Letter regarding FTC Disgorgement

Honorable Jon Leibowitz
Chairman
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20590

Dear Chairman Leibowitz:

The U.S Chamber of Commerce, the world’s largest business federation representing the interests of over three million businesses and organizations of every size sector and region, writes to express its deep disappointment in the Federal Trade Commission’s (FTC) handling of its decision to withdraw its 2003 policy statement regarding the imposition of monetary equitable remedies in competition cases.

Without question, the FTC should periodically review and update its policy positions and guidance. However, with regard to antitrust policy and enforcement, perhaps above all things, the business community both values and deserves transparency and predictability. Unfortunately the FTC failed to notify and engage affected stakeholders in a transparent process to facilitate this abrupt change in policy and build a public record that credibly supports its decision.

The internal FTC decision to review and ultimately revoke its 2003 policy was not known until publicly announced. What was well-known, and relied upon, was the previous policy regarding disgorgement, which was originally issued by the FTC on a unanimous basis and later supported again unanimously by the congressionally chartered Antitrust Modernization Commission. Such policy unanimity in antitrust is exceedingly rare. The decision to consider changing such a consensus policy thus, in the Chamber’s view, required a thoughtful, informed and transparent process. This has been the standard practice used to update antitrust policy statements and guidance, such as the recently revised horizontal merger guidelines. And, indeed, the FTC used the Federal Register to inform its deliberations when it developed the 2003 policy.

With regard for the need for predictability, the law clearly does not grant the FTC fining authority in the case of antitrust violations. Disgorgement is available, but it is universally agreed to be a difficult remedy to appropriately apply. Therefore, its use has and should always be limited. The previous policy guidance correctly sought to ensure that disgorgement was considered only where the underlying antitrust violation was clear, the disgorgement amount could be easily calculated, and the potential for follow-on remedies obtained through civil and criminal litigation was considered.

The uncertainty created with the FTC’s withdrawal of the 2003 policy statement is troubling on a number of levels. For example, it suggests that the agency may pursue disgorgement even in cases where follow-on remedies are likely to be applied, a virtual certainty today with the extremely aggressive antitrust plaintiffs’ bar. Pursuit of disgorgement in these circumstances, however, would unfairly expose the business community to the kind of “double recovery” about which the Supreme Court has warned. Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977). The increased risk of double recovery, coupled with the FTC’s abandonment of its policy that disgorgement will only be sought in cases involving clear violations, creates ambiguities that chill pro-competitive practices, a result that undermines an efficient economy.

The previous guidance provided certainty that disgorgement was a remedy that was to be used only in “exceptional cases”. In the FTC statement removing the 2003 policy position, the agency indicates that it will still consider these factors but that it no longer draws the conclusion that disgorgement should be reserved for a limited number of cases. As a result, there is an open-ended implication that the FTC plans to pursue disgorgement more frequently. At the same time, there is significant uncertainty regarding the use of disgorgement as a remedy going forward.

The FTC indicates that going forward it will “exercise responsibly its prosecutorial discretion in determining which cases are appropriate for disgorgement.” The credibility of this statement is openly in question given Commissioner Ohlhausen’s strongly worded dissent which points to a “lack of deliberation that has accompanied the withdrawal of the policy statement” and “that (the) public comment process was not pursued in connection with the withdrawal of the statement.”

Prosecutorial discretion, while important, is not a suitable substitute for policy guidance. The withdrawal of the 2003 disgorgement policy, combined with the FTC’s recent about face on previous pledges to issue guidance with respect to Section 5, suggests a disturbing pattern that undermines the transparent and predictable nature of U.S. antitrust policy and enforcement. The Chamber requests that, at a minimum, the FTC issue new guidance to give the business community the transparency and predictability it needs to fully understand the potential application of disgorgement in future matters.

Sincerely,

R. Bruce Josten

cc: Commissioner J. Thomas Rosch
Commissioner Edith Ramirez
Commissioner Julie Brill
Commissioner Maureen Ohlhausen
Honorable Pat Leahy
Honorable Chuck Grassley
Honorable Herb Kohl
Honorable Michael Lee
Honorable Jay Rockefeller
Honorable Kay Bailey Hutchinson
Honorable Lamar Smith
Honorable John Conyers
Honorable Bob Goodlatte
Honorable Mel Watt