It's taken from their margins. For math's sake, let's say the network gets $10 from the advertiser for an offer and are paying affiliates $6. If they want to work at a minimum of 20% and you get bumped, they can move you to $8 and still make their 20%.
However, if you have a referrer, your max payout will be $7.50 with $.50 going to the referrer. The network is still paying $8 on the offer in total ($7.50 for you and $.50 for the referrer) but you aren't getting everything you can. If they were to pay you $8 and your referrer $.50 they are only making 15%.
That's how I've been told it works, at least
So what happens if you're working with the default payout of $6? C2M pays the $0.12 referral commission out of their own pocket?