On July 31, 2012, the Federal Trade Commission (“FTC”), in a 4-1 vote, withdrew its 2003 Policy Statement on Monetary Equitable Remedies in Competition Cases (the “2003 Policy Statement”).1 This action reflects a significant policy shift that signals and facilitates the agency’s expanded use of monetary remedies (e.g., disgorgement and restitution) for antitrust violations.
The withdrawn 2003 Policy Statement only permitted the FTC to seek financial remedies in “exceptional” antitrust cases in which: (1) the underlying antitrust violation was “clear”; (2) there was a reasonable basis to calculate the remedial payment; and (3) alternative remedies in other civil or criminal proceedings were unlikely to accomplish the purposes of the antitrust laws. The Commission’s statement accompanying the withdrawal stated that this test from the 2003 Policy Statement provided an “overly restrictive view” of the circumstances in which the FTC may seek monetary remedies, and, in particular, the Commission clearly rejected the clarity and alternative remedy tests.2
With respect to the clarity requirement, the Commission rejected the notion of a heightened standard for seeking disgorgement or restitution compared to the standards by which it would otherwise seek an antitrust remedy: “Whether conduct is common or novel, clearly a violation or never before considered, has little to do with whether the conduct is anticompetitive; some novel conduct can violate the antitrust laws and can be even more egregious than ‘clear’ violations.”
As for the likelihood that other proceedings, including civil litigation, may effectively remedy a violation, the Commission stated “whether ‘other remedies are likely to fail to accomplish fully the purposes of the antitrust laws’ . . . may be read to require that the Commission demonstrate the insufficiency of other actions to secure monetary equitable remedies … such a burden is inappropriate . . . it is not dispositive [but] only one of several questions that might usefully be asked in deciding whether a Commission imposed monetary remedy is appropriate and necessary.” Thus, while still a relevant consideration, the FTC will not be limited by the likelihood that violating parties may otherwise be subject to monetary penalties though other channels, such as private litigation.
Going forward, the FTC says it will be guided by existing case law3 and that it “will exercise responsibly its prosecutorial discretion in determining which cases are appropriate for disgorgement.” The FTC did not indicate when and in what circumstances it will seek monetary remedies, but the Commission’s statement makes clear that a majority of the current Commissioners believe such remedies have been sought too infrequently.4 The majority believes that the withdrawn 2003 Policy Statement has had a “chilling” effect on the FTC staff, and pointed out that the FTC has only sought monetary remedies in two antitrust cases over the past nine years. Several commentators have suggested that the FTC withdrew the 2003 Policy Statement because it has specific targets in mind, including so-called “reverse payment” settlement agreements between branded and generic pharmaceutical manufacturers.
FTC Commissioner Maureen Ohlhausen voted against the FTC withdrawal and issued a dissenting statement.5 In her dissent Commissioner Ohlhausen noted that the 2003 Policy Statement had widespread, bipartisan support, and raised concern over the removal of important safeguards:
Rescinding the bipartisan Policy Statement signals that the Commission will be seeking disgorgement in circumstances in which the three-part test heretofore utilized under the Statement is not met, such as where the alleged antitrust violation is not clear or where other remedies would be sufficient to address the violation. I have significant concerns about sending such a signal and seeking disgorgement in such situations.
Commissioner Ohlhausen also expressed frustration that by removing rather than revising the 2003 Policy Statement, the FTC now provides the legal and business communities no guidance as to the circumstances under with the agency may seek disgorgement or restitution in antitrust cases. Lending support to those who believe the FTC withdrew the 2003 Policy Statement with specific targets in sight, Commissioner Ohlhausen also criticized the other Commissioners for withdrawing a long-standing policy without seeking public comment and with limited internal deliberation.
The withdrawn 2003 Policy Statement only governed the FTC and did not apply to the U.S. Department of Justice Antitrust Division (DOJ), which shares responsibility with the FTC for enforcing the federal antitrust laws. DOJ does not have a specific policy statement explaining when it will/will not seek monetary penalties for non-criminal antitrust violations, but it has tended to exercise considerable restraint. For example, in February 2010, as part of a settlement with DOJ, Key Span Corporation agreed to disgorge $12 million in profits to resolve claims that Key Span violated the antitrust laws by entering into an anticompetitive agreement with Morgan Stanley which DOJ alleged resulted in a price increase for retail electricity suppliers and increased electricity prices for consumers in New York City.6 In that case, DOJ explained that it pursued monetary penalties in a civil antitrust proceeding because it believed that the filed-rate doctrine (which precludes private litigation over certain regulated utility rates) would have substantially impeded private damages actions, and injunctive relief would not have been meaningful given the nature of the violation alleged.7 In this regard, while not covered by the FTC’s 2003 Policy Statement, DOJ nonetheless applied similar considerations when pursuing monetary penalties in the Key Span matter. Whether the FTC’s withdrawal of the 2003 Policy Statement reflects a possible point of future divergence between the FTC and DOJ on the use of monetary remedies in civil antitrust cases is to be determined.