UNITED STATES OF AMERICA

FEDERAL TRADE COMMISSION

WASHINGTON, D.C. 20580

BEFORE THE

NATIONAL TELECOMMUNICATIONS 

AND INFORMATION ADMINISTRATION

U.S. DEPARTMENT OF COMMERCE

WASHINGTON, D.C.

In the Matter of 

Improvement of Technical Management of Internet Names and Addresses

Docket No. 980212036-8036-01

Comment of the Staffs of the Bureaus of Economics and Competition

of the Federal Trade Commission(*)

March 23, 1998

I. Introduction

The Staffs of the Bureaus of Economics and Competition of the Federal Trade Commission (“FTC Staff”) welcome 

this opportunity to respond to the National Telecommunications and Information Administration’s (“NTIA”) request for 

comments (“RFC”) on its proposal to privatize the Internet Domain Name System (“DNS”).(1) Internet domain names 

are the familiar and descriptive names for Internet sites (e.g., “www.ftc.gov”). They link to the unique Internet Protocol 

(“IP”) numbers (e.g., 98.37.241.30) that serve as routing addresses on the Internet. The Domain Name System 

translates Internet names into the IP numbers required for transmission of information across the network. Currently, 

the registration and propagation of “top-level domain” (“TLD”) names is carried out by a single firm that is under a 

soon-to-expire contract with the National Science Foundation. 

The NTIA now proposes that the administration of TLDs, and the registration of domain names, be provided 

competitively by private, for-profit entities. The NTIA also proposes that certain other technical functions (e.g.,

management of number addresses; coordination of the root server system; dissemination of protocol parameters for 

Internet addressing) be carried out cooperatively (via a new not-for-profit corporation) by parties having vested 

interests in the efficient operation of the system. 

As explained more fully in this comment, purchasers of domain name registration services might be subject to 

supracompetitive prices in the future if they become “locked-in” to a particular vendor of those services. The likelihood 

of a significant customer investment that results in “lock-in” is a detailed factual question on which this comment 

cannot reach a definitive conclusion. Economic analysis suggests, however, that purchasers may be able to take 

steps to reduce their vulnerability to higher prices from “lock-in” effects. In addition, higher prices arising from “lock-in” 

also could occur under alternatives to the NTIA proposal and under the current registration system. Finally, the 

benefits to consumers of introducing competition to the registration of domain names are likely to make the NTIA 

proposal, on balance, preferable to the current system. 

II. Expertise of the Staff of the Federal Trade Commission
The FTC is an independent agency responsible for preventing unfair methods of competition and unfair or deceptive 

acts or practices.(2) In response to requests by federal, state, and local government bodies, the staff of the FTC often 

analyzes regulatory or legislative proposals that may affect competition or the efficiency of the economy. In the 

course of this work, as well as in antitrust and consumer protection research, nonpublic investigations, hearings, and 

litigation, the staff applies established principles and recent developments in law and economics to the analysis of 

competition and consumer protection matters.

The FTC has actively applied its competition and consumer protection enforcement principles to Internet commerce. 

The FTC began to examine the potential for consumer protection problems on the Internet even before on-line 

consumer transactions became common. In the fall of 1995, for example, the FTC held public hearings to explore 

business and consumer issues arising from technological innovation and increasing globalization.(3) Thereafter, a 

workshop in 1996 focused on issues relating to the on-line collection of information from consumers.(4)

As part of its ongoing review of issues relating to on-line commerce, the Commission has directed education efforts 

and brought several law enforcement actions to combat frauds that have migrated to (or taken advantage of) the online medium. For example, in 1996, the staff of the FTC coordinated the “Internet Pyramid Surf Day,” a law 

enforcement surveillance effort that included federal, state and local law enforcement officials. The participants surfed 

the Internet to locate those sites posting possible pyramid scams. In 1997, the staff of the FTC conducted additional 

“surf days” seeking to identify, among other things, possible on-line credit repair and business opportunity frauds. In 

addition, firms that have used the Internet and related hi-tech products to peddle fraudulent business opportunity and 

pyramid scams have been charged by the FTC with violating federal laws.(5)

III. Introducing Competition into Registration and Administration of Domain

Names

A. Background

The actual address of a computer on the Internet is a string of numbers -- the Internet Protocol (“IP”) address.(6)

Every Internet site is assigned a unique IP number.(7) Because these numbers can be difficult for users to remember, 

most Internet sites also have a “domain name.” Domain names are an alphabetical, hierarchical, and more userfriendly system of Internet addresses. The network depends on the numerical address, however, so to use domain 

names, the system relies upon machines known as “name servers,” which translate (or “resolve”) domain names into 

their corresponding IP addresses.

The Internet domain name space is divided into top-level domains (“TLDs”), with each TLD then divided into secondlevel domains (“SLDs”), and so on.(8) A set of generic top-level domains (“gTLDs”) denote the intended function of 

that portion of the domain space. For example, “com”was established for commercial users, “org” for not-for-profit 

organizations, and “net” for network service providers.(9) The registration and propagation of these gTLDs are 

performed by Network Solutions, Inc. (“NSI”) under a five-year cooperative agreement with the National Science 

Foundation that expires in March 1998. The master list of domain names and IP numbers is kept on a “root server” 

operated by NSI, which is updated daily.(10)

According to the NTIA RFC, there is dissatisfaction with the absence of competition in the provision of domain name 

registration, and with the limited number of TLDs now available under the existing system.(11) NTIA proposes a new 

system that would create a competitive market for “registries” and for “registrars.” Under the proposal, up to five new 

privately-owned, for-profit entities would be allowed to become Internet registries.(12) Initially, each of these registries 

would be allowed to offer one TLD (e.g., “store”, “vend”, “biz”, etc.). 

In addition, NTIA’s proposal would allow unlimited entry into the market for “registrar” services. A “registrar,” as 

contrasted with a “registry,” essentially would be an intermediary between a registry and a firm that wishes to create 

an Internet site. For example, a firm (e.g., a retailer wishing to create a web site to sell merchandise on-line) might 

employ the services of a registrar, to (among other things) help the retailer choose the registry best suited to its 
demands and actually register the client’s domain name and IP number with the chosen registry. Presumably a client 

could, if it wished, do some or all of these things for itself, as now appears to be the case. 

B. Competitive Issues

The principal competitive issue in this proceeding centers on the registry issue. According to the RFC, some parties 

have expressed reservations about the desirability of a competitive registry system. These parties argue that lack of 

portability among registries (that is, the fact that users cannot change registries without adjusting at least part of their 

domain name string) could create lock-in problems and harm consumers.(13) Some have recommended that if 

multiple registries are to exist, they should be undertaken on a not-for-profit basis. 

The potential problems associated with “lock-ins” and “switching costs” have been analyzed extensively in the 

economics and antitrust literature.(14) The phenomenon arises when buyers must make relationship-specific 

investments in order to do business with particular suppliers. Even if competition between suppliers is perfect ex ante

(i.e., before any such investments are made), customers may find themselves locked in to those suppliers ex post, 

possibly rendering them vulnerable to opportunistic future price increases. 

It would appear plausible that the absence of domain name portability across registries could impose a switching cost 

on users who change registries. For example, if a firm must invest substantial resources to familiarize consumers with 

its web-site name (e.g., “brandname.biz”), the cost of switching to a new site (e.g., “brandname.store”) would consist 

of the incremental investment that it would have to make to inform consumers of the new name, plus any lost profits 

from forgone sales (because some consumers never learn the new site). It is theoretically possible, therefore, that a 

supplier could raise the future prices to locked-in customers. Nonetheless, it would be premature to conclude that this 

switching cost provides a sufficient basis for precluding the proposed move to a competitive domain name registration 

system.

The economic analysis of markets with switching costs has identified a number of factors that, in appropriate 

circumstances, can diminish the ability and the incentive of a supplier to act opportunistically with respect to its 

locked-in customers.(15) As we discuss below, important to this analysis are: (1) the extent to which prospective 

customers are aware of the possibility of supplier opportunism; (2) the extent to which customers have effective 

means (e.g., enforceable long-term contracts) to protect themselves against opportunism; (3) the intensity of 

competition among suppliers; and (4) the importance of reputation and repeat business to suppliers’ current and 

future profits.

If prospective buyers are aware that choosing a particular vendor commits them to that vendor in future periods, thus 

exposing them to ex post opportunism,(16) then they have incentives to seek contractual protection against such 

behavior -- for example, in the form of a long term contract that restrains the vendor’s pricing discretion in future 

periods -- before committing to a particular vendor. Buyers’ ability to obtain such protection will be greater, other 

things held constant, the more intense the competition among vendors, for one important dimension of competition 

among these vendors likely would be their ability to credibly assure buyers that they will not be victimized by future 

price increases.(17) Other things equal, vendors that can provide such credible assurances to buyers will profit at the 

expense of those that cannot.

Even without the ability to obtain explicit and complete contractual protections against supplier opportunism, there 

nonetheless may be other factors that afford buyers some degree of protection against supplier opportunism.(18) If 

prospective buyers are concerned about the future prices as well as current prices, and have reasonably good 

information about vendors’ pricing policies towards their existing locked-in customers, then vendors will have a 

reduced incentive to engage in opportunism, for it will diminish their ability to attract new customers.(19) This 

incentive will be amplified, the greater the growth rate of the relevant market, for then the costs of opportunism to 

suppliers (forgone profits from lost future sales) will weigh more heavily against the corresponding benefits (profits 

from opportunism against existing locked-in customers).(20) By contrast, if the market is in decline, or the vendor is 

considering exit for some other reason, then these forgone future profits may be sufficiently small that the vendor will 
find it profitable to engage in opportunism. Given the prospects for growth in Internet commerce, this set of 

circumstances generally would appear unlikely. 

Overall, we would conclude that while the possibility of supplier opportunism exists, the potential benefits to 

customers from enhanced competition -- such as possible price reductions and quality improvements -- argue in favor 

of the NTIA proposal. This is especially true given that the alternatives that have been proposed likely would not 

remedy any such problems. One possible alternative is simply maintaining the status quo (i.e., a monopoly registry). 

Clearly, this would not address any competitive issues associated with lock-in. If lock-in is perceived as a competitive 

problem in a market with competitive registries, it follows a fortiori that it would be at least as great a problem absent 

such competition.

A second alternative is to allow competition among registries, but to require that registry services be provided only by 

not-for-profit entities. The problem here is that neither economic theory nor available empirical evidence establishes a 

presumption that not-for-profit entities would forbear exploiting locked-in customers, assuming that it would be 

profitable to do so. Theoretical analyses have yielded ambiguous predictions as to whether not-for-profit firms are 

less likely than their for-profit counterparts to exploit market power. Similarly, empirical tests of this proposition have 

yielded ambiguous outcomes; some studies claim to find that not-for-profit entities leave market power 

unexploited,(21) while numerous others find the contrary.(22) At present, there is insufficient evidence to conclude 

that organizing registries on a not- for-profit basis would solve any problems arising from customer lock-in.

C. Law Enforcement Considerations

Domain name registration information also plays an important role in the enforcement of consumer protection laws, 

because it often enables the FTC and other law enforcement agencies to identify the persons or entities responsible 

for fraudulent or deceptive commercial practices on a particular web site. Increasingly, however, domain name 

registration information for web sites containing fraudulent commercial activity is unreliable. To the extent that 

fraudulent operators of web sites are permitted to easily register under fake names or sham corporations or entities, it 

becomes more difficult for the FTC and other law enforcement agencies to protect consumers who wish to do their 

shopping on-line. Thus, from a law enforcement perspective, it is important that whatever domain name registration 

system is in place appropriately safeguard the accuracy of this information.

IV. Activities Requiring Coordinated Private Behavior 

Although the NTIA proposes to allow certain activities, such as domain name registration, to be carried out in a 

competitive market setting, the NTIA also maintains that certain other technical functions (e.g., management of 

number addresses; coordination of the root server system; dissemination of protocol parameters for Internet 

addressing) will continue to require coordinated behavior among various parties having vested interests in the 

efficient operation of the system (“stakeholders”). To carry out these activities, the RFC proposes the creation of a 

new not-for-profit corporation whose board of directors would be made up of representatives of IP number registries, 

domain name registries, domain name registrars, the technical community, and Internet users (commercial, not-forprofit, and individuals). As the RFC notes, 63 Fed. Reg. at 8828, this corporation will act much like a private standardsetting body.

The FTC has a long-standing interest in industry self-regulation of the type proposed in the RFC. As the RFC notes, 

cooperation among Internet stakeholders may be essential for maintaining a stable system of Internet addresses that 

will continue to provide connectivity for all users. Economic analysis suggests that private parties will be likely to 

voluntarily set socially efficient technological standards when (1) there are aggregate net benefits from 

standardization; (2) per capita private benefits from promoting standardization exceed per capita private costs; and 

(3) no party has vested interests in any particular standard.(23) Private standard setting often will be more efficient 

than government standard setting because industry participants possess better information than government 

regulators regarding technical protocols, system administration, and future growth of relevant markets. Moreover, 
industry participants are likely to move more quickly and flexibly than would be possible for government 

regulators.(24)

Many of the benefits of industry self-regulation can be lost if competitors use otherwise legitimate industry forums to 

undermine competition. When this occurs, it is usually because some party has a vested interest in a particular 

standard. The FTC generally is concerned when competitors use self-regulation mechanisms to inappropriately limit 

choices available to consumers or to forestall welfare-enhancing innovation.(25) In the context of the RFC, several 

types of conduct could raise antitrust concerns. These include discriminatory allocation of number blocks; 

exclusionary conduct against companies desiring to provide registry or registrar services; and adoption of technical 

protocols that anticompetitively disadvantage competitors of board members. 

To alleviate these possibilities, the NTIA has suggested a number of safeguards designed to ensure that no single 

competitor or group of competitors will be able to use the proposed new corporation to impair competition. For 

example, to protect against “capture by a narrow group of stakeholders,” the RFC proposes that the new 

corporation’s “decision-making processes should be sound and transparent; the bases for its decisions should be 

recorded and made publicly available.” The corporation’s board is to contain representatives of various groups of 

Internet stakeholders, including regional number registries, domain name registries and registrars, the Internet 

technical community, and commercial and non-commercial Internet users. 

Forming the proposed new corporation consistently with these guidelines should provide some protection from 

anticompetitive conduct. Self-regulatory decisions made pursuant to a clearly-established decision-making procedure, 

based on objective criteria, may be less likely to raise antitrust concerns than those that are not. As we understand 

the proposed structure, the decision-making process would provide opportunities for interested parties not directly 

represented on the new corporation’s board of directors to express their views on particular questions and to notify 

the corporation of issues that may warrant consideration. The informational benefits of broad-based participation in 

the process, coupled with the diverse composition of the corporation’s board of directors, would increase the 

likelihood that decisions will be made in an appropriate manner. If these safeguards fail, the arrangements still would 

be subject to antitrust review by the Federal Trade Commission and the Department of Justice.

The RFC also suggests that super-majority or consensus (i.e., unanimity) voting could provide additional protection 

against co-optation of the new corporation by narrow coalitions of self-interested board members. The competitive 

implications of this proposal, however, are ambiguous. If unanimous voting is required, a self- interested board 

member could block the corporation from taking appropriate action. There may be circumstances where giving 

individual board members an effective veto would be proper, but in other circumstances a veto might be used 

anticompetitively.

V. Conclusion

The NTIA has proposed that the administration of TLDs and the registration of domain names be provided 

competitively by private, for-profit entities, and that certain other technical functions be carried out cooperatively by a 

diverse collection of interested parties via a new, not-for-profit corporation. Both proposals would appear to offer 

benefits to current and future Internet users. Although one cannot rule out, as a matter of theory, the possibility of an 

exercise of market power under these proposals, on balance the likely benefits to customers of enhanced competition 

support adoption of the proposed changes.

Endnotes

(*) This comment represents the views of the staffs of the Bureaus of Economics and Competition of the Federal 

Trade Commission. They are not necessarily the views of the Federal Trade Commission or any individual 

Commissioner. Inquiries regarding this comment should be directed to Michael Vita (202-326-3493) or Frederick 

Horne (202-326-2308).
(1)See Department of Commerce, National Telecommunications and Information Administration, Proposed Rule and 

Request for Public Comment In the Matter of Improvement of Technical Management of Internet Names and 

Addresses, Docket No. 980212036-8036-01, February 20, 1998.

(2) 15 U.S.C. § 41 et seq.

(3) FTC Staff Report, Anticipating the 21st Century: Consumer Protection Policy in the New High-Tech, Global 

Marketplace, May 1996.

(4) FTC Staff Report, Public Workshop on Consumer Privacy on the Global Information Infrastructure, December 

1996. 

(5) See FTC v. FutureNet et al. , No. 98-1113 GHK (AIJx) (C.D. Cal. filed Feb. 17, 1998) (illegal pyramid scheme 

involving Internet access devices); FTC v. TouchNet, Inc., No. 98-0176 R (W.D. Wash., filed Feb. 11, 1998) 

(fraudulent claims that investors could earn $15,000 a month by becoming “Internet Consultants”); FTC v. Hart 

Marketing Enterprises, Ltd., Inc., No. 98-222CIV-T-23E (M.D. Fla., filed Feb. 2, 1998) (fraudulent claims that 

consumers who invested in the computer kiosks selling Internet access could expect earnings between $500 and 

$700 per kiosk per week). 

(6) IP numbers are 32 bit addresses that consist of eight octets, and they are expressed as four numbers between 0 

and 255, separated by periods (e.g.,198.41.0.52).

(7) The Internet Assigned Numbers Authority (“IANA”) at the University of Southern California coordinates this system 

by allocating blocks of numerical addresses to regional IP registries. These are the American Registry for Internet 

Numbers (“ARIN”) in North America, Reseaux IP Europeens (“RIPE”) in Europe, and the Asian- Pacific Network 

Information Center (“APNIC”) in the Asia/Pacific region. Larger Internet service providers apply to the regional IP 

registries for blocks of IP addresses. The recipients of those address blocks then reassign addresses to smaller 

Internet service providers and to end users.

(8) In the Domain Name System, the top-level domain is that portion of the domain name that appears furthest to the 

right (e.g., the “gov” in “ftc.gov”). The second-level domain is that portion of the domain name that appears 

immediately to the left of the top-level domain (e.g.,the “ftc” in “ftc.gov”). Second-level domain names are often 

descriptive and have come to be used increasingly to represent businesses and other commercial concerns on the 

Internet. The third-level domain is that portion of the domain name that appears two segments to the left of the toplevel domain (e.g., the “reston” in “reston.va.us”). 

(9) Currently, there are five world-wide generic domains (“com”, “org”, “net”, “edu”, and “int”); two U.S.-only generic 

domains (“mil” and “gov”); and numerous country code domains (e.g., “us” for the United States, “au” for Australia, 

etc.). 

(10) A root server is a machine with the software and data needed to locate name servers that contain authoritative 

data for the top level domains (e.g., root servers know which name servers contain authoritative data for com, net, fr, 

uk, etc.). Currently, technical specifications limit the number of root servers to 13. These machines are located in the 

U.S., the U.K., Sweden, and Japan. 

(11) For example, BellSouth has argued that the current monopoly system has led to inconsistent levels of service 

(e.g., slow response time for assigning domain names) and high prices for registering names. See Comments of 

BellSouth In the Matter of Request for Comments on the Registration and Administration of Internet Domain Names, 

Docket No. 970613137-7137-01, August 18, 1997. Similarly, MCI has observed that the current system provides NSI 

with inadequate incentives to achieve improved reliability and performance. See Comments of MCI In the Matter of 

Request for Comments on the Registration and Administration of Internet Domain Names, Docket No. 970613137-

7137-01.
(12) A registry is responsible for delegating Internet addresses (such as Internet Protocol numbers and domain 

names), and keeping a record of those addresses and the information associated with their delegation. Examples of 

regional IP registries include RIPE, APNIC, and ARIN. Examples of domain name registries include Network 

Solutions’ InterNIC operation (.com, .net, and .org) and the ISO 3166 country code registries (e.g., .fr, .de, .uk, .us). 

(13) Some commenters (see, e.g., Comments of the Electronic Frontier Foundation In the Matter of Request for 

Comments on the Registration and Administration of Internet Domain Names, Docket No. 970613137-7137-01, 

August 18, 1997) have recommended that NTIA mandate portability of domain names across registries. Such 

portability would eliminate competitive problems arising from lock-in. Whether such portability can be achieved at 

reasonable cost is unclear, however; as the NTIA noted in its review of the comments, “the technical implications of 

[mandatory domain name portability] were not fully discussed and certainly not resolved.” See NTIA, Summary of 

Comments In the Matter of Request for Comments on the Registration and Administration of Internet Domain Names, 

Docket No. 970613137-7137-01. If significant lock-in problems develop, NTIA may wish to revisit these technical 

issues and consider means for enhancing portability.

(14) Early analyses are Klein, Crawford, and Alchian, “Vertical Integration, Appropriable Rents, and the Competitive 

Contracting Process,” 21 J. L. & Econ. 297 (1978); and Williamson, The Economic Institutions of Capitalism (1985). 

More recent contributions include Farrell and Shapiro, “Dynamic Competition with Switching Costs,” 19 RAND J. 

Econ. 123 (1988); Farrell and Shapiro, “Optimal Contracts with Lock-In,” 79 Am. Econ. Rev. 51 (1989); and 

Klemperer, “Competition When Consumers Have Switching Costs: An Overview With Applications to Industrial 

Organization, Macroeconomics, and International Trade,” 62 Rev. Econ. Stud. 515 (1995).

(15) See footnote 14, supra. See also Shapiro, “Aftermarkets and Consumer Welfare: Making Sense of Kodak,” 63 

Antitrust L.J. 483 (1995); Shapiro and Teece, “Systems Competition and Aftermarkets: An Economic Analysis of 

Kodak,” 39 Antitrust Bull. 135 (1994); Kattan, “Market Power in the Presence of an Installed Base,” 62 Antitrust L.J. 1 

(1993).

(16) The extent to which current and prospective creators of Internet sites would be aware of the possibility and 

consequences of lock-in is unknown. Certainly, at least some of them are aware (e.g., those who raised the issue in 

their responses to the NTIA’s July 1997 Request for Comments on the Registration and Administration of Internet 

Domain Names). It is not always necessary for all prospective customers to be equally well- informed about this 

possibility; if there is a substantial number of well-informed customers, and if vendors cannot easily discriminate 

between those who are well- informed, and those who are not, then competition for the former frequently may result 

in contractual protections being offered to all. See, e.g., Shapiro and Teece, supra note 15, at 143-45.

(17) From this perspective, then, there is considerable appeal in expanding the number of registries, perhaps even 

beyond the five contemplated in the NTIA RFC. We recognize, however, that expanding the number of gTLDs 

increases the technical complexity of the tasks that must be carried out by the root server system. 

(18) See Shapiro and Teece, supra note 15, at 146-48; Shapiro, supra note 15, at 490- 95.

(19) As noted by Shapiro (supra note 15, at 493-94) and Shapiro and Teece (supra note 15, at 148), in theory buyers 

may receive protection against monopoly prices even if they do not take into account future prices when choosing a 

vendor. This is because vendors will compete for the ability to “lock-in” customers. If this competition is sufficiently 

intense, and if the competition for new customers is price (as opposed to nonprice) competition, the initial price could 

fall to the point where all of the future monopoly profits are competed back to consumers. See Shapiro, supra note 

15, at 505- 11, for a formal analysis of this proposition. In some of these instances, some inefficiency could remain, 

notwithstanding a complete dissipation of any profits from lock-in. This could occur in situations where (for example) 

consumers must buy replacement parts for durable goods from the original equipment vendor. Here, the price of the 

original equipment would be too low, and the price of replacement parts too high, leading to inefficiently frequent 

rates of replacement for the original equipment. See Borenstein, Mackie-Mason, and Netz, “Antitrust Policy in 

Aftermarkets,” 63 Antitrust L.J. 455 (1995). 
(20) The incentive for vendors to hold-up buyers also will be diminished if the vendor would suffer reputational 

damage in other product markets. 

(21) See, e.g., Lynk, “Nonprofit Hospital Mergers and the Exercise of Market Power,” 38 J. L. & Econ. 437 (1995).

(22) See, e.g., Simpson and Shin, “Do Nonprofit Hospitals Exploit Market Power?”, Int’l J. Econ. of Bus., forthcoming, 

1998; Dranove and Ludwick, “Competition and Pricing by Nonprofit Hospitals,” J. Health Econ., forthcoming, 1998; 

Keeler and Melnick, “Effects of Competition on Nonprofit and For-profit Hospital Prices,” J. Health Econ., forthcoming, 

1998.

(23) See Besen and Saloner, “The Economics of Telecommunications Standards,” in Crandall and Flamm, eds., 

Changing the Rules: Technological Change, International Competition, and Regulation in Communications (1989). 

Much standard-setting activity typically falls into this category, such as the activity carried out by the Society of 

Automotive Engineers (“SAE”), the American National Standards Institute (“ANSI”), the International Standards 

Organization (“ISO”), and the International Telegraph and Telephone Consultative Committee (“CCITT”).

(24) See Lemley, “Antitrust and the Internet Standardization Problem,” 28 Conn. L. Rev. 1041, 1063-65 (1996).

(25) In a recent case, the FTC charged that Dell Computer Corporation restricted competition in the personal 

computer industry and undermined the standard-setting process by threatening to exercise previously undisclosed 

patent rights against computer companies adopting the VL-bus standard, a mechanism to transfer instructions 

between the computer's central processing unit and its peripherals, such as a hard disk drive or video display 

hardware (In re Dell Computer Corp., Docket No. C-3658 (May 20, 1996) (Comm’r Azcuenaga dissenting)). 

According to the FTC complaint detailing the charges, Dell was a member of the Video Electronics Standards 

Association (“VESA”), a non-profit standards-setting organization, when the association began developing a design 

standard for a computer bus design to respond to demand for faster graphics performance. VESA members, 

representing virtually all major U.S. computer hardware and software manufacturers, voted to approve the new VLbus standard in 1992. As part of the approval process, a Dell representative allegedly certified that he knew of no 

patent, trademark or copyright that the bus design would violate. After the VESA VL-bus design standard became 

successful and computer manufacturers had sold more than 1.4 million personal computers incorporating the VL-bus, 

Dell contacted certain VESA members and asserted that it had obtained a patent in 1991 that they were violating by 

using the VL-bus standard. To settle the FTC’s charges, Dell agreed not to enforce its patent rights against computer 

manufacturers using the VL-bus.