International Trade Law News

Published by Jacobson Burton Kelley PLLC

In F. Hoffman-La Roche Ltd. v. Empagran S.A., the U.S. Supreme Court ruled on June 14, 2004 that foreign buyers cannot sue an international business in U.S. courts over price fixing unless they can demonstrate that the company's actions in the United States directly harmed them.

In an 8-0 ruling, the Court overturned part of an appeals court ruling that was opposed by multinational corporations, the Bush administration and antitrust agencies in Canada, Europe and Japan as amounting to unreasonable extraterritorial reach for U.S. antitrust law.

The case, a private lawsuit brought by five companies in Australia, Ecuador, Panama and Ukraine against multinational vitamin manufacturers and distributors, does not end here, however. With the clarification by the Supreme Court, the five foreign companies, mostly large farms that bought the vitamins for adding to cattle feed, could still pursue their claims in U.S. courts.

The five companies' private lawsuit followed the U.S. Justice Department settlement in an international price-fixing scheme by a cartel of vitamin manufacturers that resulted in U.S. criminal fines amounting to $500 million plus heavy civil penalties imposed by European governments.

The central legal issue in the case was an amendment to the U.S. Sherman Act antitrust law called the Foreign Trade Antitrust Improvements Act of 1982 (FTAIA). The FTAIA sought to limit the scope of U.S. antitrust law outside the United States except for behavior that has a "direct, substantial and reasonably foreseeable effect" on domestic U.S. commerce.

The overturned appeals court decision had found that that exception applied in this case. Even assuming that foreign higher prices were independent of higher domestic U.S. prices in this case, the appeals court ruling said, the FTAIA's underlying goal of deterring price fixing made the lack of connection inconsequential.

In effect, the appeals court decision said that, in a global economy, price fixing by a multinational corporation in one country can harm people in other countries.

But Justice Stephen Breyer, writing an opinion for fellow Supreme Court justices, argued that the FTAIA exception does not apply when the antitrust claim depends solely on harm done outside the United States.

"The case involves vitamin sellers around the world that agreed to fix prices, leading to higher vitamin prices in the United States and independently leading to higher vitamin prices in other countries such as Ecuador," Breyer wrote.

"We conclude that, in this scenario, a purchaser in the United States could bring a Sherman Act claim under the FTAIA based on domestic injury, but a purchaser in Ecuador could not bring a Sherman Act claim based on foreign harm," he wrote.

Breyer also wrote, however, that the five companies could still attempt to argue in a U.S. court that the foreign injury to them was not in fact independent of anti-competitive behavior in the United States.