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Monetary Penalties in China and Japan

American Bar Association Section of Antitrust Law Cartel & Criminal Practice Newsletter, Forthcoming

George Mason Law & Economics Research Paper No. 16-40

9 Pages Posted: 24 Oct 2016  

Koren W. Wong-Ervin

George Mason University, Scalia Law School - Global Antitrust Institute

Douglas H. Ginsburg

U.S. Court of Appeals for the District of Columbia Circuit; George Mason University - Antonin Scalia Law School, Faculty

Ariel Slonim

George Mason University, Department of Economics, Students

Bruce H. Kobayashi

George Mason University - School of Law

Joshua D. Wright

George Mason University - Antonin Scalia Law School, Faculty

Date Written: October 21, 2016

Abstract

Recent solicitations for comments on monetary penalties in China and Japan highlight opportunities to improve the deterrent effect of antitrust law by more closely aligning penalties with economic theory and evidence. When monetary penalties are not based upon economic analysis and clearly linked to identified harms, they are likely to generate costly errors, either by overdetering welfare-enhancing behavior or underdetering anticompetitive behavior.

On June 17, 2016, China’s Anti-Monopoly Commission of the State Council requested comments on Draft Guidelines issued by the National Development and Reform Commission (NDRC) for the calculation of illegal gains (disgorgement) and setting of fines issued. On July 13, 2016, the Japan Fair Trade Commission (JFTC) requested comments on introducing flexibility into their administrative surcharge system, developing a settlement program, and reforming due process in conjunction with surcharge reform.

Both proposed monetary penalty systems would benefit from a deeper grounding in economics. The NDRC’s Draft Guidelines provided only for the optional use of economic analysis in calculating illegal gains and appear to create a presumption that disgorgement would apply in addition to fines in nearly all cases. The JFTC’s consultation acknowledged that the current inflexible surcharge system could give rise to “unreasonable or unfair” surcharges, but did not require economic analysis to determine appropriate monetary penalties. In both countries, monetary penalties are applied broadly and are not based upon identified harms, although the JFTC’s consultation invited comments on whether differentiation by type of infringement was necessary.

Keywords: antitrust, antimonopoly, cartels, competition, disgorgement, due process, economic theory, illegal gains, mitigation, monetary penalties, settlement, surcharge

JEL Classification: K21

Suggested Citation

Wong-Ervin, Koren W. and Ginsburg, Douglas H. and Slonim, Ariel and Kobayashi, Bruce H. and Wright, Joshua D., Monetary Penalties in China and Japan (October 21, 2016). American Bar Association Section of Antitrust Law Cartel & Criminal Practice Newsletter, Forthcoming; George Mason Law & Economics Research Paper No. 16-40. Available at SSRN: https://ssrn.com/abstract=2857044

Koren W. Wong-Ervin (Contact Author)

George Mason University, Scalia Law School - Global Antitrust Institute ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States
310-779-0982 (Phone)

Douglas H. Ginsburg

U.S. Court of Appeals for the District of Columbia Circuit ( email )

333 Constitution Ave NW
Room 5523
Washington, DC 20001
United States

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States

Ariel Slonim

George Mason University, Department of Economics, Students ( email )

Fairfax, VA
United States

Bruce H. Kobayashi

George Mason University - School of Law ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States
703-993-8034 (Phone)
703-993-8088 (Fax)

HOME PAGE: http://mason.gmu.edu/~bkobayas

Joshua D. Wright

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States

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