On June 14, 2004, the United States Supreme Court closed the door to U.S. federal courts on foreign antitrust plaintiffs seeking to recover for the "independent foreign effect" of anticompetitive conduct that harmed markets in both the U.S. and abroad. F. Hoffman-La Roche, Ltd., v. Empagran S.A., No. 03-724. Justice Breyer wrote for the six-judge majority. Justice Scalia, joined by Justice Thomas, added a brief concurrence in the judgment. Justice O’Connor did not participate.
Foreign Plaintiffs Allege Injury Abroad
Plaintiffs, a class of foreign direct purchasers of vitamins, alleged that manufacturers and distributors had formed a global cartel that raised vitamin prices in the United States and other nations. The issue before the Court was whether these foreign purchasers, who had according to the lower court alleged "an independent foreign effect" of the cartel—supracompetitive prices for vitamins purchased overseas—could sue under U.S. antitrust law based on that foreign harm. Reversing the Court of Appeals for the D.C. Circuit, the Court held that they could not.
The Court grounded its decision in the Foreign Trade Antitrust Improvements Act of 1982 ("FTAIA").1 The Court explained that the FTAIA lays down a general rule which sets activity involving "non-import" foreign commerce outside the Sherman Act’s reach. It then brings that conduct back within the Sherman Act’s reach to the extent it (1) sufficiently affects American commerce, and (2) has an effect of a kind that gives rise to a Sherman Act claim.
Independently Caused Foreign Injury Is Not Within The Sherman Act’s Reach
The Court gave two main reasons for its holding.
First, the Court "ordinarily construes ambiguous statutes to avoid unreasonable interference with the sovereign authority of other nations." Making foreign conduct that causes foreign harm subject to American antitrust sanctions, however, would create a "serious risk of interference with a foreign nation’s ability independently to regulate its own commercial affairs." Since higher foreign prices do not flow from "any domestic anti-competitive conduct that Congress sought to forbid," there is no good reason why the FTAIA should extend U.S. antitrust jurisdiction to "significantly foreign" conduct causing "independent foreign harm" that gives rise to an antitrust claim (emphasis in original). 2
Second, "the FTAIA’s language and history suggest that Congress designed the FTAIA to clarify, perhaps to limit, but not to expand in any significant way, the Sherman Act’s scope as applied to foreign commerce" (emphasis in original). The Court found "no significant indication" that Congress, when enacting the FTAIA, might have been influenced by court opinions holding that purely foreign injury could be redressed under the Sherman Act. Indeed, the Court observed (distinguishing six cases proffered by respondents), "no pre-1982 case provides authority for application of the Sherman Act in the circumstances we here assume." The Court went on to reject two of "respondents’ linguistic arguments" as to how they believe the statute ought to be read, countering that "respondents’ reading is not consistent with the FTAIA’s basic intent."
Case Remanded To The Court Of Appeals
The Court remanded the case for possible consideration of respondents’ alternative argument – that their foreign injury was not in fact "independent" (as the Supreme Court here assumes it was, based on the issue as framed by the Court of Appeals) but rather was linked to the cartel’s domestic U.S. effects. On this theory, higher U.S. prices allowed the cartel to maintain the higher foreign prices that injured respondents. If this argument was properly preserved below, the D.C. Circuit "may consider it and decide the related claim."
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Footnotes
1. The FTAIA provides: "Sections 1 to 7 of this title [the Sherman Act] shall not apply to conduct involving trade or commerce (other than import trade or import commerce) with foreign nations unless
(1) such conduct has a direct, substantial and reasonably foreseeable effect
(A) on trade or commerce which is not trade or commerce with foreign nations, or on import trade or import commerce with foreign nations; or
(B) on export trade or export commerce with foreign nations, of a person engage in such trade or commerce in the United States; and
(2) such effect gives rise to a claim under the provisions of sections 1 to 7 of this title, other than this section."
2. In his concurring opinion, Justice Scalia stated that he would have reached the same result on the majority’s first ground, reading the statute "in accord with the customary deference to the application of foreign countries’ laws within their own territories."
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