Case comment: Roche v. Empagran.

AuthorReinker, Kenneth S.
PositionApplication of US antitrust law in foreign countries

A central challenge of modern antitrust law is determining the extent to which U.S. antitrust law applies to actors in foreign countries. (1) Although foreign violations of U.S. antitrust law seem beyond the proper sphere of U.S. courts' subject matter jurisdiction, (2) anticompetitive behavior in foreign countries affects consumers in the U.S., (3) suggesting that the U.S. has an interest in adjudicating these issues. Last Term, in Roche v. Empagran, (4) the Supreme Court held that where antitrust violations cause similar but independent harms to domestic and international purchasers, those international purchasers cannot bring suit in U.S. courts. (5) However, the Court's assumption that the harms were independent was fallacious and thus the Court failed to establish a workable standard for determining when U.S. courts have jurisdiction over foreign antitrust violations. (6)

Roche arose out of a class action filed on behalf of both domestic and foreign vitamin purchasers against vitamin manufacturers alleging a price-fixing conspiracy designed to raise prices for vitamins both domestically and abroad. (7) The manufacturers moved to dismiss the complaint of the foreign purchasers (8) because their vitamin purchases occurred outside the United States and thus were not part of U.S. commerce and did not fall under the ambit of U.S. antitrust law. (9) The district court agreed and dismissed the foreign claims. (10) The district court applied the Foreign Trade Antitrust Improvement Act of 1982, (11) which exempts commerce with foreign nations from U.S. antitrust jurisdiction when such actions do not injure domestic interests. (12) The court then found that none of the exceptions to the FTAIA applied and thus concluded that it lacked jurisdiction over the foreign purchasers' claims. (13) The domestic purchasers then separated their claims, leaving only the foreign purchasers to appeal. (14)

The Court of Appeals for the District of Columbia reversed. (15) The appeals court agreed with the district court that the FTAIA applied, but held that these activities affected domestic commerce, thereby bringing these activities under an exception to the FTAIA. (16) The appeals court went through a two-step analysis, first determining that the conspiracy did in fact lead to higher domestic vitamin prices and then concluding that these higher prices gave rise to an antitrust claim because a domestic consumer could bring a suit under the Sherman Act for these higher prices. (17) The court concluded that the existence of the domestic claim satisfied the requirements of the FTAIA exception, (18) despite assuming that the effect on foreign vitamin prices was independent of the effect on domestic vitamin prices. (19) Then the court, reading the FTAIA broadly, held that the lack of a connection in the harmful effects did not matter because the FTAIA's goal was to deter price-fixing. (20) The dissent argued that for the FTAIA to apply the requisite harm must occur in the United States before U.S. antitrust law can be applied to foreign actors; the dissent would thus have affirmed the district court. (21) An en banc rehearing was denied. (22)

The Supreme Court reversed, vacating the opinion and remanding for further proceedings. (23) Writing for the Court, (24) Justice Breyer began by explaining that the FTAIA excludes all non-import activity involving foreign commerce from the ambit of U.S. antitrust laws but brings some of that conduct back under U.S. jurisdiction if it has a "direct, substantial, and reasonably foreseeable effect" on American commerce and has a harmful effect as defined by antitrust law. (25) As a preliminary matter, the Court established that the FTAIA was meant to apply not only to export activity but also to wholly foreign commerce that might affect the U.S. (26) This meant that the FTAIA's limitations on Sherman Act subject matter jurisdiction also apply to purely foreign commerce.

The Court then proceeded to the heart of the issue: whether the exception to the FTAIA's general exclusion applied in this case. (27) The Court ultimately held that where price-fixing conduct significantly affects consumers both in the United States and abroad but where the foreign effect is independent of any domestic effect, the exception to the FTAIA does not apply and U.S. courts cannot apply domestic antitrust laws when adjudicating the claims of those foreign consumers. (28) The Court based this decision on two lines of reasoning. The first was that courts should give deference to foreign laws and sovereignty when interpreting ambiguous statutes. (29) The second was based on the history and language of the FTAIA, which the Court read to mean that Congress did not intend for the FTAIA to expand antitrust jurisdiction. (30)

The Court's first reason for not applying the FTAIA exception is that doing so would interfere with the ability of foreign nations to regulate their commercial affairs. (31) While applying antitrust laws to situations involving imports also interferes with foreign nations, the Court argues that this is "nonetheless reasonable, and hence consistent with principles of prescriptive comity, insofar as they reflect a legislative effort to redress domestic antitrust injury that foreign anticompetitive conduct has caused." (32) But where, as here, the foreign effect is assumed to be independent of the domestic effect, the Court found that applying antitrust law would be unreasonable. (33) Although the Court recognized that Congress does have an interest in regulating the activities of American companies abroad, it noted that the essential purpose of the FTAIA was to "release domestic (and foreign) anticompetitive conduct from Sherman Act constraints when that conduct causes foreign harm" and only foreign harm. (34) The Court then addressed the argument that because foreign nations have similar antitrust laws to the U.S.'s the problem of infringing upon foreign sovereignty is moot. (35) The Court observed that it had held differently in the past, (36) but that regardless the remedies and penalties for such violations differ widely between nations. (37) Because it would be unworkable for courts to compare domestic and international antitrust law in every case to make sure both bodies of law are sufficiently similar, (38) the Court chose to apply the FTAIA generally and limit U.S. antitrust jurisdiction over all activities abroad. (39)

The Court's second reason for not applying the exception to the FTAIA in this case is that Congress did not intend the FTAIA to expand the subject matter jurisdiction of U.S. antitrust law. (40) Thus, the...

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