Level Discrimination and FRAND Commitments Under EU Competition Law

Abstract

Standards are of fundamental importance in our economy and competition law has an important role to play in ensuring that standard setting procedures are not distorted so as to result in negative effects on technological progress and social welfare. This article examines the practice of level discrimination, which occurs when the holder of a standard essential patent (SEP), having made a commitment to license the SEP on fair, reasonable and non-discriminatory (FRAND) terms, decides to license only undertakings at a given level of the supply chain, typically, the end-product manufacturers, rather than the component manufacturers. Level discrimination is significant in practice and raises novel questions in the interpretation and application of Article 102. This article examines the economic and policy arguments for and against level discrimination and discusses whether the practice may amount to an abuse of a dominant position under Article 102 TFEU, distinguishing the position of practising and non-practising entities.