COMMENTS OF THE AMERICAN BAR ASSOCIATION SECTION OF ANTITRUST LAW ON THE DRAFT BILL AMENDING THE COMPETITION ACT ISSUED BY THE REPUBLIC OF CHILE

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1 COMMENTS OF THE AMERICAN BAR ASSOCIATION SECTION OF ANTITRUST LAW ON THE DRAFT BILL AMENDING THE COMPETITION ACT ISSUED BY THE REPUBLIC OF CHILE The views stated in these Comments are presented on behalf of the Section of Antitrust Law. They have not been approved by the House of Delegates or the Board of Governors of the American Bar Association and therefore may not be construed as representing the policy or opinions of the American Bar Association. May 15, 2015 I. Introduction and Summary The Section of Antitrust Law (the Section ) of the American Bar Association respectfully submits these comments to the Draft Bill to Reform D.L. 211 the Competition Act (the Draft Bill ) released for public comment by the Republic of Chile. The Section commend Chile for the open process it has pursued in reforming the current law and are grateful for the opportunity to participate in that process. The Section s comments, which reflect the experience and expertise of our members from the US and many other jurisdictions, are intended to help promote a healthy and efficient competitive environment. We would be pleased to continue our participation or respond to any comments or inquiries that may be useful during this process. II. Specific Suggestions A. Merger Control The Draft Bill s proposed merger control amendments replace the current voluntary reporting system with a mandatory, suspensory regime. We recognize that various jurisdictions around the world have elected to adopt and implement either mandatory or voluntary reporting regimes and, as experience has shown, either type of regime can be workable and successful. Given Chile s decision to move to a mandatory regime, there are important steps it can take to address certain undesirable consequences of such a regime. The Section has been advised that under current practice, the vast majority of notified transactions are local in nature that is, they involve transactions between domestic Chilean businesses. However, we understand that the Draft Bill as currently drafted likely would capture many foreign-to-foreign transactions that is, transactions between businesses headquartered outside Chile that may or may not do business in Chile. Failure to report covered transactions or closing such transactions prior to obtaining clearance in Chile could result in the imposition of significant fines. Accordingly, it is important that the rules determining when transactions trigger the notification requirements of the statute be clear, so that non-chilean entities can comply. In addition, it is important that only transactions having a material nexus to Chile be required to be notified, so that neither the parties to a transaction nor the Fiscalia Nacional Economica will need to expend scarce time and resources on the review of transactions that have no or minimal potential impact on Chilean markets and consumers. The Section s comments accordingly include (i) suggestions for clarifying the definition of a concentration and (ii) suggestions relating to the materiality of an impact in Chile.

2 Defining concentration Article 47 provides that a concentration operation shall be any action, act or convention or group of these having the effect that two or more economic agents, previously independent between them, lose such independence in any area of activities. Loss of independence is described in paragraphs 47(a) through (d). Economic agent is defined very broadly and includes every entity, or part of it, regardless of its legal organization form or even if it lacks one, developing or that have directly or indirectly developed business activities, offering or requiring goods and services as well as a group of tangible and/or intangible assets allowing the development of a business activity. Economic agent is also the basis by which the turnover thresholds are to be determined under Section 48. Theoretically, the current definition could encompass a wide range of associative arrangements between companies not involving the creation of an independent decision-maker on the market, such as a license agreement, supply agreement, distribution agreement or non-structural joint venture. Such a broad and ambiguous standard for defining an economic agent can render compliance decisions difficult and lead to both over-reporting and under-reporting of transactions. Further, a great deal of government resources could be consumed in assisting companies trying to comply. The Section recommends the adoption of a narrower, more certain and objective test for economic agent. In particular, we recommend that the Draft Bill identify with specificity which, if any, types of non-structural agreements would potentially constitute reportable concentrations and provide examples of agreements that are not likely to be reportable concentrations. The legislation would also be aided by a definition of control for example, the acquisition of 50 percent of the voting rights of an entity, the right to appoint or elect 50 percent of the board of directors, or the contractual right to manage the entity s affairs. See, e.g., 16 C.F.R (b)(definition of control for purposes of regulations under the U.S.A. s mandatory premerger notification law, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. 18a); Council Regulation (EC) No. 139/2004 of 20 January 2004 on the control of concentrations between undertakings (EC Merger Regulations) Art. 5(4). Further, Section 47 of the Draft Bill excludes from merger control a concentration between two or more economic agents that do not form part of the same business group pursuant to the terms of Article 96 of Law No. 18,045, but includes a merger coming within the terms of Article 99 of law No. 18, Control is defined with reference to Article 97 of law No. 18,045. It would be very helpful to facilitating compliance by international companies for the Draft Bill to clearly define within the language of the Bill itself which concentrations are exempt or not, rather 1 Article 99 defines mergers as including (1) a joining of one or more corporations in a single one that succeeds the former in all of its rights and obligations, and to which the total capital and shareholders of the merged entities are incorporated; (2) when the assets and liabilities of two or more corporations that are dissolved is contributed to a new corporation that is created; (3) when one or more corporations that dissolve are absorbed by an already existing corporation, which acquires all of its assets and liabilities. 2

3 than solely by reference to other laws or parts of the law. For example, Article 47 could be modified to expressly set forth the definition of control used in Article 97 of law No. 18,045. The Section also recommends clarifying the concept of decisive influence through the use of objective principles. While the Section recognizes that decisive influence is a term used in many jurisdictions, there is a divergence among jurisdictions regarding the interpretation of that term, which has made compliance unnecessarily burdensome and costly. The Section therefore suggests that Chile consider defining decisive influence by reference to the acquisition of a certain percentage of the equity or voting interests in an entity, as is done in Canada, Germany and the United States; alternatively, decisive influence could be defined by reference to the acquisition of managerial control, e.g., the ability to operate the business on a day-to-day basis or the ability to veto ordinary course business decisions. Finally, the Section recommends that the Draft Bill make clear that the acquisition of a passive ownership interest is not subject to merger control. Investments that carry only traditional minority rights should not be subject to merger control regulation. Such rights would include, for example, the right to prevent the majority from making major capital expenditures or capital calls, the right to prevent affiliate transactions, the right to sell or encumber all or substantially all of the assets of an entity, and the right to liquidate or declare bankruptcy. Necessity of an impact in Chile It is well accepted that the reach of a merger control law should be limited to transactions that will have an appreciable effect in the jurisdiction where that law is enacted. The ICN s Recommended Practices for Merger Notification Procedures provide that [j]urisdiction should be asserted only over those transactions that have an appropriate nexus with the jurisdiction concerned and that [m]erger notification thresholds should incorporate appropriate standards of materiality as to the level of local nexus required for merger notification. The ICN s Recommended Practices also provide that [d]etermination of a transaction s nexus to the jurisdiction should be based on activity within that jurisdiction, as measured by reference to the activities of at least two parties to the transaction in the local territory and/or by references to the activities of the acquired business in the local territory. The Working Group commented that the relevant local activities of the acquired party should generally be limited to the local sales or assets of the business(es) being acquired. The Section s suggestions are reflective of this ICN policy, and are meant to clarify the scope of the Draft Bill s mandatory reporting requirements. Proposed Article 48 sets out a two-part threshold test for reportability: The sum of the sales in Chile of the economic agents involved in the concentration must be over an as-yet unspecified threshold; and Two of the economic agents planning to concentrate must each have sales in Chile over an as-yet unspecified threshold: o For mergers and joint ventures/associative agreements, the sales of the economic agents must include those of their respective business groups; o For acquisitions of control, the sales of the economic agent acquiring control and the target entity must include those of their respective business groups; 3

4 o For acquisitions of assets, the sales of the acquiring economic agent must include those of its business group, but the sales on the target are limited to those generated by the target s assets to be acquired. It appears that Article 48 could apply in non-asset transactions even where the target of an acquisition has no nexus with Chile. For example, assume that two global companies having business operations in Chile each agreed to acquire a 50 percent interest in an entity that controls a manufacturing plant in the United States. As currently drafted, the Draft Bill could require a filing even if the manufacturing plant was dedicated to supply the U.S. market. To avoid this type of consequence, the Section recommends that Chile adopt a target-specific objective local effects requirement for example, by providing that the target have sales in or into Chile exceeding some threshold. This type of limitation has been adopted in other jurisdictions to good effect. Brazil, for example, takes into account the sales of the business groups of both the buyer and the seller, but specifies that the transaction must have effects in Brazil, generally meaning that the target must have assets, sales or a subsidiary in Brazil. In addition, the Draft Bill might result in inconsistent treatment depending on the structure of a transaction. To take an extreme example, the acquisition by a single buyer of a target entity which has no sales in Chile could be reportable if members of the target s business group make sufficient sales in Chile, but an acquisition of all of the target entity s assets might not be reportable. We therefore recommend a test that requires the existence of a material nexus between the target and Chile regardless of whether the transaction involves equity or assets. B. Re-criminalization of Certain Agreements The Draft Bill includes a provision for the reinstatement of criminal penalties for certain agreements deemed to violate Chile s competition law. The discussion included in the Draft Bill recognizes that criminalization of certain antitrust violations is an important deterrence tool: From a deterrence perspective, criminalization of collusion will constitute a substantial advance aimed at encouraging a company s executives, who are those that make the decision to be a part of a cartel, to behave according to basic principles underlying free competition and to choose not to engage themselves or their companies in these reprehensible practices. 2 The Section recognizes that different jurisdictions have come to different conclusions about whether fines, without criminal penalties, are a sufficient deterrent for antitrust violations. We note that jurisdictions such as the United States, the United Kingdom, and Canada have concluded that administrative fines are insufficient to deter cartel conduct. While criminal penalties may be an effective tool, resort to criminal sanction should be used sparingly. The Section respectfully notes, as an initial matter, the importance of recognizing the rights of the accused in re-criminalizing cartel conduct. Antitrust defendants must enjoy the procedural and substantive protections that will ensure a full and fair trial. In the United States, for example, 2 Unofficial English translation. Draft Bill at II(e): Desde un punto de vista disuasorio, la criminalización de la colusión constituirá un avance sustancial dirigido a incentivar a que los ejecutivos de las empresas, quienes son los que toman la decisión de ser parte de un acuerdo colusorio, se comporten de acuerdo a los principios más básicos que inspiran la libre competencia y opten por no involucrarse ellos ni a sus empresas en estas prácticas tan reprobables. 4

5 the accused are granted a right to counsel, the right against self-incrimination, and the right to receive prior to trial any exculpatory evidence discovered by the government, among other protections. In Canada, as another example, the government must turn over to the accused any and all relevant evidence, whether exculpatory or not. Such protections are important for the proper functioning of a criminal antitrust regime. The Section also notes the difficulty in prosecuting foreign nationals for violations of domestic antitrust laws. Authorities in many jurisdictions are pursuing foreign-based corporations and foreign nationals for antitrust violations that affect domestic commerce. Such extraterritorial application of domestic criminal laws can be rife with complications with possible foreign policy implications. The Section respectfully suggests Chile expressly limit application of its law to conduct having a direct, substantial, and reasonably foreseeable effect on commerce in Chile. The scope and analysis of collusive conduct As noted above, the Section believes that criminal sanctions are an effective tool to combat cartel conduct. The Section respectfully cautions that the activities subject to criminal sanction be carefully defined so that potentially procompetitive conduct, such as legitimate joint ventures, not be at risk of criminal sanction. The discussion in the Draft Bill recognizes the importance of properly defining what violations may be subject to criminal sanction. The discussion notes that antitrust violations were decriminalized in 2003, in part because the law did not clearly enumerate what activity was criminal. The Draft Bill appropriately provides that only hard-core cartels would be subject to criminal sanction: In the new Article 286 bis of the Penal Code, the crime of collusion is described. The description of the conduct relates only to so-called hard-core cartels. 3 The Section commends the Chilean government s recognition of the importance in properly defining the activities that may invite criminal sanction and offer the follow observations. In the United States, while the same law applies to criminal and non-criminal antitrust violations, criminal remedies have long been applied only to hard-core cartel conduct, understood to be naked price-fixing, bid-rigging, and market or customer allocation agreements among competitors, all of which are deemed to inevitably harm consumers. 4 A Commission that studied U.S. antitrust laws (the Antitrust Modernization Commission ( AMC )) attempted to define the conduct that is prosecuted criminally. The AMC explained that the DOJ has made quite clear that it does not currently prosecute anything other than hard-core cartel activity criminally and that other types of potentially anticompetitive conduct can have 3 Unofficial English translation. Draft Bill at II(e): En el nuevo artículo 286 bis del Código Penal se tipifica el delito de colusión. La descripción de la conducta se refiere únicamente a los denominados carteles duros. 4 See, e.g., Antitrust Enforcement and the Consumer, available at (noting that hard core cartel conduct provides no plausible offsetting benefits to consumers ); Antitrust Guidelines for Collaborations Among Competitors, available at s-collaboration-among-competitors/ftcdojguidelines-2.pdf (noting that the DOJ prosecutes participants in hard-core cartel agreements criminally). 5

6 more ambiguous effects on consumers and consumer welfare, and the legal standards by which such conduct is determined to be anticompetitive are more complex and fact intensive. The AMC further noted that: there is a wide range of unilateral conduct, such as pricing and distribution practices, that can be pro-competitive in most instances, and anticompetitive only in very limited circumstances. Criminal penalties, by contrast, are typically reserved for cases in which conduct is clearly unlawful. To impose them more broadly, on conduct that is potentially not anticompetitive, runs the risk of penalizing the very procompetitive, proconsumer conduct the antitrust laws are intended to encourage. 5 Hard-core cartel conduct has been defined by the Organization for Economic Cooperation and Development ( OECD ) as follows: an anticompetitive agreement, anticompetitive concerted practice, or anticompetitive arrangement by competitors to fix prices, make rigged bids (collusive tenders), establish output restrictions or quotas, or share or divide markets by allocating customers, suppliers, territories, or lines of commerce. 6 While the Section recognizes that many jurisdictions impose criminal sanctions for hard-core cartel violations, we believe it is essential to transparency and predictability that there be a clear legal distinction between conduct that will be treated as criminal and conduct that will be subject to only civil liability. As a matter of both efficiency and a degree of consistency essential to the rule of law, entities potentially subject to a law should be able to determine, clearly and in advance, the rules that will be applied to and the consequences that will follow from their actions. This is particularly important where the threat of criminal sanctions could discourage pro-competitive forms of cooperation and interactions (such as lawful joint ventures) that may enhance welfare and economic growth (for example, joint marketing by a legitimate joint venture enterprise). The Section submits that the distinction may be drawn either by definition or by a specific element of the offense. The Section recognizes the difficulty in defining with precision conduct constituting the criminal offence (the actus reus). The formulation must capture only hard-core cartel behavior involving criminality and concealment, leaving restrictive arrangements that do not involve well-recognized indicia of felonious behavior to the realm of civil enforcement. Although the U.S. remains one of the few global jurisdictions that applies a per se rule to hard-core cartel activity, even those jurisdictions that enforce competition law against cartels under the rule of reason have generally adopted truncated or quick look approaches that presume hard-core activity to be anticompetitive, while leaving some ability for the defendant to argue that the conduct was, on balance, procompetitive. The Section recommends that the Draft Bill adopt 5 Antitrust Modernization Commission, Report and Recommendation, April 2007, pp. 296, 297. Available at accessed on May 7, OECD, Recommendation of the Council Concerning Effective Action against Hard Core Cartels (1998), available at: 6

7 this latter approach, which provides the predictability benefits of a per se rule, while retaining the ability in an extraordinary case to avoid deterring procompetitive or competitively neutral conduct. Punishment of five to ten years of imprisonment The Draft Bill provides for the imprisonment of individuals convicted of the enumerated antitrust violations. The Draft Bill recommends a sentence of five to ten years for these violations: For executives that conclude, implement, or execute this class of collusive agreements, as well as the individuals who organize them, such as trade association managers or consultants for competitive companies, a criminal penalty is established, that is, the greater imprisonment in its minimum degree (5 years and one day to 10 years). 7 However, the Section notes that the examples cited in the Draft Bill in support of the proposed prison sentence may rest on a misapprehension of the United States Sentencing Guidelines. The discussion included in the Draft Bill points to the prison sentences provided in the United States and Canada for support of the recommended five- to ten-year range: Canada and the United States of America, which are the countries that were the earliest in issuing competition laws, punish with up to 14 years and 10 years in prison, respectively, those who commit the crime of collusion. 8 The Section agrees that the imprisonment for individuals convicted of antitrust violations is an important tool in antitrust enforcement and deterrence. However, the Section notes that in the United States, the U.S. Sentencing Guidelines (the Guidelines ) that guide a judge s sentencing calculations indicate a recommended base sentence range for criminal antitrust violations of ten to sixteen months. 9 In Canada, recent amendments to the Competition Act provide for a prison sentence of up to fourteen years. However, actual sentences imposed on individuals found to have violated the Competition Act range from several months up to one year Unofficial English translation. Draft Bill at II(e): Tanto para los ejecutivos que celebren, implementen o ejecuten esta clase de acuerdos colusorios, como para las personas naturales que los organicen, tales como directivos de asociaciones gremiales o asesores de las empresas competidoras, se establece una pena principal de crimen, esto es, reclusión mayor en su grado mínimo (5 años y un día a 10 años). 8 Unofficial English translation. Draft Bill at II(e): Canadá y los Estados Unidos de América, que son los países en que más tempranamente se dictaron leyes de defensa de la competencia, sancionan con hasta 14 años y 10 años de prisión, respectivamente, a quienes cometan el delito de colusión. 9 Antitrust violations start at Base Offense Level 12. See 2014 Federal Sentencing Guidelines Manual: Antitrust Offenses, 2R1.1 (2014), available at The Sentencing Guidelines recommend a sentence of between 10 and 16 months for a Base Offense Level 12. See United States Guidelines Table, available at 10 Richard Annan and Calvin S Goldman, Canada: Cartel Enforcement, THE ANTITRUST REVIEW OF THE AMERICAS 2015, Global Competition Review (2015). Available at An offender serving a sentence in the community is released into the community but must follow a set of rules imposed by the court for a specific period of time. Note that, after recent changes to the Competition Act, Canada no longer allows sentences to be served in the community. Id. 7

8 In light of the practices in jurisdictions that provide for the imprisonment of individuals convicted of antitrust violations, the Section respectfully notes that a sentence range of five to ten years may be excessive. Such a long sentence may have negative impacts on deterrence goals as well as cooperation through the leniency program. Disproportionately large criminal penalties are less likely to obtain cultural acceptance which leads to enforcement difficulties. Further, defendants facing the prospect of such long prison sentences are more likely to challenge the charges in court rather than settling with the enforcement agencies. Large numbers of complex antitrust trials may stress the government s trial resources. Finally, it is important that the sentencing tribunal have discretion to deviate from the proposed sentence so that the sentence reflects any mitigating or aggravating factors. Such flexibility in sentencing would likely lead to increased cooperation. Leniency program covering criminal liability The Draft Bill proposes to extend the protections of Chile s leniency program to cover not only fines but also criminal liability. The discussion of the Draft Bill rightly reflects the impact that extending leniency to cover individuals will have on cooperation: The first informer to the Fiscalía Nacional Económica, who meets all of the requirements of the law, may be exempted from criminal liability. Thus is established a powerful incentive for executives, who become involved in this class of illicit activities, to timely appear before the Fiscalía Nacional Económica and provide accurate, truthful, and verifiable information that would enable the proof of collusion before the relevant tribunals. 11 The Section supports this amendment and commends its inclusion. With the re-criminalization of hard-core antitrust offenses, the leniency program must also be expanded to include the participants who seek its protection, as the Draft Bill suggests. The Section notes that extending certain leniency benefits, such as reduced sentence and/or a reduced fine, to second and third amnesty applicants could further benefit the investigation of cartel behavior. C. Calculation of Fines for Competition Act Violations The Draft Bill proposes to adopt a new method of assessing fines for certain antitrust violations. 12 Specifically, the Draft Bill proposes that the maximum fine assessed should amount to either (i) double of the economic benefit resulted of the infringement, if this benefit can be clearly determined by the Court, or (ii) 30% of the sales of the agent during the period of the infringement. While the Section supports the concept that fines for so-called hard core antitrust violations should be assessed in proportion to the volume of commerce negatively affected by the 11 Unofficial English translation. Draft Bill at II(e): [E]l primer delator ante la Fiscalía Nacional Económica, que cumpla con todos los requisitos establecidos en la ley, podrá eximirse de responsabilidad penal. Así, se configura un poderoso incentivo para que los ejecutivos que se vean involucrados en esta clase de ilícitos comparezcan oportunamente ante la Fiscalía Nacional Económica y aporten antecedentes precisos, veraces y comprobables que permitan acreditar la colusión ante los tribunales que correspondan. 12 The Section suggests that the amended law make clear which fines and penalties are available for criminal actions, which are available for civil, and which are available for the violation of the merger control provisions. 8

9 relevant misconduct, the Section respectfully suggests that the 30 percent is both disproportionate and excessive. First, the Section submits that proxies or presumptions are unlikely to be reliable estimates of the actual economic harm in any given case. The Section therefore recommends caution in the use of any proxy or presumption (especially with regards to an irrebuttable proxy or presumption). Second, the Draft Bill does not make clear that the fining mechanism applies only in the case of that limited set of actions that are most likely to serve anti-competitive purposes, such as price-fixing, market allocation or bid rigging. 13 The fining mechanisms in the Draft Bill appear to be applicable to hard-core cartel conduct, but also appear to apply to violations of the merger control provisions in Article 3 bis and to conduct that may not always be unlawful. The Section therefore respectfully recommends that the Draft Bill clarify the scope of conduct that will be remedied through this fining mechanism. In particular, the Section suggests that this fining mechanism not be extended to monopolization or alleged abuses of dominant positions, where fines should focus on the actual damage caused, rather than on presumed effect, or to mergers. A different set of fines should be set for violating the merger control provisions. Such fines should be set to ensure compliance with the merger control regulations and not be tied to an amount of commerce affected or percentage of sales standard. Third, the Section respectfully suggests that the proposal to presumptively set fines at 30 percent of affected sales is disproportionate when compared with the fines assessed in the United States, Europe and elsewhere across the globe. In the United States, the fining process is administered by federal courts with reference to the Sentencing Guidelines. Although the U.S. Sentencing Guidelines provide a consistent structure for the calculation of fines in criminal cartel cases, they are not mandatory and they allow for the application of judicial discretion. 14 Under the U.S. Sentencing Guidelines, a formula is used to calculate corporate fines. The Guidelines establish a base fine, which is presumed to be 20 percent of the volume of U.S. commerce affected by the violation. The volume of affected U.S. commerce is measured as the amount of goods or services sold by the defendant corporation affected by the violation over the entire length of the violation. While the use of the 20 percent multiplier has been defended as reasonable given that the determination of an overcharge or harm is very difficult to establish through evidence, the use of this irrebuttable proxy has also been subject to serious criticism in the United States. 15 In practice, many fines imposed in the U.S. are lower than the Sentencing Guidelines range. At best, any proxy or presumption is likely to be an imperfect estimate of the actual economic harm in any given case. The Section accordingly advises caution in the use of any 13 The Guidelines are only applied to hard-core violations of U.S. antitrust law, namely conspiracies among horizontal competitors to fix prices, rig bids, or allocate customers or markets. 14 United States v. Booker, 125 S. Ct. 738 (2005). 15 Empirical studies have found significant variation in the minimum, maximum, median, mean, and range of cartel overcharges. See, e.g., Margaret C. Levenstein & Valerie Y. Suslow, What Determines Cartel Success, 44 J. Econ. Literature 43, 80 (2006); Jonathan B. Baker, The Case for Antitrust Enforcement, 17 J. Econ. Persp. 27, (2003). The European experience also reflects the difficulty of establishing a presumption of harm from cartel conduct. Although the Commission s Guidelines employ a presumption of 30 percent of affected sales to calculate fines for violations of Article 101 TFEU, the vast majority of fines assessed by the Commission fall within a range of 15 to 20 percent. 9

10 proxy or presumption especially an irrebuttable proxy or presumption in fining guidelines or practices in general. Like the Draft Bill, U.S. law also provides that, as an alternative to the 20% multiplier, cartel fines may equate to twice the gain or twice the loss caused by the violation. This alternative method has fared no better in establishing an appropriate fine for conduct that directly affects the U.S. Most recently, the Division sought a twice the gain fine in the AU Optronics case 2 that came out of its investigation into the LCD panel industry. In that case, the Division successfully included economic gains from sales of both LCD panels and finished products (televisions and computer monitors) regardless of whether those sales occurred within or without the United States or whether the underlying conspiracy concerned panels or finished products. The AU Optronics fine, which has little relevance to the actual harm caused by the defendant in the United States, shows how a twice the gain metric can be distorted, exposing a defendant to multiple fines in multiple jurisdictions for the same sales. Fourth, the Section recommends that the Draft Bill specify the basis for the fine and limit it to an appropriate measure of domestic commerce. Although the Section supports basing cartel fines on the volume of affected domestic commerce, the Section recognizes that determining what is and what is not domestic commerce has confounded courts, enforcers and practitioners. Indeed, it is often the case that the scope of what is considered to be domestic commerce in any given case is driven by the economic incentives of the first defendant to plead guilty. This is neither fair nor desirable. The Section therefore recommends that the Draft Bill detail those factors that the Authority will assess in determining whether commerce is considered to be domestic or otherwise included in the fining calculation. Finally, the Section strongly recommends that fining calculations under the proposed Draft Bill should not include sales between non-chilean entities, so long as the jurisdiction for which those sales are domestic is actively enforcing competition laws. Such a rule would avoid defendants paying multiple fines based on the same underlying sales. This is also a matter of international comity, as nations should not apply their competition laws to commerce occurring outside of their borders, to companies that are not present in their jurisdiction, and against individuals who do not conduct business within their jurisdiction. 16 III. Conclusion The Section appreciates the opportunity to comment on the Draft Bill, and commend the government for its open and transparent process. If the Section can clarify any of the matters discussed herein or answer any questions, please contact us. 2 Special Verdict Form, United States v. AU Optronics Corp., No. CR (N.D. Cal. Mar. 10, 2012) (Docket #851). 16 The Section acknowledges that the Division routinely enforces U.S. antitrust law extraterritorially, a practice that was opposed by the Antitrust Modernization Commission. See Antitrust Modernization Commission, Report and Recommendation, April 2007, pp. 215 (recommendation 42), available at accessed on May 4,