Tuesday, September 13, 2016
Comment of the Global Antitrust Institute, George Mason University School of Law, on the Proposed Revisions to the Guidelines of the Anti-Monopoly Commission of the State Council on Determining the Illegal Gains Generated from Monopoly Conduct and on Sett
Bruce H. Kobayashi, George Mason University - School of Law, Koren W. Wong-Ervin, George Mason University School of Law - Global Antitrust Institute, Joshua D. Wright, Antonin Scalia Law School, George Mason University, and Douglas H. Ginsburg, U.S. Court of Appeals for the District of Columbia Circuit; Antonin Scalia Law School, George Mason University offer Comment of the Global Antitrust Institute, George Mason University School of Law, on the Proposed Revisions to the Guidelines of the Anti-Monopoly Commission of the State Council on Determining the Illegal Gains Generated from Monopoly Conduct and on Setting Fines.
Abstract: We respectfully recommend that the Draft Guidelines be revised to limit the application of disgorgement (or the confiscating of illegal gain) and punitive fines to matters in which: (1) the antitrust violation is clear (i.e., if measured at the time the conduct is undertaken, and based on existing laws, rules, and regulations, a reasonable party should expect that the conduct at issue would likely be found to be illegal) and without any plausible efficiency justifications; (2) it is feasible to articulate and calculate the harm caused by the violation; (3) the measure of harm calculated is the basis for any fines or penalties imposed; and (4) there are no alternative remedies that would adequately deter future violations of the law. In the alternative, and at the very least, we strongly urge the NDRC to expand the circumstances under which the Anti-Monopoly Enforcement Agencies (AMEAs) will not seek punitive sanctions such as disgorgement or fines to include two conduct categories that are widely recognized as having efficiency justifications: unilateral conduct such as refusals to deal and discriminatory dealing and vertical restraints such as exclusive dealing, tying and bundling, and resale price maintenance.
We also urge the NDRC to clarify how the total penalty, including disgorgement and fines, relate to the specific harm at issue and the theoretical optimal penalty. As explained below, the economic analysis determines the total optimal penalties, which includes any disgorgement and fines. When fines are calculated consistent with the optimal penalty framework, disgorgement should be a component of the total fine as opposed to an additional penalty on top of an optimal fine. If disgorgement is an additional penalty, then any fines should be reduced relative to the optimal penalty.
Lastly, we respectfully recommend that the AMEAs rely on economic analysis to determine the harm caused by any violation. When using proxies for the harm caused by the violation, such as using the illegal gains from the violations as the basis for fines or disgorgement, such calculations should be limited to those costs and revenues that are directly attributable to a clear violation. This should be done in order to ensure that the resulting fines or disgorgement track the harms caused by the violation. To that end, we recommend that the Draft Guidelines explicitly state that the AMEAs will use economic analysis to determine the but-for world, and will rely wherever possible on relevant market data. When the calculation of illegal gain is unclear due to a lack of relevant information, we strongly recommend that the AMEAs refrain from seeking disgorgement.