Are FRAND commitments applicable outside the SEPs domain – An Economic Perspective

To date, CCCS has dealt with two cases that involved Fair, Reasonable and Non-Discriminatory (“FRAND”) commitments in order to resolve the competition concerns identified.

The idea of FRAND commitments is well established and commonly used by Standard Setting Organizations (“SSOs”) to strike a balance between two objectives namely, to deter ex-post opportunistic behaviour by its members contributing Standard Essential Patents (“SEPs”) in the standards setting process; and valuing technology contributions to standardisation efforts in a way that encourages further innovation. However, the application of FRAND commitments outside the standard setting process, i.e., in non-SEP cases, remains limited globally. This raises the question as to whether there is a unique set of circumstances specific to the standards setting process. Put differently, could FRAND be used as a behavioural remedy to address competition concerns in non-SEP cases with specific circumstances similar to those in SEP cases?

This research paper shows that the circumstances that give rise to the economic justification for the use of FRAND commitments in SEP cases are not unique, but instead are also present in some non-SEP cases such as those involving vertical effects in mergers and acquisitions, or abuse of dominance conduct such as refusal to supply. While FRAND commitments may be useful in non-SEP cases, there are challenges in their application, particularly the uncertain interpretation as to what constitutes “fair, reasonable and non-discriminatory”. Nevertheless, there is still much room for competition authorities to explore using FRAND commitments as a behavioural remedy in addressing competition concerns.