It was a rare scene but it may be just the beginning. A group of small business firms convened a press conference at the Capitol recently to charge Big Business with using industry standards and certifications to block innovative and less-expensive products.
Sponsored by Reps. James M. Shannon, D-Mass., and Robert T. Matsui, D-Calif., the gathering of entrepreneurs announced the formation of the National Council for Fair Standards (NCFS), whose declared purpose is to “prevent large corporations from using private standards to keep new products off the marketplace.”
NCFS’ first mission is to persuade members of Congress now meeting in the House-Senate Conference on the Federal Trade Commission (FTC) legislation to delete the Senate-passed ban against the FTC’s proposed rule to make the procedures of these private standards’ groups fair and more open. This area of industry may be little known to consumers but what occurs there affects prices, health and safety for millions of Americans.
More than 400 industry-controlled standards organizations like the Society of Automotive Engineers or the American Society for Testing and Materials write standards for thousands of products ranging from computers, automobiles and building material to furnaces, worker safety devices and light bulbs. Naturally, the companies that have got it made with certain products, no matter how wasteful or hazardous they may be to users, do not usually look with favor on upstart inventors or business firms with a better mousetrap. So when these upstarts try to get the standards changed or their products certified, their entrenched competitors, who control these organizations, place overwhelming obstacles in their way. The net result is to deny these small firms the right to sell their products.
The FTC held several public hearings around the country where evidence was submitted on dozens of standards abuses by these industry organizations. Companies complained of energy-saving devices and solar technologies being suppressed. Other testimony by labor groups showed how industry standards, often incorporated into law, permit high levels of toxicity or risks of personal injury on the job. An association representing 6,200 hospitals charged that “equipment intensive” standards issued by a front for the equipment producers increase hospital costs.
Norman J. Ream, former director of computer sciences at the National Bureau of Standards, claims that the large computer manufacturers have used the private American National Standards Institute to, in his words, “prevent competition in the market for peripheral equipment, such as disks and magnetic tapes.” This situation is costing the federal government at least $80 million a year, he adds.
Lowell C. Johnson, vice president of the Johnson Gage Co., has this to say about big business regulating small business through the private standards process: “The restraint of trade activity here is much more subtle…. The door is closed by specifying acceptability gages for product screw threads that openly dictates the gage products to be used in the marketplace and, effectively, prevents and excludes new products from making any penetration into the market.”
The proposed FTC rule, which these innovative businessmen came to Congress to support, would require the industry standards groups to provide notice of their proceedings to all affected interests and to facilitate fair opportunity for these interests to participate. Also, the proposal would require these groups to set up an appeal mechanism for complaints about deceptive or unduly restrictive standards. Certifying organizations would be held responsible for the truth of their certifications and expected to oppose misuse oftheir seals of approval by manufacturers.
The senators and representatives who will decide whether or not to let the FTC continue its rulemaking proceeding should take a little time to understand its significance. One senator who voted to block the FTC on this issue confessed to me that he didn’t even remember doing so and had no knowledge of the subject matter.
This senator and others in Congress would do well to ponder a question put to them by Leonard Frier, president of Met Electrical Testing Co. He asked: “Why should Congress want to terminate a process that can do nothing but promote competition among organizations providing certification services, improve the products that are available on the market, improve the processes that would make these products more economical, and improve our competition with foreign manufacturers on products shipped overseas to increase our exports?”
Readers who wish more information about the National Council for Fair Standards’ position on the FTC’s proceeding can write to Suite 600, 133 Federal St., Boston, Mass. 02110.