The Competition & Markets Authority (CMA) of the United Kingdom has recently been in the news primarily for its stance on mergers, particularly Microsoft's acquisition of Activision Blizzard (the final order deadline is only eight days away). Horizontal cooperation agreements are actually closer to merger control than any other field of competition law. Major jurisdictions now have more specific rules governing merger reviews (such as the HSR Act in the U.S., certaion sections of the UK Enterprise Act, and the EU Merger Regulation). But a merger is just the ultimate form of cooperation.
It would have been somewhat inconsistent for the CMA to hold merging parties to a high standard while condoning cartels, though Apple--which effectively made three submissions to the CMA on its draft horizontal guidance, one of which amounts to deceptive lobbying--and its allies, such as certain automotive industry players, would have liked it to happen. Market forces are not a bad thing only because some companies believe they could otherwise save money (on patent license fees).
What Apple (along with its allies and astroturfers) wanted would also have created a potential conflict between the CMA and UK Intellectual Property Office (IPO). The UK IPO, which is the country's patent and trademark office, correctly notes that SEP licensing is a field in which any potential intervention must be approached with caution, which contrasts nicely with the regulatory activism exhibited by the European Commission's Directorate-General for the Internal Market (DG GROW).
In late January, the CMA published its draft guidance on horizontal agreements and launched a public consultation. In the section on purchasing agreements, there was the following passage that became a bone of contention and has, fortunately, been deleted (final version):
"Groups of potential licensees may seek to jointly negotiate licensing agreements for standard essential patents with licensors in view of incorporating that technology in their products (sometimes referred to as licensing negotiation groups)."
LNGs are a bad idea. I agree with the Qualcomm executive who said that everyone involved with LNGs should go to jail. About two years ago I posted a series of articles (1, 2, and 3) on the subject, which I was happy to see referenced by Acer in a U.S. patent infringement complaint against Volkswagen.
Yet there are some who continue to lobby for the permission to form LNGs regardless of market share. I wouldn't have a problem with a couple of startups cooperating within reason. But an alliance of, say, Volkswagen-Stellantis-Toyota would go too far. Way too far. The risk of group boycott clearly outweighs any purported efficiency gains.
Apple basically made three submissions to the CMA on its draft horizontal guidelines: one in its own name, one through the Fair Standards Alliance (which is at least reasonably transparent), and one through its astroturfing operation named ACT | The App(le) Association. When I reached out to the UK IPO about ACT's lobbying, they acknowledged the ACT-Apple link. The CMA is presumably aware of it as well. Not only is it obvious that (small) app developers have no SEP licensing issues but the CMA also understands the problems app makers have with Apple and Google's mobile app store duopoly. ACT consistently supports Apple against--but falsely claims to defend the interests of--app developers.
Just last month, a Politico Europe newsletter reported on a partial victory scored by watchdog NGOs Corporate Europe Observatory (CEO) and LobbyControl.
While the EU Transparency Register's secretariat deemed a complaint over ACT inadmissible, it nevertheless got ACT to adjust its register entry. And the following statement by ACT's head of communications, Karen Groppe, is hilarious:
"We do receive approximately half of our support from Apple in the EU. By accepting sponsorship from companies and organizations, we can keep membership from our small business members cost-free."
Again, the CMA is aware of the fundamental conflict between virtually all app developers (case in point, not a single app developer testified for Apple at the Epic Games trial two years ago) and Apple. It's an insult to human intelligence to suggest that a largely Apple-funded organization (and "approximately half" is most likely a gross understatement) would actually represent app makers against the heavyhanded and highly abusive monopolist.
Cleary Gottlieb, a firm with Google and Sony ties, also supported the idea of endorsing LNGs. However, Cleary would have preferred for the CMA to consider LNGs an intellectual property-specific topic as opposed to a joint purchasing agreement. Cleary's argument is that joint purchasing agreements are about physical goods, not non-material property rights. However, that doesn't convince me, given that joint purchasing of IP (such as copyrighted works) is common. The CMA made the best choice anyway by dropping LNGs from its guidelines altogether.
Even if the CMA had indicated that SEP LNGs might be acceptable, the proponents of that collective hold-out vehicle would still have been far from ready to proceed with their plan: it just takes one major jurisdiction to keep such licensing cartels illegal. And right now there isn't a single major jurisdiction, at least in the Western hemisphere, that is prepared to allow LNGs.
But the lobbying effort will continue. Deceptive lobbying included.
