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International legal perspective. The enlightenment of the quantification of EU anti-monopoly damages to our country.

Published:

2024-08-21

The Anti-Monopoly Law maintains the orderly operation of the market economy by cracking down on monopoly violations, but in practical cases, it is difficult for monopoly private litigation to obtain sufficient compensation through a certain reference standard or quantitative model. my country still lacks A set of corresponding quantitative standards for damages. In 2013, the European Commission issued a practical guide on the quantification of monopoly damages, which provides a valuable reference for the international and national anti-monopoly cases, so as to explore the full impact of monopoly infringement on the injured enterprises and construct a feasible tool for judicial institutions to deal with anti-monopoly cases, the documents of the European Commission provide a very important reference in solving the difficulties of private relief, removing obstacles to public law enforcement, and determining the amount of damages.

Foreword

As China's "economic constitution", the Anti-monopoly Law plays an important role in maintaining the market economic order and social stability. However, since the promulgation and implementation of the Anti-Monopoly Law in 2008, there has been no deterministic guiding rule to regulate the calculation of the amount of damages in monopoly disputes, resulting in the low enthusiasm of monopoly private relief in recent years. The number of anti-monopoly cases is very small. However, the characteristics of monopoly violations determine that they are extremely harmful to the economy and society, so it is necessary to improve the design of the relevant system of monopoly damages, and clarify the calculation criteria of the amount of compensation, and establish an independent monopoly damages system, rather than directly using the relevant provisions of civil law to determine the amount in general.

1. the legislative status quo of China's anti-monopoly damage compensation system.

In order to prevent monopolistic behavior, protect fair competition in the commodity market, safeguard the legitimate interests of consumers and the public interests of society, and promote the development of the socialist market economy, my country promulgated and implemented the the People's Republic of China Anti-Monopoly Law on August 1, 2008. The only provision in this law concerning compensation for monopoly damages is Article 50: "Operators who commit monopolistic behavior and cause losses to others shall bear civil liability according to law."

In June 2012, the Supreme People's Court promulgated and implemented the Provisions on Several Issues Concerning the Application of Law in the Trial of Civil Dispute Cases Caused by Monopolistic Behaviors. Article 14, paragraph 2, of the judicial interpretation stipulates: "at the request of the plaintiff, the people's court may include the reasonable expenses paid by the plaintiff for investigating and stopping monopoly behavior into the scope of compensation for losses."

Quantification of 2. EU Antitrust Damages

Introduction of (I)-related regulations

Anyone who has suffered damage as a result of a violation of article 101 or 102 of the Treaty on the Functioning of the European Union is entitled to compensation for damages. The Court of Justice of the European Union held that this right should be guaranteed by the main EU law. Damages mean restoring the victim to the state in which he would have been without the effects of the violation. Thus, compensation includes not only compensation for the loss actually suffered (damnum emergens), but also compensation for loss of profits (lucrum cessans) and the payment of interest. Among them, the actual loss suffered refers to the reduction of its assets, and the loss of profits refers to the part of the assets that should have been increased but not increased due to the existence of the infringement.

Civil indemnity proceedings are generally decided by national courts and, in the absence of EU rules, the exercise of strict indemnity guaranteed by EU law should be regulated in detail by the domestic legal system of each Member State. However, such rules must not make the exercise of the rights conferred on individuals by EU law (the principle of validity) too difficult and even impossible in practice should not be inferior to actions for damages based on similar rights conferred by domestic law (the principle of equivalence).

(II) general calculation method

The key to calculating compensatory damages is to compare the position of the plaintiff (claimant) in the event of anticompetitive conduct with the position that the plaintiff would have been in in the absence of anticompetitive conduct. The general methodology for antitrust damages uses a comparison-based approach, the key to which is to construct a situation for comparison, I .e., the non-infringement scenario (non-infringement scenario), which is known in econometric methods as the counterfactual model (counterfactual inference model). The specific calculation method is as follows:

Since the most common situation in which a cartel results in antitrust damages and the assessment techniques used in that situation are equally applicable to other situations, the cartel situation is used as an example for a counterfactual assessment.

By constructing a counterfactual model, the plaintiff's profit in the counterfactual situation can be compared with its actual profit observed, and the difference between the two is the compensatory damages payable to the plaintiff.

Figure 1 The profit of the direct buyer before the cartel raises the price.

As shown in the figure, the position of the firm that purchased the cartel product before the cartel began is described, P0 is pricing, Q0 is sales volume, MC0 is marginal cost, and the shaded portion is corporate profit, I .e. sales volume Q0 multiplied by profit per unit (P0-MC0).

Quantification of (III) damages

Econometric analysis of observational data is a way to understand when the effects of infringement begin and when they cease.

1. Quantification of damages for price increases

Figure 2 Impact of price increases due to infringement

As shown in the figure, P1 and Q1 are the price and corresponding sales volume in the case of no infringement, and P2 and Q2 are the price and corresponding sales volume in the case of monopoly infringement. The shadow A area is the loss of interest caused by overpricing (overcharge), I .e. the direct impact of price increases, and the shadow B area is the loss of interest caused by the volume effect (volume effect), I .e. the indirect damage caused by price increases.

As for the infringement that leads to an increase in the price of a product, the European Commission distinguishes between two types of damage caused by the infringement (Region A and Region B, respectively):

The first comes from the fact that direct or indirect consumers of the infringing enterprise have to pay more for each product they buy (compared to if there is no infringement), and this effect is called "overcharge";

The second is the damage caused by the so-called "volume effect", which is caused by the decline in product purchases caused by rising prices.

The following two types of damage are analyzed separately:

(1) "overcharge": According to data from the European Commission in 2009, nearly 93% of cartel cases are accompanied by excessive charges, the most common of which is the existence of 10-20% excessive charges;

(2) "Volume effect": The volume effect is the unearned part that occurs after a price increase leads to a reduction in demand, so there is an intrinsic link between the direct impact and indirect damage of a price increase.

In some cases, the court will apply the simplified method of calculation provided by the EU. For example:

"Consequential damage from the volume effect = the average profit margin per transaction x the amount of units unsold as a result of the tort."

2. Quantification of damages for exclusive practices

The aforementioned price cartels are mostly harmful to direct or indirect consumers, while the exclusive practices of monopolies will have an impact on competitive markets and harm competitors. Such exclusionary practices are abuse of dominant market positions, exclusion of market competition or reduction of market share, including: predatory pricing (predation), franchise (exclusive dealing), denial of supply (refusal to supply), tying (tying), bundling (bundling), marginal squeezing (margin squeeze), etc.

The loss of competitors' interests caused by the exclusive practice mainly comes from two aspects: first, the decrease of product revenue, mainly due to the decrease of turnover; second, the increase of product cost, mainly due to the increase of input price. Because the dominance and degree of dominance of each monopoly in each market is difficult to measure, the time dimension should be used as a variable when quantifying damages for exclusive practices, and a comparison should be made before and after the occurrence of monopoly infringement in the same market. Specific practices are:

In order to ascertain whether and to what extent competitors have suffered a loss of interest, it is necessary to compare:

① During the period of infringement, the competitor's income in the market affected by the infringement;

② Product revenue that a competitor would receive in a non-infringing situation.

According to the EU Usage Guide (Commission Staff Working Document Practical Guide), the usual calculation is:

"Amount of loss = counterfactual profit-actual profit"

(The actual profits component is usually zero in cases where monopoly infringement manifests itself as an impediment to market entry, or even negative in cases where the impeded competitor has incurred costs and no gain.)

The European Commission's practical investigation of antitrust damage litigation cases shows that enterprises excluded from competition sometimes choose to claim only part of the following losses:

① Costs incurred in response to the exclusion of competitive conduct;

② non-recoverable costs ("sunk costs");

③ The amount determined to be too high in the case of marginal squeeze;

④ Costs arising from differential pricing.

In addition, the quantification of damage on the basis of additional costs incurred (sunk costs plus non-sunk costs) usually constitutes the lower limit for assessing the total loss of benefit.

3. EU Anti-monopoly Damages Calculation and Its Enlightenment to China

(I) the establishment of the principle of attribution of no-fault liability

Generally speaking, when a monopoly actor implements a monopoly behavior, he must realize that his own behavior is illegal, and almost no monopoly behavior occurs due to fault. Because of the asymmetry of information, it is difficult for the victim to prove whether the monopoly actor was at fault or deliberately. Moreover, even if the original intention of the implementer of monopoly behavior is to improve economic efficiency, but in the course of their behavior will inevitably have a negative impact on downstream enterprises, competitors and even competitive markets. This situation, which is difficult to attribute to specific actors due to economic development, should also be recognized.

(II) the establishment of a system of punitive damages

First of all, monopoly violations often cause huge economic losses, and this impact is usually lasting, and the complex and diverse characteristics of this kind of damage also make it difficult to make a simple artificial distinction, therefore, if the use of punitive damages other than the establishment of compensatory damages, it can more encourage private victims to discover and expose monopoly violations, and then make up for the shortcomings of public agencies in law enforcement, it is conducive to the protection of the legitimate rights and interests of the victims.

Secondly, in practice, the subjective mentality of each monopoly enterprise is not the same, so if forced to use the three-fold damage compensation system for negligent monopoly violations, it may cause excessive punishment. Moreover, discretionary compensation not only requires judges to have a very high level of legal literacy, but also requires judges to have a certain level of economic literacy, so the resulting uncertainty should also have institutional regulation.

(III) distinguish between harm and lost benefit

In the case of damages for monopolistic competition, the damage is usually intuitive and easy to calculate, while the amount of the lost benefit is more complex and directly related to the amount of damages available to the victim. The calculation of the amount of lost benefits should refer to the practical guidelines of EU operating treaties, and predict the price assuming no illegal acts by means of regression analysis method, that is, the influence of cartel on price should be separated from the price changes caused by other variables (price changes of substitutes not affected by cartel, cost changes caused by new technologies, raw material price changes, etc.), so as to more accurately determine the amount of lost benefits of victims.

Conclusion

Damages in the anti-monopoly law are different from civil liability in the traditional sense. Because the economic monopoly subject has advantages in scale, information and so on, the monopoly subject and the injured person are not in an equal position, so it is very important to clarify the difference between monopoly damage compensation and civil damage compensation in the scope and amount calculation. Based on the consideration of the development of China's anti-monopoly legal system and the situation of anti-monopoly private litigation in the past ten years, the determination of the scope and amount of damages has a large research space and value.

References:

[1] Li Guohai. On the Constitutive Elements of Anti-monopoly Law Damages, Journal of Central South University Social Science Edition 2006(2).

[2] You Yu. Research on Cartel Regulation System, Law Press, 2006.

[3] Li Guohai. A comparative study of the anti-monopoly law damage compensation system, Law and Business Research 2004(6).

[4] Li Junfeng. Discussion on the calculation of loss in anti-monopoly civil litigation, Journal of Heilongjiang Academy of Political and Law Management 2006.

[5] [English] Simon Bishop, Mike Walker. The Economics of EU Competition Law: Concept, Application and Measurement, Translated by Dong Hongxia, People's Publishing House, 2016.

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