terminology and symbols, test methods, interoperability
criteria, and performance and safety requirements. These efforts continue today and are being
applied to new critical areas such as the environment and healthcare.
ANSI
also is the
In
fulfilling its roles and responsibilities, ANSI continues to pursue its mission
to “[e]nhance both the global competitiveness of
ANSI Processes and Procedures[1]
As the
only accreditor of
If
a standard is developed according to ANSI requirements, there should be
sufficient evidence that the standard has a substantive reasonable basis for
its existence and that it meets the needs of producers, users and other
interest groups. If a vote on a standard
was or is somehow perceived as having been subtlety manipulated, any person or
entity who is materially affected by or otherwise interested in the standard –
whether a voting member of the consensus body or a public commentator – can
appeal the decision. The grounds for an
appeal to ANSI include issues such as lack of balance on the consensus body,
dominance by any person or entity, inadequate response to a negative comment
(again whether from a voting member of the committee or a public commentator),
and improper restraint of trade concerns.
The appeals process, and the requirement that all consensus bodies seek
to have representatives from a balanced group of stakeholder interests, assures
that no one interest can manipulate the process unfairly. The ANSI system is designed so that contrary
evidence proffered by opponents of the standard must be properly addressed and
responded to or else the standard will fail to achieve ultimate approval.
In
addition, proper procedures are of little value if they are not followed in
practice. As a result, in addition to
the review ANSI undertakes when a standard is submitted to it for approval as
an American National Standard, the Institute also has implemented a mandatory
standards developer audit program. The
program is designed both to verify an accredited developer’s compliance with
current ANSI requirements and to provide guidance on more efficient or effective
ways to address various aspects of the standards development process.
While
all American National Standards must be developed in accordance with these
basic hallmarks of the ANSI process, accredited developers may satisfy these
requirements in innovative ways and rely extensively on electronic
communications. If there is a ready
consensus by the interested parties on a proposed standard, the standard can
meet the procedural requirements for, and be approved as, an American National
Standard in a matter of months.
ANSI
recognizes that there are many ways to develop standards, and that in many
instances other methods and the resulting standards are entirely appropriate
for the targeted user community. ANSI
has no objection whatsoever to the existence of organizations that develop
standards outside the so-called “formal” process used within the ANSI
community. ANSI has never had—nor has it
ever sought—exclusivity in promulgating a standards development process.
While
the term “public-private partnership” has been in vogue in Washington in recent
years, it has been a reality for ANSI since our creation. In fact, ANSI was founded in 1918 by a group
of private sector organizations and government agencies that recognized the
need to have a forum in which they could address common concerns. As a private sector organization with many
government members, ANSI has a strong tradition of working cooperatively with
government as well as industry, organizations, and consumer interests.
ANSI
is a private sector organization in which many government representatives are
active at all levels, from our Board of Directors to the committees that
promulgate, maintain and implement the procedures pursuant to which standards
developers are accredited and American National Standards are developed and
approved. Government representatives
participate in ANSI delegations addressing international standardization
issues, thereby strengthening the U.S. voice in international standardization
negotiations.
When
Congress enacted the National Technology Transfer and Advancement Act of 1995
(NTTAA)[2],
it specifically and strongly encouraged the participation of the U.S.
government in the development of voluntary consensus standards. It was the clear intent of Congress that
federal employees play an active role in the development of standards that will
be used in regulation, procurement, and trade.
This action by the Congress confirmed a basic principle of the U.S.
standardization system—that standards-setting is a partnership process in which
government and the private sector are equal partners. The importance of the private-public
partnership was reaffirmed in a series of laws enacted by Congress in recent
years, including these:
·
Consumer
Product Safety Improvement Act of 1990
·
The
National Technology Transfer and Advancement Act of 1995 (P.L. 104-113)
·
Health
Insurance Portability and Accountability Act of 1995
·
Telecommunications
Reform Act of 1996
·
FDA
Modernization Act of 1997
Each of these laws reinforced the principle that the Federal government should rely heavily upon private sector standards, and that the government should participate actively in the development of those standards.
The U.S. is an example to the rest of the world on how the public and private sectors can work cooperatively. Using voluntary standards allows the government to achieve economies of scale and have access to the most modern technologies and a wide range of technical experts. If federal participation in standards development were curtailed, over time these benefits might be lost to the federal government—costs would go up and the advantages of government use of products meeting consensus standards would be lost. While the private sector would suffer the loss of the expertise of often uniquely knowledgeable government experts, the government would lose the benefit of critical, timely access to private sector expertise and standards.
In an era of constant technological change, we cannot afford to sacrifice our economic advantage because of laws that stifle development of standards that provide many pro-competitive benefits.
The Standards Developing Organization Act and the U.S. Economy
The benefits and pro-competitive effects of voluntary standards are not in dispute. Standards do everything from solving issues of product compatibility to addressing consumer safety and health concerns. Standards also allow for the systemic elimination of non-value-added product differences (thereby increasing a user’s ability to compare competing products), provide for interoperability, improve quality, reduce costs and often simplify product development. They also are a fundamental building block for international trade. As the U.S. Court of Appeals for the First Circuit explained:
The joint specification, development, promulgation, and adoption efforts would seem less expensive than having each member of CISPI [a trade association] make duplicative efforts. On its face, the joint development and promulgation of the specification would seem to save money by providing information to makers and to buyers less expensively and more effectively than without the standard. It may also help to assure product quality. If such activity, in and of itself, were to hurt Clamp-All by making it more difficult for Clamp-All to compete, Clamp-All would suffer injury only as result of the defendants’ joint efforts having lowered information costs or created a better product…. And, that kind of harm is not “unreasonably anticompetitive.” It brings about the very benefits that the antitrust laws seek to promote.[3]
As a result of the increasing number of laws passed by the Congress since the early 1990’s mandating government adoption and use of standards, and participation in private standards development, the standards community actually is performing some critical development functions that were previously the exclusive province of government agencies. As standards developers take on the role of government in formulating consensus standards, they arguably deserve some of the exemptions from liability that the government has traditionally enjoyed, such as relief from potentially onerous antitrust liability exposure.
The National Cooperative Research and Production Act of 1993 recognized the need to balance the governmental interest in avoiding anti-competitive conduct with the efficiency and pro-competitive results of certain types of cooperative ventures in the areas of research and production. H.R. 1086 creates an explicit filing opportunity for SDOs which mirrors the requirements and restrictions currently placed on organizations and companies filing under the existing law.
SDOs – and the experts that populate these groups – serve an important public interest function in devising voluntary consensus standards. The public interest is both served and protected if the standards developer is adhering to the hallmarks of the ANSI process: Openness, balance, consensus, public notice and review, opportunity to appeal, and other due process safeguards. The entire voluntary consensus standards system will be severely hindered in its ability to continue its valuable work if SDOs are subjected to possible antitrust claims and forced to incur substantial legal and other costs in their defense.
We ask that you favorably consider H.R. 1086, by which Congress will take a step to offer some protection to the SDOs on which the government depends for assistance in devising reasonable regulations and procurement standards that fulfill government needs.
Conclusion
ANSI shares this Committee’s desire to see that the antitrust laws continue to protect American citizens and businesses from harmful anti-competitive practices, while at the same time not unduly restricting the ability of American firms to work together to address the common challenges they face in the global marketplace. We also believe that along with the responsibilities that have been assumed by the hundreds of organizations that sponsor the development of standards, there is a need for some protection from the high costs of defending against litigation. This legislation strikes a good balance, and provides some recognition of the contribution that standards developing organizations make to the American society and economy, and increasingly, as partners with the Federal Government.
We want to work with you to promote the development of quality standards that serve all our citizens.
Thank you for this opportunity to testify. I would be very happy to answer any questions you might have.
[1]
The ANSI procedural requirements for accrediting standards developers
and for designating American National Standards are available on ANSI Online at
<http://public.ansi.org/ansionline/Documents/Standards%20Activities/American%20National%20Standards/Procedures,%20Guides,%20and%20Forms/ER2003.doc>
[2]
Op.cit.
[3] Clamp-All
Corp. v. Cast Iron Soil Pipe Institute, 851 F.2d 478, 487 (1st
Cir. 1988) (Breyer, C.J.) (citation omitted; emphasis in original), cert.
denied, 488 U.S. 1007 (1989).