Legal rules to live by when launching standard-setting programs for your profession or industry.
Standard setting is a critical function of many associations, but it's also a high-stakes process. Following are 10 important rules to follow when your organization decides to implement an accreditation, certification, or standard-setting program.
1. Thou shalt be sure that any decision or standard is legitimately designed to promote quality or efficiency. If a decision or standard does not further this objective, it is not serving the purpose for which it is intended.
2. Thou shalt be mindful that each criterion be fairly related to achieving that goal. If a provision in a standard does not promote quality or efficiency, it exposes the source of the standard to the argument that the standard suppresses competition. For example, an accreditation standard of the American Bar Association (ABA) that required law schools to pay faculty salaries based on salaries at comparable law schools was viewed by the Department of Justice's Antitrust Division as not furthering the quality of law schools.
3. Thou shalt follow fair procedure. First, it's the right thing to do. Second, because courts are ill equipped to adjudicate the competitive significance of a standard or decision, they use procedural fairness as a proxy for pro-competitiveness. A standard issued that is the result of unfair procedures will be deemed to violate antitrust law.
4. Thou shalt seek input from thy neighbor. Standards can have serious consequences for those who don't meet them. For example, failure to meet a standard may be used against a defendant in a case alleging malpractice or another form of negligence. It's critical to get input from affected parties on whether a proposed standard is too stringent or fails to reflect reasonable practice. Otherwise, the association may be inadvertently placing its members at risk in tort litigation.
5. Thou shalt review thy standards periodically so they continue to reflect the state of the art. Standards may be used against a defendant in a malpractice or negligence action. Accordingly, associations should try to make sure that they reflect advances in technology, understanding, and practice since their initial issuance. Additionally, a standard will be ignored if it is not kept reasonably up to date.
6. Thou shalt not adopt standards or make decisions that fix prices or salaries. The Supreme Court has characterized price as the central nervous system of our economy. Courts are wary of self-appointed neurosurgeons whose standards affect price or salaries. The consent decree in the ABA case discussed previously is a good example. Standards and credentialing decisions should not address price or salaries.
7. Thou shalt neither boycott nor threaten entities or products that do not meet thy standards. It is one thing to issue a standard or to certify a product or service; it is quite another to agree not to do business with a company whose product or service doesn't meet the standard. The latter will be regarded as a violation of the Sherman Act. The association should issue the standard and let the market do the rest.
8. Thou shalt not place individuals with an economic stake in a decision-making capacity. Sometimes an individual with an economic stake in a standard or decision will manipulate the process for anticompetitive purposes. But even if the individual acts entirely appropriately, the involvement of someone with a direct economic stake makes it easy for a plaintiff to allege that the standard or decision was designed to suppress, and had the effect of suppressing, competition. It is better for all concerned to have individuals with an arguable conflict of interest recuse themselves.
9. Thou shalt not write standards or make decisions that stifle innovation. One of the benefits of competition is that it spurs innovation. A standard that prevents innovative products or services from coming to market is likely to be deemed anticompetitive and therefore a violation of the Sherman Act.
10. Thou shalt not conceal thy ownership of any intellectual property that might affect compliance with a standard. A standard that mandates use of a particular patented technology or copyrighted work will impose costs on those who must license the technology or work. Had disclosure been made, the standard might have been written so as not to require use of the intellectual property. Concealment of intellectual property in the standard-setting process may be regarded, therefore, as violating the antitrust laws.
Jack R. Bierig is a partner at Sidley Austin LLP in Chicago. Email: [email protected]