United States: The Sherman Act’s Increasingly Long Arm

Courts grapple with questions raised by the "inelegantly phrased" Foreign Trade Antitrust Improvements Act of 1982.

As competition has become more global in nature, so too has the focus of U.S. antitrust enforcement. The Department of Justice's (DOJ's) number-one enforcement priority is to discover, punish, and deter international cartels that harm U.S. consumers. Private antitrust litigation in the United States is also increasingly focused on conduct straddling national borders. The Foreign Trade Antitrust Improvements Act of 1982 (FTAIA), 15 U.S.C. § 6a, limits the extraterritorial reach of the U.S. antitrust laws by excluding from its purview all foreign conduct except for conduct "involving" (a) "import commerce" and (b) commerce with a "direct, substantial and reasonably foreseeable effect" on domestic commerce, import commerce, or certain export commerce. This statute's "convoluted language" and "awkward phrasing"1 have become the focus of increasing litigation attention, with many questions regarding its interpretation and application bubbling their way through the courts. This creates considerable uncertainty for companies operating in the international marketplace and may ultimately need to be resolved by the U.S. Supreme Court.

Jurisdictional or Substantive?

The FTAIA has historically been considered a jurisdictional statute imposing limits on the subject matter jurisdiction of the U.S. courts to consider claims involving non-U.S. commerce. That designation provides significant advantages for companies defending Sherman Act claims—allowing earlier resolution of FTAIA issues based on the court's analysis of actual evidence, rather than mere allegations, and requiring plaintiffs to bear the burden of establishing that the courts can entertain foreign commerce antitrust claims. However, several district courts have recently ruled that the FTAIA is non-jurisdictional, holding that the FTAIA instead serves to outline the elements of a Sherman Act claim involving foreign commerce. On August 17, 2011, the U.S. Court of Appeals for the Third Circuit became the first circuit to hold that the FTAIA is a substantive limitation.2 Defendants petitioned the U.S. Supreme Court for certiorari on this point but their petitions were denied on March 19, 2012.3 The same jurisdictional/substantive question was presented to the Seventh Circuit in Minn-Chem, Inc. v. Agrium, Inc.,4 but the original panel sidestepped the issue, electing instead to deal with the FTAIA's "import commerce" and "effects" exceptions. The entire Seventh Circuit reheard Minn-Chem on February 8, 2012, and if the court sticks with precedent it could set the stage for a clear circuit split, prompting the Supreme Court to weigh in sooner rather than later to resolve this issue.

What Conduct "Involves" Import Commerce?

The FTAIA does not bar Sherman Act claims that "involve import commerce." Several courts have recently been asked to consider what sort of "involvement" with import commerce is sufficient. The Third Circuit in Animal Science Products rejected the notion that the "import commerce" exception is limited to physical importers of goods. The court defined conduct "involving import commerce" as conduct "directed at" or "targeted at" the U.S. import market. Although the original Minn-Chem Seventh Circuit panel agreed with this approach, neither court gave clear guidance on how to apply this standard. Is a subjective intent to harm the U.S. import market required? Or is it sufficient to allege a global conspiracy to fix prices or set production limits that had as a consequence (as opposed to its focus or target) higher U.S. import prices? The DOJ's view is that the FTAIA does not require a subjective intent to harm U.S. import commerce and that a price-fixing conspiracy involves U.S. import commerce even "if the conspirators set prices for products sold around the world (so long as the agreement includes products sold into the United States) and even if only a relatively small proportion or dollar amount of the price-fixed goods were sold into the United States."5

Courts have also been asked to construe the import commerce exception in the air transportation sector. In re Air Cargo Shipping Services Antitrust Litigation,6 the issue was whether the alleged price fixing of cargo transportation services to the United States "involved import commerce" even if the services were reserved and paid for outside the United States. The district court concluded the defendants' alleged conduct was inseparably connected to commerce in imported goods because it was targeted directly at airfreight, a channel of import commerce. Other district courts presented with similar allegations but for passenger fares have held that these claims do not "involve import commerce" because the transportation of people is not tantamount to importing of people. The en banc panel of the Seventh Circuit is also expected to address this issue in its reconsideration of the Minn-Chem case.

How "Direct" Is "Direct"?

The FTAIA permits application of the Sherman Act to conduct involving non-import foreign commerce if the same conduct causes "direct, substantial, and reasonably foreseeable" effects on U.S. commerce. Among the other issues being considered by the Seventh Circuit in Minn-Chem is how "direct" the effects on U.S. commerce must be to trigger this exception. Defendants in the case argued that "direct effects" in the statute means effects arising as "an immediate consequence" of foreign anticompetitive conduct. The original Minn-Chem panel accepted that position, which was also the standard adopted by the Ninth Circuit in United States v. LSL Biotechnologies.7 In contrast, the DOJ would define "direct" as "reasonably proximate."8 Its position is that the Sherman Act should apply to foreign anticompetitive conduct involving sales of component parts outside the United States if the parts are incorporated into finished products sold in the United States. This view is reflected in the agency's recent criminal enforcement actions targeting the electronic components and auto part industries.

Conclusion

In the current environment, foreign companies involved in the manufacture or distribution of products outside the United States can no longer assume that the U.S. antitrust laws do not apply to their activities. This is presently an evolving area of the law with substantial uncertainty. It will take time for these issues to be sorted out in the courts and for clarity to emerge regarding the extraterritorial reach of the U.S. antitrust laws. Until then, a case-by-case analysis will be required to properly assess foreign companies' potential exposure to criminal penalties (significant fines and jail sentences) and civil treble damages for violations of the U.S. antitrust laws.

Footnotes

1. Turicentro, S.A. v. Am. Airlines, Inc., 303 F.3d 293, 300 (3d Cir. 2002); and Minn-Chem, Inc. v. Agrium, Inc., No. 10-1712, 2011 U.S. App. LEXIS 19433, at *17 (7th Cir. Sept. 23, 2011).

2. Animal Science Products, Inc. v. China Minmetals Corp., 654 F.3d 462 (3d Cir. 2011).

3. China Minmetals Corporation, et al. v. Animal Science Products, Inc., et al., No. 11-846, U.S. Sup.; Sinosteel Corporation, et al. v. Animal Science Products, Inc., et al., No. 11-847, U.S. Sup.

4. 2011 U.S. App. LEXIS 19433.

5. Minn-Chem, Inc. v. Agrium Inc., No. 10-1712, Brief for the United States and the Federal Trade Commission as amici curiae in support of neither party on rehearing en banc (Jan. 12, 2012), at pp. 19.

6. Case No.06-cv-1775(JG) (VVP), 2008 WL 5958061 (E.D.N.Y. Sept. 26, 2008).

7. 379 F.3d 672 (9th Cir. 2004).

8.See also In re TFT-LCD (Flat Panel) Antitrust Litig., MDL No. 1827, 2011 U.S. Dist. LEXIS 115212 (N.D. Cal. Oct. 5, 2011), holding in an indirect purchaser action that an effect was direct enough and an "immediate consequence" of the defendants conduct if the "nature of the effect" on U.S. consumers was the same as the effect on foreign commerce in "upstream" transactions.

Copyright 2012. Morgan, Lewis & Bockius LLP. All Rights Reserved.

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
J. Clayton Everett, Jr.
 
In association with
Related Video
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
Accounting and Audit
Anti-trust/Competition Law
Consumer Protection
Corporate/Commercial Law
Criminal Law
Employment and HR
Energy and Natural Resources
Environment
Family and Matrimonial
Finance and Banking
Food, Drugs, Healthcare, Life Sciences
Government, Public Sector
Immigration
Insolvency/Bankruptcy, Re-structuring
Insurance
Intellectual Property
International Law
Law Practice Management
Litigation, Mediation & Arbitration
Media, Telecoms, IT, Entertainment
Privacy
Real Estate and Construction
Strategy
Tax
Transport
Wealth Management
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.