[authors: Matthew P. Hendrickson, Gary A. MacDonald, Steven C. Sunshine]
Signaling an intention to enforce antitrust laws more aggressively with monetary remedies, the Federal Trade Commission (Commission) revoked its 2003 Policy Statement on Monetary Equitable Remedies in Competition Cases (Policy Statement) on July 31, 2012. In a 4-1 vote, the Commission decided that, contrary to the Policy Statement, monetary remedies no longer should be limited to “exceptional cases” where the violation was clear and other remedies would be insufficient to achieve the purpose of the antitrust laws.
The Commission introduced the Policy Statement in 2003, shortly after obtaining disgorgement by consent decrees in two cases.1 The Policy Statement acknowledged that the monetary equitable remedies of disgorgement and restitution may be useful tools for government antitrust enforcement but should be reserved for “exceptional cases.” It provided guidance that such cases may exist where (1) the violation was “clear,” i.e., at the time of the conduct, an offender reasonably could have expected that the conduct would be found illegal; (2) a reasonable basis existed to calculate a remedy; and (3) other remedies through criminal or civil litigation would not fully address the violation by taking back all ill-gotten gains from the defendant.
In rescinding the Policy Statement, the Commission now has taken the position that monetary equitable remedies no longer should be limited to exceptional cases, and that the first and third criteria had created an overly restrictive view of the Commission’s options to seek monetary remedies. With regard to the first criterion, the Commission stated that the distinction between a “clear” violation of established law and a violation based on novel or unclear antitrust law “has little to do with whether the conduct is anticompetitive.” The Commission also explained that the third criterion could be interpreted to impose an inappropriate burden that would require the Commission to demonstrate the insufficiency of alternative remedies. In addition, the Commission deemed the second criterion unnecessary because it is a well-established principle of antitrust law. On these bases, the Commission voted to withdraw the Policy Statement and rely instead on existing case law to guide its use of monetary remedies.
Commissioner Maureen K. Ohlhausen dissented from the withdrawal, stating she had “strong concerns” about the majority’s intention to seek disgorgement for violations that might be unclear or sufficiently addressed by other remedies. She noted that adoption of the Policy Statement had been subject to a public comment process, garnered support from well-respected antitrust practitioners and achieved a level of government transparency, whereas the majority’s withdrawal of the Policy Statement did not allow for public deliberation or provide any revised guidance to fill the void. She further stated that, in her experience, the Policy Statement had never inappropriately constrained the Commission.
Revocation of the Policy Statement is a clear signal that the Commission plans to use the threat of monetary remedies to increase its enforcement weaponry. Any attempt to impose a monetary payment in a litigated Commission enforcement action likely would be contested vigorously before the trial court. However, this policy change may have a greater impact on cases that previously would have settled without adjudication — now, in such instances, the Commission may demand a monetary remedy as well, particularly if it and the investigation target(s) cannot agree on a strong conduct remedy. Speculation has centered around current investigations that may have triggered the Commission’s view that it needed to change its remedy policy, perhaps in its ongoing battles against so-called “pay-for-delay” pharmaceutical settlements or its investigation of Google. However, it also is worth noting that the Commission has become increasingly vigorous in antitrust enforcement in recent years and likely has been planning to change its position on disgorgement for some time. For example, in his concurring statement in the Commission’s decision to file a complaint against Ovation Pharmaceuticals in 2008, Chairman Jon Leibowitz expressed some disagreement with the Policy Statement, stating that the Commission “should use disgorgement in antitrust cases more often.” It is now clear that is exactly what the Commission intends to do.
1 FTC v. Mylan Labs, Inc., Civ. No.1:98CV03114 (D.D.C. 2001); FTC v. The Hearst Trust, Civ. No.1:01CV00734 (D.D.C. 2001).