FTC’s Final Consent Order in Matter of Negotiated Data Solutions, LLC

On 22 September 2008 the Federal Trade Commission issued the final consent order in the matter of Negotiated Data Solutions LLC (vote 3-1, Chairman Kovacic dissenting).

According to FTC’s complaint, Negotiated Data Solutions LLC violated Section 5 of the FTC Act by seeking to break a licensing commitment its predecessor made to the standard-setting organization Institute of Electrical and Electronics Engineers as to an Ethernet standard to which the industry subsequently became locked in.

The FTC relied on a theory of a stand-alone violation of Section 5 of the FTC Act that the challenged conduct constitutes both 1) unfair methods of competition and 2) unfair acts or practices, rather than a violation based on a Sherman Act theory. Apart from immediate injury to consumers and competition resulting from the royalties exceeding the level committed to, the complaint also identified harm to the development, reliance and adoption of industry standards as anti-competitive effects.