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Foreign Trade Antitrust Improvement Act of 1982 (FTAIA)

Foreign Trade Antitrust Improvement Act of 1982 (FTAIA). General Rule : Sherman 1-7 not apply to “conduct involving trade or commerce (other than import trade or import commerce) with foreign nations. Exception : Two prongs:

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Foreign Trade Antitrust Improvement Act of 1982 (FTAIA)

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  1. Foreign Trade Antitrust Improvement Act of 1982 (FTAIA) General Rule: Sherman 1-7 not apply to “conduct involving trade or commerce (other than import trade or import commerce) with foreign nations. Exception: Two prongs: 1. Conduct has “direct, substantial, reasonable foreseeable effect”on non-foreign trade or commerce, import trade or commerce, or export commerce of a person engaged in such commerce in U.S., and 2. Such “effect” gives rise to claim under Sherman 1 – 7. Law 552 - Antitrust - Instructor: Dwight Drake

  2. Empagran S.A. v. F Hoffman-LaRoche,LTD (D.C. Cir 2003) • Basic Facts: Ds, manufactures of vitamins, conspired to fix vitamin prices around the world. Ps were foreign purchasers of vitamins. Ps claim was based on theory that FTAIA exclusion not apply. Two arguments: General FTAIA rule not apply because limited to exports – not here. Even if apply, the domestic effects exception apply because both prongs of test satisfied. • D.C. Circuit Holding: Where anticompetitive conduct has requisite effect on US, foreigners who are injured solely by conduct’s effect on foreign commerce (independent of US injury) may sue under US antitrust. • Legislative history supports broader reading. • Broader reading creates greater deterrence against global conspiracies. • Foreign Ps direct victims so have standing. • Query: What position did DOJ and FTC take? Why? Law 552 - Antitrust - Instructor: Dwight Drake

  3. Empagran S.A. v. F Hoffman-LaRoche,LTD (Sup. Ct 2004) • Cite: 124 S.Ct.2359 • Holding: Vacated D.C. Cir. holding. General FTAIA rule not limited to exports. Second prong of domestic “effects” exception not satisfied if foreign injury independent of domestic injury. Remanded for independence determination. • FTAIA purpose to exempt activities from antitrust laws to extent only impact foreign markets. • Court construes ambiguities against unreasonable interference with sovereign • authority of other nations. Not reasonable to apply US law to foreign parties • who are injured in foreign lands. Undermine laws of other lands. • Intent and legislative history not support broader reading. Policy arguments • support narrower interpretation. Law 552 - Antitrust - Instructor: Dwight Drake

  4. United States v. Aluminum Co. of America (“Alcoa”) (1945) • Tough issues on market definition: • - Alcoa produced ingot and sheet produced from ingot, and sold ingot to others that produced sheet in competition with Alcoa. • If in-house captive ingot production excluded, ingot market share 60%. If included, 90%. Court included because Alcoa controlled how ingot used. • Should secondary ingot refabricated from junk be factored into market share? Court said no because Alcoa could impact recycling flows. • Should off-shore ingot be factored in. Court held only portion that excluded tariffs and other barriers. • Bottom Line: Justice Hand analytically determined Alcoa had 90% market share of ingot and showed monopoly power. Two step analytical process: • 1. Define relevant market • 2. Evaluate power within relevant market. Law 552 - Antitrust - Instructor: Dwight Drake

  5. United States v. Aluminum Co. of America (“Alcoa”) (1945) • More from Hand: • Size itself isn’t unlawful if monopoly thrust on a party. “The successful competitor must not be turned on when he wins”. • Alcoa used its size to build and strengthen monopoly. • Section 2 requires both power to monopolize and “intent”, but no “monopolist monopolizes unconscious of what he is doing”. • Unlawful practice of using power to raise ingot prices while squeezing sheet prices not part of unlawful monopoly reasoning. Separate offense. Law 552 - Antitrust - Instructor: Dwight Drake

  6. United States v. Aluminum Co. of America (“Alcoa”) (1945) • Why did district court not bust up Alcoa? • Strong aluminum industry vital to national security. • Strength requires size and economies of scale. • Government had sold its aluminum facilities to Reynolds and Kaiser so there were new competitors. • Dividing vertically integrated company may do more harm than good – inefficiencies, management, less research, etc. • - Court ended Alcoa’s control of its Canadian sub. This, with government sales, did the job of creating competitive market. Law 552 - Antitrust - Instructor: Dwight Drake

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