Antitrust Guidelines for International Operations

On April 5, 1995, the United States Department of Justice and the Federal Trade Commission issued joint Antitrust Guidelines for International Operations.The Guidelines replace versions previously issued in 1977 and 1988 by the two federal U.S. antitrust enforcement agencies. They combine a strong bent towards assertion of U.S. jurisdiction over extraterritorial conduct with a sensitivity to foreign law and policy.

The Guidelines State An Enforcement Philosophy

The pro-active philosophy of the Guidelines is summarized in the introductory language to Paragraph 2:

  • Foreign commerce cases can be expected to arise in areas covered by almost every substantive provision of the antitrust laws.
  • The U.S. enforcement agencies do not discriminate in the enforcement of the antitrust laws on the basis of the nationality of the parties.
  • The agencies do not employ their statutory authority to further non-antitrust goals (e.g., expansion of U.S. trade).
  • Once jurisdictional requirements, comity, and doctrines of foreign governmental involvement have been considered and satisfied, the same substantive rules apply to all cases, whether purely domestic or international.

The key to the Guidelines is in the last point. The Guidelines focus largely on discussions and examples relating to jurisdiction and comity, rather than on substantive antitrust law. If there is power over the subject matter and power over the parties, and if, after a review of certain foreign policy factors, they choose to exercise that power, U.S. antitrust law is applicable to the conduct in issue. Neither the nationality nor the location of the parties will change the result.

How Far Do the U.S. Antitrust Laws Reach?

According to the Guidelines, the reach of U.S. antitrust law is as far as possible, consistent with the United States Constitution.

The Guidelines deal with two categories of conduct: first, conduct that directly affects imports into the United States; and second, conduct that involves everything else (including indirect effects on import commerce and export commerce).

As to import commerce, the Guidelines, and relevant case law, make clear that "the Sherman Act (the principal U.S. antitrust statute) applies to foreign conduct that was meant to produce and did in fact produce some substantial effect in the United States." Hartford Fire Insurance Co. v. California, 113 S.Ct. 2891, 2909 (1993). In other words, the agencies assert that they have jurisdiction over, for example, two foreign entities that fix prices abroad on a product that they intend to and do import into the United States in a not insignificant amount. (Illustrative Example A of the Guidelines.)

Conduct that adversely affects U.S. commerce in less direct ways poses a more difficult issue. The Guidelines refer to the Foreign Trade Antitrust Improvement Act of 1982 (the "FTAIA") which amended the Sherman Act(footnote)xx(footnote 1) 15 U.S.C. 6(a) xx and the Federal Trade Commission Act (footnote 2)xx(footnote 2) 15 U.S.C. 45 (a)xx to make them applicable to foreign conduct that has a direct, substantial and foreseeable affect on U.S. commerce.

Through a series of hypotheticals, the Guidelines explore how different factual scenarios, all involving conduct outside of the United States, are likely to be treated.

Not surprisingly, a cartel composed entirely of non-U.S. entities that sells to a foreign intermediary, knowing that the intermediary will resell the product into the United States, will be subject to U.S. antitrust jurisdiction. (Illustrative Example B.) On the other hand, a foreign cartel that expressly excludes U.S. sales from its agreement on prices, and whose members are free to sell into the U.S. independently at whatever price they choose, will not be subject to U.S. jurisdiction under the FTAIA. For that matter, this hypothetical price-fixing agreement would not pose a U.S. antitrust problem providing the prices are not predatory. (Illustrative Example C)

Suppose instead that the same exclusively non-U.S. member cartel enters into an agreement among its members on U.S. prices but at price levels that undercut prevailing U.S. prices; the agreement would be subject to FTAIA jurisdiction. Strangely, however, the Guidelines state that the agencies would be "particularly cautious" about moving forward if the apparent affects on the U.S. market appeared to be beneficial to consumers, as in the case of a pricing agreement which undercuts existing U.S. prices. (Id.) This latter statement is odd given the agencies' insistence that, if jurisdiction exists, substantive antitrust law applies evenly to domestic and foreign conduct alike. Certainly the law on price-fixing by competitors condemns per se all agreements on price, whether the prices set are high or low, reasonable or unreasonable. (See, e.g., United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940)). The statement is perhaps best understood as a reluctance to be overbearing in enforcement against foreign actors, particularly when it is likely (or the drafters of the Guidelines hope it is likely) that the cartel will be attacked by antitrust authorities abroad in any event. (Guidelines, 3.121 at fn. 59.)

If Jurisdiction Exists, Will It Be Exercised?

Throughout the Guidelines, sprinkled in footnotes, text and hypotheticals, is the acknowledgement that there are real-world limitations on the power the agencies can exercise. Some are dealt with in the agencies' consideration of comity, a doctrine of discretionary restraint arising from the respect that nations have for one another and their respective legal systems. (Guidelines 3.2) Others relate to foreign government involvement in the conduct in question. (Guidelines 3.3). In other instances, the agencies will lack personal jurisdiction -- they will not be able to bring a party before a U.S. court or administrative tribunal. In some cases, it may be difficult or impossible for the agency to investigate conduct undertaken abroad by foreign actors. In yet other cases, U.S. courts or the agencies may not be able to enforce abroad a remedy, whether it be monetary or injunctive relief.

The Guidelines deal with these problems by relying on the anticipated ability and willingness of foreign antitrust authorities to cooperate in investigations of practices that violate U.S. antitrust law and to initiate action of their own with respect to practices that violate foreign antitrust law.

In determining whether to exercise jurisdiction, for example, the agencies will take into account "the extent to which the enforcement activities of another country with respect to the same persons, including remedies resulting from those activities, may be affected; and ... the effectiveness of foreign enforcement as compared to U.S. enforcement action." (Guidelines 3.2.)These two comity considerations are derived from the U.S.-E.C. Antitrust Cooperation Agreement. (Id., at fn. 74.) They are also reminiscent of the International Antitrust Enforcement Assistance Act of 1994, which gives U.S. antitrust authorities the power to enter into mutual legal assistance agreements with the antitrust authorities or governments of foreign states that provide for exchanges of information and cooperative investigations.

Today, multijurisdictional antitrust issues arise in mergers, distribution arrangements and intellectual property licenses, to name just a few examples. The Guidelines promote aggressive enforcement of the U.S. antitrust laws against foreign entities, regardless of location or nationality. But in lieu of futile attempts to enforce U.S. law where jurisdiction is lacking, or where philosophies of competition law differ, the agencies have chosen to rely on international cooperation. It is an idea which has not yet been put into practice on a wide scale internationally. Yet, international antitrust cooperation appears to be the solution of choice in a world increasingly dominated by cross-border commerce.
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