OECD Publishes Paper on Remedies and Sanctions in Abuse of Dominance Cases

OECD Publishes Paper on Remedies and Sanctions in Abuse of Dominance Cases

On 22 May 2007, the Organisation for Economic Co-operation and Development (OECD) published a paper setting out the proceedings of a policy roundtable, held by the OECD Competition Committee in June 2006, on remedies and sanctions in abuse of dominance cases.

Each year the OECD Competition Committee holds several policy and best practice roundtables. These involve delegates from a number of competition authorities discussing particular issues of interest on competition policy and procedure.

The OECD has now published a paper setting out the proceedings of such a roundtable held by the Competition Committee in June 2006 on remedies and sanctions in abuse of dominance cases.

The paper contains an executive summary of the key points that arose during the discussions, a background paper (around which the discussion was based), written submissions of the delegates (who included the UK, US, European Commission, Germany, France, Japan and Canada) participating in the roundtable and an overall summary of the proceedings.

The background paper considers the potential objectives of remedies and sanctions in the context of abuse of dominance cases. It contains general suggestions for designing effective remedies and considers specific types of remedies and sanctions along with their strengths and weaknesses. Finally it reviews the remedies and sanctions applied in recent notable abuse of dominance cases (in particular the Microsoft cases in the US and EU). The national submissions set out the legislative powers for imposing remedies and sanctions, the policy considerations and objectives, and the application of remedies and sanctions in practice in that jurisdiction.

Key points that arose from the discussion, the written submissions and the background paper include:

·  There is an important difference between remedies (which cure, correct or prevent unlawful conduct) and sanctions (which seek to deter future unlawful conduct and, in some jurisdictions, require the disgorgement of illegal gains or compensation of victims). No general consensus was reached as to whether remedies or sanctions are more important.

·  The crafting of appropriate and effective remedies is just as important as the definition of dominance and the identification of abuse. However, it is a topic which has received much less attention. There is little point in correctly identifying an abuse of dominance if the remedies or sanctions imposed are too lenient, too sever, too late, ineffective, or otherwise poorly conceived or implemented. Flawed remedies can harm competition.

·  There are difficulties in identifying appropriate and effective remedies and sanctions in abuse of dominance cases. This is partly due to a divergence of opinion regarding the objectives that should be pursued and the different priorities applied in different member states (which are not always internally consistent). The difficulties of ascertaining the level of fines that will achieve deterrence, while not stifling competition, or of imposing behavioural remedies that can be enforced effectively are exacerbated by the comparative lack of experience in this area and the extent of academic disagreement.

·  Structural remedies have the advantage of eliminating market power rapidly and require less oversight. However, they may be more disruptive to the company's business and may create inefficiencies. Behavioural remedies tend to be less controversial and can be tailored to individual market circumstances. However, they require ongoing and possibly extensive monitoring and also have compliance risks. Monetary sanctions, however, are easy to understand and enforce and have a deterrent effect (if set at the right level), but do not, themselves restore competition. Therefore, each type of remedy and sanction has certain advantages and disadvantages.

·  Remedies and sanctions should be proportionate: a remedy must not exceed what is necessary to achieve competition law's objectives and a sanction most not over or under-deter. Proportionality is expressly required by statute in some jurisdictions. Proportionality ensures that measures are appropriate, are not arbitrary and are more predictable.

·  Most jurisdictions allow the imposition of both behavioural and structural remedies, although behavioural remedies are often preferred and structural remedies may only be allowed where there is no equally effective behavioural remedy or where the behavioural remedy is too burdensome.

·  The effectiveness of remedies is rarely monitored closely by authorities. However, compliance with remedies tends to be monitored closely. It was concluded that greater monitoring of effectiveness would be desirable as it would enable authorities to design remedies that are closer to meeting their objectives.

·  There was no consensus as to the appropriateness of imposing fines in dominance cases. In particular, the US does not generally impose fines for monopolisation violations, although the Federal Trade Commission has sought disgorgement. France, however, has regularly imposed fines. Whereas the EU and Germany retain the discretion to impose fines where merited. There was, however, general agreement that fines may not be appropriate in particularly complex cases where the conduct in question was not obviously anti-competitive. Further, it was noted that private actions are less common in those jurisdictions where fines are imposed. Fines may not be needed for deterrence purposes in those jurisdictions, such as the US, where private actions are more common.