Antitrust and International Commerce

• Author: Ronan P. Harty
• Pages: 1287-1407

1287

CHAPTER 12

ANTITRUST AND INTERNATIONAL

COMMERCE

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.

U.S. DEP’T OF JUSTICE & FED. TRADE COMM’N, ANTITRUST GUIDELINES FOR INTERNATIONAL

ENFORCEMENT AND COOPERATION (2017), availa ble at https://www.justice.gov/opa/press-

release/file/926481/download [hereinafter INT’L ANTITRUST GUIDELINES].

1288 ANTITRUST LAW DEVELOPMENTS (NINTH)

B. Extraterritorial Reach of the Sherman Act and Related Issues

1. Sherman Act

a. FOREIGN TRADE ANTITRUST IMPROVEMENTS 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 agrees—that 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).

ANTITRUST AND INTERNATIONAL COMMERCE 1289

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

“exorbitant.” RESTATEMENT (THIRD) OF THE FOREIGN RELATIONS LAW OF THE UNITED STATES

§ 403, reporters’ note 1 (1987) [hereinafter RESTATEMENT (THIRD)]; see also ABA SECTION OF

ANTITRUST LAW, REPORT OF THE SPECIAL COMMITTEE ON INT’L ANTITRUST 150 (1991) (noting

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. INT’L 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.

DEP’T OF JUSTICE, ANTITRUST GUIDE FOR INT’L OPERATIONS (1977) [hereinafter 1977 INT’L

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.