Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.
Hwang LEE
Professor
Korea University School of Law
Innovation, Competition & Regulation Law Center
Antitrust Fines in the ...
 Globalization raises issue of global coordination of antitrust fines b/c
the effects of international sanctions tend to ...
2.1. Rationality Hypothesis and Discretion of Authorities
 Competition authorities’ discretion should be guaranteed for o...
2.2. Difficulties of Conceptualizing Fining Methodologies
 Establishing fining guidelines is an extremely difficult job a...
2.3. How detailed are Fining Guidelines?
 Details of fining guidelines are different across jurisdictions.
• US and Canad...
2.4. Pros and Cons of Detailedness
 Details in guidelines suggest both positive and/or negative effects.
 Highly sophist...
3.1. Proportionality and Discretion of Authorities
 While the main issue is under-deterrence particularly about hardcore
...
3.1. Proportionality and Discretion of Authorities
 Due process matters a lot and it relates to details of guidelines and...
3.2. Proportionality and Diverse Sanctions
 Factors to put on the scale should include all kinds of sanctions
applicable,...
3.3. Judicial Review and Deterrence
 For effective deterrence, fining guidelines need to be sufficiently
detailed and the...
4.1. Rightful Beneficiary of Antitrust Fines
 Most jurisdictions count antitrust fines in government revenue and it
can u...
4.2. Antitrust Fines and Private Damages
 The avoidance of double payment b/w fines and damages may be
addressed differen...
4.3. Antitrust Fines to Mitigate Consumer Harm
 To ensure the legitimacy of antitrust fines, genuine efforts should
conti...
 If pecuniary remedies become tax-deductible, the intended
deterrence effect is reduced by the corporate tax rate.
 Rule...
 The problem of over-deterrence by overlapping fines in multi-
jurisdictions is still a matter of theoretical possibility...
6.2. Double Fines
 Most jurisdictions set a certain rate (e.g. 10% in EU) of global
turnover as a limit to fines for conc...
6.3. How to Coordinate Antitrust Fines
 A difficult topic about cooperation among authorities needs to be
addressed based...
 As more jurisdictions worldwide actively enforce competition laws
as a strategy to develop the economy, the success of e...
Thanks.
Q & A
hwang_lee@korea.ac.kr
Upcoming SlideShare
Loading in …5
×

Sanctions in Anti-trust cases – Prof. Hwang LEE – Korean University School of Law – November 2016 OECD discussion

5,184 views

Published on

This presentation by Prof. Hwang LEE from the Korean University School of Law was made during the discussion on "Sanctions in Anti-trust cases" held at the 15th Global Forum on Competition on 2 December 2016. More papers and presentations on the topic can be found out at www.oecd.org/competition/globalforum/competition-and-sanctions-in-antitrust-cases.htm

Sanctions in Anti-trust cases – Prof. Hwang LEE – Korean University School of Law – November 2016 OECD discussion

  1. 1. Hwang LEE Professor Korea University School of Law Innovation, Competition & Regulation Law Center Antitrust Fines in the Era of Globalization 15th OECD Global Forum on Competition 1~2 December 2016
  2. 2.  Globalization raises issue of global coordination of antitrust fines b/c the effects of international sanctions tend to spill over borders. • Conversely, preventing any loopholes among jurisdictions cannot be over-emphasized. • Many authorities impose fines not only on hardcore cartels but also unilateral conducts.  Fining guidelines should be sharpened and proper discretion of competition authorities should be guaranteed. • Judicial review plays a critical role to prevent excessive/wrong fines and any arbitrary exercise of discretion.  To enhance deterrence by fines, fining system needs to gain support from the public and victims should be compensated. • Other issues including tax-deductibility, double punishment by multiple authorities & indirect sales calls for global coordination. 1. Introduction 2
  3. 3. 2.1. Rationality Hypothesis and Discretion of Authorities  Competition authorities’ discretion should be guaranteed for optimal deterrence by fines b/c rationality hypothesis which fining guidelines rely on contains several drawbacks that may limit deterrence. • Factors that should be considered in theory to limit excessive fines may be difficult to assess in practice for evidentiary reasons. • It may be exacerbated by the problem of irrational undertakings.  Increasing pecuniary sanctions may not be the right answer and further inquiry is required to enhance deterrence. • Other kinds of sanctions, e.g. imprisonment, may be considered. • Balance b/w specificity of guidelines and discretion of enforcers should be made to make imperfect guidelines work effectively. 2. Specificity of Fining Guidelines 3
  4. 4. 2.2. Difficulties of Conceptualizing Fining Methodologies  Establishing fining guidelines is an extremely difficult job and no competition authority in the world may be able to set an ideal guideline that resolves all of the issues that may limit effectiveness of the guidelines. • E.g. suboptimal statutory cap (let’s assume 20% overcharge, 10% cap of total revenue) may be problematic because it affects disproportionately to each of the specialized and diversified firms.  It calls for a certain level of discretion on the part of authorities to supplement insufficiency of guidelines. 2. Specificity of Fining Guidelines 4
  5. 5. 2.3. How detailed are Fining Guidelines?  Details of fining guidelines are different across jurisdictions. • US and Canada provide fairly general provisions that give significant discretion to authorities. • Others (Northeast Asia) have detailed guidelines and their rigidity does not allow much discretion to authorities. • EU seems to take a middle ground.  Difference may be due to the different approaches to the relationship b/w transparency and deterrence. • Trust in the fining authorities, seriousness of enforcement, voices of the business community, culture and history, etc.  Degree of detailedness of fining guidelines should vary to match individual jurisdiction’s situation. 2. Specificity of Fining Guidelines 5
  6. 6. 2.4. Pros and Cons of Detailedness  Details in guidelines suggest both positive and/or negative effects.  Highly sophisticated fining guidelines make good economic sense but doubt may be raised as to whether particular facts in an individual case warrant such an application. • Radical departures from the base fines for an appropriate problem-solving may raise suspicion. • This is where confidence in competition authorities, and to some degree in the judiciary, comes into play.  There is a challenge in finding an optimal level of detail. • Optimal level of detail varies depending on many factors. • Certain level of discretion of authorities is essential to mitigate the deficiencies of guidelines. 2. Specificity of Fining Guidelines 6
  7. 7. 3.1. Proportionality and Discretion of Authorities  While the main issue is under-deterrence particularly about hardcore cartels, deterrence is not necessarily the sole purpose of enforcement. • Other values should be considered, e.g. legitimate interests of undertakings, procedural rights of defendants, preventing false positives, etc. • It contributes to enhancing deterrence by increasing actual enforceability on a lasting basis.  Sanctions need to be balanced with the gravity of violations. • The issue of excessive/wrong fines may not be serious about hardcore cartels. • Some sorts of unilateral conducts whose liability may not be uncontroversial depending on jurisdictions, e.g. margin squeeze, may require further efforts for legitimacy. 3. Developing Judicial Review 7
  8. 8. 3.1. Proportionality and Discretion of Authorities  Due process matters a lot and it relates to details of guidelines and authorities’ discretion. • In Korea, arguably, inefficient judicial review is caused by both excessively complicated guidelines and strict judicial review that watches closely if the authority abided by them.  EU courts also have unlimited jurisdiction to review whether the fines are appropriate and, if necessary, even to adjust fines imposed by the Commission. • Judicial scrutiny made over facts, laws, procedures, discretion, etc. • Accurate, efficient, and impartial procedures will enhance effective, legitimate enforcement, and deterrence. 3. Developing Judicial Review 8
  9. 9. 3.2. Proportionality and Diverse Sanctions  Factors to put on the scale should include all kinds of sanctions applicable, i.e. fines, imprisonment, disqualification orders, etc. • If one fails to consider them in totality, it may lead to excessiveness with a prejudice to the actual enforceability.  One needs to take into account the different institutional settings in each jurisdiction when assessing optimal volume of fines. • E.g. in US, fines may be set less than in EU or Korea b/c the success of private damages suit may justify different priority.  The sum of various sanctions in a jurisdiction may remain constant in the boundary of proportionality. • Conversely and more importantly, aggregate sanctions not reaching to an optimal level will be ineffective. 3. Developing Judicial Review 9
  10. 10. 3.3. Judicial Review and Deterrence  For effective deterrence, fining guidelines need to be sufficiently detailed and the judiciary should review whether it is properly established and observed in practice. • At the same time, certain discretion of authorities is necessary. • An appropriate balance between the deterrence from details/judicial review and discretion of authorities, two seemingly conflicting principles, needs to be sought. • Various factors including confidence on authorities will explain the balancing point.  One needs to be reminded of the potential for under-enforcement caused by the predominance of resources by large undertakings. • More judicial review might mean more influence from big undertakings rather than serving more justice. 3. Developing Judicial Review 10
  11. 11. 4.1. Rightful Beneficiary of Antitrust Fines  Most jurisdictions count antitrust fines in government revenue and it can undermine the very raison d'être of antitrust fines. • US seems to be an outlier in that courts must consider restitution to victims of the violation when determining fines.  It would be unfair if the fining system denies victims the right to be compensated based on concerns of duplicative payment or disproportionality that may be caused by fines by authorities.  Treating antitrust fines as a source of treasury revenue may work to discredit the motives of competition authorities. • Like the common example of speeding tickets issued to make up for local government’s deficit. 4. Beneficiary of Collected Fines 11
  12. 12. 4.2. Antitrust Fines and Private Damages  The avoidance of double payment b/w fines and damages may be addressed differently between antitrust fines and private damages. • In setting antitrust fines, damages payments might be a mitigating factor. • But the payment of antitrust fines will not justify a reduction in the amount of damages. • In theory, however, the principle of proportionality may lower the amount of damages awarded as courts typically take into account the overall effects of sanctions. 4. Beneficiary of Collected Fines 12
  13. 13. 4.3. Antitrust Fines to Mitigate Consumer Harm  To ensure the legitimacy of antitrust fines, genuine efforts should continue to distribute monies collected as antitrust sanctions to the victims of antitrust violations.  Authorities needs to devise measures to fill the gap between private enforcement and public enforcement. • E.g. assisting private claimants in lawsuits, filing amicus curiae briefs in court, Parens patriae suits. • Cy pres remedies often ordered by US courts may have some relevance. 4. Beneficiary of Collected Fines 13
  14. 14.  If pecuniary remedies become tax-deductible, the intended deterrence effect is reduced by the corporate tax rate.  Rule of thumb is the dichotomy of punitive and compensatory damages; the punitive portion should not be tax-deductible. • But there is a grey area, e.g. whether compensation to victims or reimbursement of legal fees (unlike bribery) are not against public policy, so that tax deductibility may be justifiable.  Another issue is the tax-deductibility of fines or punitive damages paid to foreign competition authorities or foreign plaintiffs. • In 2015, the Korean National Tax Services announced that settlement of treble damages claims in the US is not deductible. • But in 2016, the Ministry of Strategy and Finance was known to have issued a new interpretation that they are deductible. • There is no settled law in Korea about this important issue. 5. Effective Fines and Tax-deductibility 14
  15. 15.  The problem of over-deterrence by overlapping fines in multi- jurisdictions is still a matter of theoretical possibility and not empirically tested. • Not all of the jurisdictions seriously enforce competition laws and even many of hardcore cartels are not fairly detected and sanctioned, leaving the issue of under-deterrence significant. • However, several issues arise recently. 6.1. Indirect Sales  Concerns over double counting is likely to arise in the context of calculating fines based on the sales which took place outside a jurisdiction but indirectly affects the jurisdiction. • Leading authorities took ambiguous approaches until recently. • Efforts among authorities to cooperate for a consistency and build best practice should be sought. 6. Problem of Double Punishment 15
  16. 16. 6.2. Double Fines  Most jurisdictions set a certain rate (e.g. 10% in EU) of global turnover as a limit to fines for concerns of financial ability to pay, etc. • This broad limitation may result in excessive fines when multiple authorities sanction an identical violation.  This approach worked before to prevent any evasive conduct by assigning turnover to a loophole jurisdictions. • Today as most jurisdictions enforce competition laws, this justification may not work perfectly.  A solution would be limiting the cap of fines to turnover within the boundary of a jurisdiction, as is the case in Korea. • A concern for global firms to slip through regulatory net better be addressed by empowering ROW competition authorities. 6. Problem of Double Punishment 16
  17. 17. 6.3. How to Coordinate Antitrust Fines  A difficult topic about cooperation among authorities needs to be addressed based on international comity. • Concurrent jail terms enforced in the Marine Hose case is a good example.  More substantive cooperation can be considered w/r/t antitrust fines. • It is not uncommon for a competition authority to decide not to find infringement or not to impose a cease-and-desist order when remedies imposed by foreign competition authorities sufficiently address the competition concern. • More difficulty is expected in coordinating antitrust fines b/c ex post distributional consequence. 6. Problem of Double Punishment 17
  18. 18.  As more jurisdictions worldwide actively enforce competition laws as a strategy to develop the economy, the success of enforcement heavily depends on deterrence by antitrust fines.  Current design of fining guidelines adopts the rationality hypothesis but this approach does not work perfectly in reality. • Diverse measures should be considered to cure the shortcomings.  Need to enhance enforcement capabilities of competition authorities so that findings of liability would increase coupled with imposing an optimal sanctions across global jurisdictions.  Current Active cooperation over substantive measures should be actively promoted. • It will benefit not only the global community but also individual regulators. 7. Conclusion 18
  19. 19. Thanks. Q & A hwang_lee@korea.ac.kr

×