SD ASSOCIATIONANTITRUST POLICY AND GUIDELINES
The purpose of this Antitrust Policy and Guidelines is to provide a brief overview
of the antitrust and competition laws applicable to the SD Association’s (“SDA”)
activities and to provide general guidelines for compliance with those laws.
The SDA is a global open industry standards organization established in January
2000 and comprised of close to 1,000 companies. The SDA provides industry
standards and promotes SDA standards acceptance in a variety of applications.
The goal of the SDA is to promote and foster innovation and support consumer
choice by creating standards that allow the interoperability of differentcomponents. The SDA’s activities are a coordinated effort among competitors
whose interest or objective involves the design, development or application of anext generation flash memory card with security methods that prevent
unauthorized use or copying. As with any collaboration among competitors andpotential competitors, these activities must comply with antitrust and competition
laws and are subject to regulatory scrutiny.
The SDA cannot fulfill its purpose if the conduct of its members does not complywith competition and antitrust laws. A violation (or claims of violation) ofantitrust laws jeopardize what all participants are working so hard to build;
impede SDA’s mission; and may expose participants and their employers to therisk of imprisonment and other criminal penalties, civil remedies, and significant
litigation costs. The penalties for violating antitrust laws can be quite severe,
including large fines and even imprisonment of individuals found guilty of illegalconduct. Contrary to the popular belief that recent administrations have relaxedantitrust enforcement, the Justice Department has recommended jail sentences forthe majority of persons convicted of violating antitrust laws. The JusticeDepartment also reports that the number of criminal charges and terms ofsentences have increased in recent years for violations of the antitrust laws.
Moreover, the U.S. Supreme Court has ruled that a trade association may be held
legally responsible for the unauthorized, as well as authorized, acts of itsmembers. Accordingly, every effort must be made to avoid even the appearanceof impropriety.
Antitrust litigation brought by private parties and investigations by theDepartment of Justice and the Federal Trade Commission are costly. Althoughmany SDA participants receive antitrust compliance training from theiremployers, SDA wants to help all of its participants avoid potentially expensive
litigation and investigation by reinforcing such training and highlighting for thoseparticipants that have not received such training the antitrust risks that are mostpertinent to standards development and to explain the SDA’s policies with respect
to antitrust law matters.
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GENERAL BACKGROUND ON U.S. ANTITRUST LAWS
In the U.S., antitrust and unfair competition law is called “antitrust law,” andelsewhere it is called “competition law.” But regardless of the label, mostcountries have substantially similar laws regarding this matter. In general, mostof the world prohibits agreements and certain other activities that unreasonably
restrain trade.
There are two antitrust statutes in the U.S. which are of principal concern toindividuals and firms who take part in non-profit organizational activities: theSherman Act and the Federal Trade Commission Act. These laws prohibit
contracts, combinations, and conspiracies in restraint of trade. The Supreme
Court has said that not every contract or combination in restraint of trade
constitutes a violation, rather only those which unreasonably restrain trade areunlawful. This means that courts will look at all of the facts and circumstances
surrounding the conduct in question in order to determine whether it unreasonably
restrains trade and therefore violates antitrust law.
Competition authorities throughout the world uniformly condemn actions that arereferred to as “naked restraints on trade” – that is, agreements that do nothing
more than limit competition between competitors. The conduct is exclusively
presumed to be unreasonable and therefore unlawful per se because it clearly
restrains competition and has no other redeeming benefits. The classic examples
that could arise in the standards process – and the kinds of violation that mostfrequently result in significant jail time for the participants – include:Agreements to establish price (price fixing)—for example, wherestandards participants or other competitors agree on the prices that theywill charge for compliant products;
Agreements to restrict output—for example, where standards participants
or other competitors agree on how much of a compliant product they will
each produce;
Agreements to allocate customers or territories—for example, wherestandards participants or other competitors agree on where or to whomthey will each sell compliant products;
Agreements to refuse to deal with third parties (boycotts); andTie-in sales which require the customer to buy an unwanted item in orderto buy the product desired.

Other kinds of violations can also arise in the standards process. For example,
selecting one technology for inclusion in a standard is lawful, but an agreement toprohibit standards participants (or implementers) from implementing a competing
standard or rival technology would be unlawful – although as a practical matter, a
successful standard may lawfully achieve this result through the workings of themarket.
Industry associations like the SDA by their very nature present potential antitrust
problems. One reason is that in bringing competitors together into a consensual
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standards setting organization, they have the means and opportunity to collude in
violation of the antitrust laws. Both the Sherman and Federal Trade Commission
Acts prohibit agreements in restraint of trade and an industry organization by itsvery nature reaches agreements which means that one element of a possible
violation is already present; all that is missing is action to restrain trade in orderfor there to be a violation.
Single entity conduct can also violate U.S. antitrust law. Monopolization is theobtaining of a monopoly – the ability to obtain profit by restricting output andselling at a higher price – through wrongful means. For example, a company
might unlawfully convert its patents into monopoly power by misleading otherparticipants in the standards organization into incorporating the company’s
patented technology into a standard under the false impression that no patents
were involved.
What if SDA meetings occur outside the U.S.? Whose law governs? Most
countries will apply their antitrust and competition laws to any conduct that has asubstantial effect in their country, regardless of where that conduct took place.
The SDA’s Antitrust Policy and Guidelines apply to SDA activities wherever themeetings occur.
LAWFUL ACTIVITIESAs a basic premise, the goals of the SDA to foster innovation and consumer choice
are clearly lawful. Regulators recognize that standard setting organizations offer
pro-competitive benefits when they help promote innovation and allow consumers
to make educated choices. The proposed activities, if properly conducted, will not
be found to violate the antitrust laws because they will not have an adverse effecton the competitive market place.
The SDA may rely on the judgment of legal counsel who may be present at theSDA meetings to ensure that topics which may give an appearance of anagreement that would violate antitrust laws are not discussed at these meetings.
However, the presence of counsel at a meeting should not invite probing todetermine how far a discussion can proceed before it becomes apparent that it isimproper and is cut off. Each member has the responsibility in the first instanceto avoid raising improper subjects for discussion.
UNLAWFUL ACTIVITIESThe most common violations of the antitrust laws are agreements amongcompetitors to fix prices or allocate customers. As for the SDA, the mostimportant thing to keep in mind is that its purpose is to define standards for, andpromote market acceptance of, a next generation flash memory card technology.
The SDA does not involve individual member’s activities in the marketing ofparticular products. Accordingly, it is not the business of the SDA to consider or
discuss matters relating to product development, marketing, purchasing or pricing
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decisions of individual companies.
SDA participants should refrain from any discussion that could provide the basis
for an inference that the members agreed to take any action that might restrain
trade. An “agreement” among members in antitrust terms is a very broad concept:
it may be oral or written, formal or informal, expressed or implied. A“gentleman’s agreement” to “hold the line” on prices is more than sufficient toevidence an unlawful conspiracy to fix prices. It is not up to you to decide
whether your words and conduct amount to an agreement – in the U.S., thatdecision gets made by a judge using the peculiar rules of evidence that only courts
use and by a jury that is unlikely to know anything about your industry orbusiness. The whole question about your actions will come up after the fact, andwith the sure vision of hindsight, any questionable discussion or debate could beseen to have led to a tacit if not an explicit agreement that is prohibited by law.
Because an “agreement” is subject to interpretation, members should refrainfrom discussing topics if agreeing on the subject would be unlawful (such as therespective selling prices of compliant products), then that subject should not bediscussed.
Do not put the SDA, your company, your colleagues in the standards community,or yourself at risk by discussingPrices (current and projected) at which products or services implementing
the standard should be sold, price changes, price differentials, markups,discounts, allowances, terms and conditions of sale, including credit terms,
etc., or data that bear on prices, including profits, margins or cost;Industry pricing policies, price levels, price changes, differentials, or thelike;Individual company current or projected cost of procurement,development or manufacture of any product;Individual companies’ market shares and sales territories;

Allocation of customers, markets, production levels, or territories; orrestricting the customers to whom, or territories in which, a company may
sell or resell products;

Matters relating to actual or potential individual suppliers that might havethe effect of excluding them from any market or of influencing thebusiness conduct of firms toward such suppliers or customers;

Plans of individual companies concerning the design, characteristics,production, distribution or marketing or introduction dates of particular
products, including proposed territories or customers;

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

Changes in industry production, capacity or inventories;

Using standards or certification programs to exclude suppliers orcompetitors from the marketplace for any reason other than costperformance or technical considerations;Conditioning the implementation of a standard on the implementer’s useof products or services from a particular supplier [such as requiring use ofa particular manufacturer’s components];Bidding (or terms of bids) or refraining from bidding to sell any product orservice; and

Any matter which restricts any company’s independence in setting prices,establishing production and sales levels, choosing the markets in which itoperates, or the manner in which it selects its customers and suppliers.

In addition to topics that are prohibited on purely competition-law grounds,
certain topics are not productively discussed in technical standards-development
meetings, including:The status or substance of ongoing or threatened litigation;

The essentiality, interpretation, or validity of patent claims;

Desirable versus undesirable terms of patent licenses;

Specific patent license terms or other intellectual property rights,

These unlawful topics identified in this section shall not be discussed, and noinformation should be exchanged relating thereto, during any SDA meetings,
social gatherings incidental to the SDA-sanctioned meetings, even in jest.
Likewise, those topics should not be discussed in e-mail reflectors or otherelectronic communications provided under the auspices of the SDA, hallway
conversations, luncheons, social events, or in any gathering held in connection
with SDA standards-development activities.
COMPETITION
Nothing contained in the SDA’s Antitrust Policy and Guidelines shall in any
manner be deemed to prohibit or limit a member from making, using or selling
any competing product which does not embody any specification standard
adopted by the SDA.
BEST PRACTICES TO MINIMIZE ANTITRUST RISKThe SDA’s policy is to discuss thoroughly with legal counsel any proposed
programs or policy decisions before they are implemented. If any participant has
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any question as to the legality of a proposed course of action, the matter should be
immediately referred to the SDA Board, who will discuss it with legal counsel. In
this manner, the SDA can ensure continued pursuit of its legitimate objectives
with maximum protection for its participants.
Below are the best practices that SDA believes help minimize the antitrust risk
inherent in standards-setting organizations like SDA:
1. Participants in SDA meetings should consult with the SDA’s legal counsel
or your company’s counsel in all cases involving specific situations,interpretations or advice, including antitrust questions related to antitrust
meetings.
2. Participants in SDA meetings should comply at all times with thisAntitrust Policy and all other Policies of the SDA, including the IP Policy.
3. Adhere to prepared agendas for all SDA meetings.
4. Insist that meeting minutes be prepared and distributed to all participants,and object whenever meeting minutes do not accurately reflect the matterswhich transpired.
5. Understand the purposes and authority of each SDA committee or othergroup in which you participate.
6. Protest against any discussions or meetings which appear to violate theantitrust laws, disassociate yourself from any such discussions oractivities, leave any meeting in which they continue and report the activity
to the SDA Board so that similar conduct can be avoided in the future.

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