Antitrust and International Commerce

AuthorRonan P. Harty
A. Introduction
The application of U.S. antitrust laws to international trade or commerce raises a
myriad of unique legal issues, discoverability of far flung evidence, conflicting choice
of law, and competing national interests. First, it raises fundamental questions
concerning a country’s ability to prescribe rules of law governing persons and conduct
beyond national borders. Second, because antitrust cases and enforcement increasingly
cross international borders, U.S. courts need to contend with the discoverability of
information from abroad for use in U.S. legal proceedings and vice versa. Third, the
international dimension of economic activity sometimes calls for the application of
special substantive rules not appropriate in the purely domestic context. Fourth,
antitrust is but one of a number of national policies affecting international trade and
other national policies may at times be in tension with antitrust policies.1 Fifth, the
competition policies of other countries are not always in accord with U.S. antitrust
policies and, even where they are, multinational coordination of both enforcement and
compliance can be challenging. Cartel and merger enforcement often is international
in scope, and enforcement agencies have taken steps to harmonize differences,
promote convergence, and create formal and informal mechanisms for bilateral and
multilateral cooperation on competition matters. This chapter discusses these and
related issues.
1. Apart from the Sherman, Clayton, Robinson-Patman, and Federal Trade Commission Acts, other
U.S. competition or trade policy statutes applicable to foreign commerce include the Omnibus Trade
and Competitiveness Act of 1988, 19 U.S.C. §§ 2901-2906; the Export Trading Company Act of
1982, 15 U.S.C. §§ 4001-4021; Webb-Pomerene Act, 15 U.S.C. §§ 61-66; Wilson Tariff Act, 15
U.S.C. §§ 8-11; Revenue Act § 801, 15 U.S.C. §§ 71-77; Tariff Act of 1930 § 337, 19 U.S.C. § 1337;
countervailing duties law, 19 U.S.C. §§ 1671-1671h; antidumping provisions of the Trade
Agreements Act of 1979, 19 U.S.C. §§ 1673-1677g; Trade Act §§ 301-306, 19 U.S.C.
§§ 2411-2416; antitrust provisions of the Shipping Act, 46 U.S.C. App. §§ 801-842; and the
Merchant Marine Act of 1920, 46 U.S.C. App. § 885. The international policies of the Department
of Justice (DOJ) and the Federal Trade Commission (FTC) are described in their joint guidelines.
release/file/926481/download [hereinafter INTL ANTITRUST GUIDELINES].
B. Extraterritorial Reach of the Sherman Act and Related Issues
1. Sherman Act
(1) Extraterr itorial Reach of the Sherman Act and the FTAIA
The Sherman Act applies to “[e]very contract, combination . . . or conspiracy, in
restraint of trade” and to every person who shall “monopolize, or attempt to
monopolize, or combine or conspire . . . to monopolize” trade or commerce “among
the several States, or with foreign nations.”2 Before the enactment of the Foreign Trade
Antitrust Improvements Act of 1982 (FTAIA), there was no consensus of how far the
Sherman Act could reach into foreign trade or commerce.
The scope of the Sherman Act’s extraterritorial reach first came before th e U.S.
Supreme Court in American Banana Co. v. United Fruit Co.,3 where the Sherman Act
was construed to be inapplicable to the defendant’s inducement of a military seizure
of property outside the United States. In rejecting the claim, Justice Holmes wrote that
the “operation and effect” of a statute such as the Sherman Act is confined to “the
territorial limits over which the lawmaker has general and legitimate power”:
[T]he acts causing the damage were done, so far as appears, outside the jurisdiction of
the United States . . . . It is surprising to hear it argued that they were governed by the
act of Congress . . . . [T]he general and almost universal rule is that the character of an
act as lawful or unlawful must be determined wholly by the law of the country where
the act is done.4
This strict territorial interpretation of Sherman Act jurisdiction was eroded in
subsequent cases5 and then largely rejected in 1945 in United States v. Aluminum Co.
of America (Alcoa).6 In Alcoa, the Second Circuit held that the Sherman Act reached
agreements entered into and consummated outside the United States by foreign
companies “if they were intended to affect [U.S.] imports and did affect them.”7 Judge
Learned Hand wrote that “it is settled law—as [the defendant] itself agreesthat any
state may impose liabilities, even upon persons not within its allegiance, for conduct
outside its borders that has consequences within its borders which the state reprehends;
and these liabilities other states will ordinarily recognize.”8
2. 15 U.S.C. §§ 1, 2.
3. 213 U.S. 347 (1909).
4. Id. at 355-57 (citations omitted).
5. See, e.g., United States v. Sisal Sales Corp., 274 U.S. 268 (1927) (fact that control of production was
aided by discriminatory legislation of foreign country did not prevent exercise of jurisdiction and
punishment of forbidden results of the conspiracy within United States); Thomsen v. Cayser, 243
U.S. 66 (1917) (exercising jurisdiction with respect to combination formed abroad that was put into
operation in United States and affected U.S. foreign commerce); United States v. Pacific & Arctic
Ry. & Navigation Co., 228 U.S. 87 (1913) (exercising jurisdiction with respect to agreement between
U.S. and Canadian firms to monopolize transportation routes partly in Canada); United States v.
American Tobacco Co., 221 U.S. 106 (1911) (exercising jurisdiction with respect to contracts
dividing world markets executed in the United Kingdom by U.S. and British companies doing
business in United States).
6. 148 F.2d 416 (2d Cir. 1945).
7. Id. at 444. The case was certified by the Supreme Court to the Second Circuit for want of a quorum.
Id. at 421.
8. Id. at 443 (citations omitted).
Alcoa’s assertion that the Sherman Act reached wholly foreign conduct on the basis
of the economic effects of that conduct within the United States proved somewhat
controversial among foreign governments.9 It was nevertheless adopted by most U.S.
courts and validated by the Supreme Court in Ha rtford Fire Insura nce Co. v.
California: “[I]t is well established by now that the Sherman Act applies to foreign
conduct that was meant to produce and did in fact produce some substantial effect in
the United States.10 After Alcoa, standards were developed for determining the
magnitude and type of domestic effect necessary to implicate U.S. antitrust laws.11
Motivated in part by the goal of articulating a uniform test for determining whether
U.S. antitrust law applies to particular international conduct, Congress passed the
FTAIA in 1982.12
The FTAIA amended the Sherman Act to preclude its application to conduct
involving trade or commerce (other than import trade or commerce) with foreign
nations unless two prerequisites are met. First, the conduct must have a “direct,
substantial, and reasonably foreseeable” effect on do mestic U.S. commerce or U.S.
import trade, or on the export commerce of a person engaged in such commerce in the
9. The United Kingdom, for example, once described the extraterritorial application of U.S. law as
§ 403, reporters’ note 1 (1987) [hereinafter RESTATEMENT (THIRD)]; see also ABA SECTION OF
that several nations whose nationals have been sued in U.S. courts have complained of extraterritorial
jurisdiction); Carl A. Cira, The Challenge of Foreign Laws to Block American Antitrust Actions, 18
STAN. J. INTL L. 247 (1982) (noting that before the FTAIA was enacted a number of foreign nations
responded to the extraterritorial application of U.S. antitrust law by declining to assist with U.S.
investigations, prohibiting cooperation in obtaining discovery for use in U.S. proceedings, and
refusing to enforce U.S. judgments).
10. 509 U.S. 764, 795-96 (1993) (finding subject matter jurisdiction where alleged activity of foreign
reinsurers outside United States produced a substantial effect in United States).
11. See, e.g., Timberlane Lumber Co. v. Bank of Am. Nat’l Trust & Sav. Ass’n, 749 F.2d 1378 (9th Cir.
1984) (before exercising jurisdiction, in addition to finding effect on U.S. commerce of the type and
magnitude to be cognizable as a violation of antitrust laws, courts weigh comity and fairness factors,
including the relative significance of the effects on the United States as compared to those
elsewhere); National Bank of Can. v. Interbank Card Ass’n, 666 F.2d 6 (2d Cir. 1981) (jurisdiction
existed only where effect upon U.S. commerce was foreseeable and appreciable); see also U.S.
ANTITRUST GUIDE], reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,110, at 20,645 (adopting
enforcement position that the Sherman Act applied only to transactions that had a “substantial and
foreseeable effect on U.S. commerce”). Various tests of antitrust subject matter jurisdiction that
developed among the circuits are described in Zenith Radio Corp. v. Matsushita Electric Industrial
Co., 494 F. Supp. 1161, 1177-89 (E.D. Pa. 1980), aff’d in part & rev’d in part sub nom. In re
Japanese Elec. Prods. Antitrust Litig., 723 F.2d 238 (3d Cir. 1983), rev’d sub nom. Matsushita Elec.
Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574 (1986).
12. The House Report stated that the FTAIA was intended to create an objective standard for determining
the existence of “intended effects” under Alcoa. See H.R. REP. NO. 97-686, at 2-3 (1982), reprinted
in 1982 U.S.C.C.A.N. 2487, 2487-88 (“Courts differ in their expression of the proper test for
determining whether United States antitrust jurisdiction over international transactions exists. [The
FTAIA] addresses these problems of perception and definition by clarifying the Sherman Act and
the antitrust proscriptions of the Federal Trade Commission Act to make explicit their application
only to conduct having a ‘direct, substantial, and reasonably foreseeable effect‘ on domestic
commerce or domestic exports.”). A second impetus for the FTAIA was a desire to ensure that U.S.
antitrust laws did not act as a “barrier to joint export activities that promote efficiencies in the export
of American goods and services.” Id. at 2. In enacting the FTAIA, Congress adopted an approach
that closely followed that of the Second Circuit in National Bank of Canada v. Interbank Card Ass’n,
666 F.2d 6 (2d Cir. 1981), but added additional requirements to the “intended effects” under Alcoa.

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