• ANTITRUST PUBLICATIONS AND OTHER MATERIALS BY RONALD W. dAVIS

INTERNATIONAL CARTELS

Materials 

Discussion

The scenario is this. Pierre Plaintiff, a French citizen residing in France, buys a price-fixed widget from Dieter AG, a German corporation. The widget goes from Germany to France, never coming near the United States. The Euros, including the overcharge resulting from the price fix, go from France to Germany.

Pierre sues Dieter in a U.S. federal court. He (and his fellow class members) claim damages for violation of Sherman Act Section 1. Does he have a claim?

Before you answer, let me tell you a few more facts. The cartel, whose German member sold the widget to the French plaintiff, is international. It includes U.S. members, and its victims include U.S. purchasers.

And something else. Fifty Nobel laureate economists are prepared to testify that if Dieter and other foreign members had not participated, the cartel would have broken down: widgets flowing into the United States from foreign non-participants would have prevented U.S. producers from charging artificially high prices.

Do you still give the same answer as to Pierre's attempt to invoke the Sherman Act? Maybe yes, maybe no.

In the articles cited above I dealt with a series of international cartel and related types of cases presenting essentially this scenario, with variations in detail. There is a conflict among the circuits. In Hoffman-LaRoche v. Empagran - the subject of the last of the four articles - the Supreme Court stepped up to the plate, swung its bat, and hit the ball in a direction not yet fully determined. It was a truly strange opinion.

The Foreign Trade Antitrust Improvements Act

The problem has two levels.

First, is the claim barred by the Foreign Trade Improvements Act of 1982?

In the articles I explained how Congress divided all antitrust violations into four boxes:

(1) "domestic" and (2) "import" commerce, where the Sherman Act would apply with full force and effect, to protect U.S. consumers and producers,

(3) "export" commerce, where the Sherman Act would protect only competing U.S. producers, not foreign consumers or producers, and

(4) wholly "foreign" commerce, where the Sherman Act would apply if and only if the violation creates a direct, substantial, and reasonably foreseeable anticompetitive effect in the United States.

So where does Pierre fit in? If anywhere, only in the fourth box. But the sale to him, considered in isolation from its international cartel context, caused no anticompetitive effect in the United States. So does the FTAIA bar his claim? Or, on the contrary, does it authorize his claim, in that the transaction tht injured him was influenced by cartel behavior that caused an anticompetitive effect in the U.S., albeit an effect that was not felt by the particular plaintiff in question?

The debate among the lower courts has featured a Clintonesque parsing of the meaning of "an" versus "the." ("What part of 'an' don't you understand?" ask Pierre's supporters? "Don't be so picky!" respond the Dieter advocates. "When Congress said "an" effect clearly it really meant 'the' effect.")

Standing and Antitrust Injury

Second, even if the claim is permitted by the FTAIA, should it nevertheless be barred by logical extension of the prudential rules of standing set forth in cases like Illinois Brick and Associated General Contractors? (See Antitrust Injury.)

Read together, my articles took a two-handed approach. On the one hand, while Congress did not have the Pierre/Dieter scenario in mind when it enacted the FTAIA, the better reading of the statute's language, considered in light of the legislative history, would permit the claim. On the other hand, there are very strong policy grounds, outside FTAIA, to hold that Pierre lacks standing to sue in the United States, and that he should instead pursue his remedy in Europe.

Miscited by All

The plaintiff-respondent's brief to the Supreme Court in Empagran, cited me, accurately but selectively, for my assertion that a victory for Dieter would "change[] the calculus of risk for rational cartel participants in away that significantly decreases the law’s deterrent effect on international cartels." But the Chamber of Commerce, as amicus supporting petitioner, countered with this observation - the second part of my two-handed analysis:
 

Even those who support the FTAIA reading followed by the court below, and the even more expansive reading in Kruman, note the far-ranging impact of the decisions. See, e.g., Ronald W. Davis, International Cartel & Monopolization Cases Expose a Gap in Foreign Trade Antitrust Improvements Act, ANTITRUST, Summer 2001, at 53, 57 (“[T]he mind boggles at expanded class action proceedings, where counsel for  purchasers in Alabama and Texas sit at the counsel table with attorneys for subclasses of purchasers in Albania and Tajikistan.”)

Also citing me selectively was the amicus brief of the Federal Republic of Germany.

The defendant-petitioner's brief put most of its eggs in the FTAIA interpretation basket, but did make the standing argument that I embrace - and that has appealed to some of the lower courts.

An Inscrutable Opinion

My 2004 article explains the inscrutability: it's too involved a topic to address here. On remand to the D.C. Circuit, the court did an elegant two-step around the Supreme Court's analytical confusion, and resolved the whole mess by dismissing the plaintiffs' claims for want of proximate cause. That is similar to the approach that I and others have advocated.