Brief Fact Summary
The purchasers of foreign and domestic vitamins brought suit under the Sherman Act claiming that the defendants, foreign and domestic manufacturers of vitamins, had allegedly conspired to fix prices, raising prices in the United States and to foreign customers.
Synopsis of Rule of Law
The Foreign Trade Antitrust Improvements Act of 1982 (FTAIA) excludes from the Sherman Antitrust Act claims arising out of foreign injury that are completely independent of the domestic effects of the allegedly anticompetitive conduct.
Plaintiffs, foreign and domestic purchasers of vitamins (Plaintiff), sued manufacturers (Defendant) of vitamins claiming that the manufacturers violated the Sherman Act by engaging in a scheme of fixing prices. Defendants moved to dismiss the foreign purchasers, who came from Ecuador, Ukraine, Panama, and Australia. The District Court allowed the motion on the grounds that the FTAIA excludes anticompetitive conduct from the Sherman Act that only causes foreign injuries. No dispute exists that the relevant transactions involving the foreign purchasers all occurred outside of United States commerce. The appeals court reversed, holding that the FTAIA’s domestic injury exception applied here. Under that exception, the Sherman Act will apply where the price fixing conspiracy had a direct effect on domestic trade and commerce and the effect gave rise to a Sherman Act claim. Defendants appealed.
Does the Foreign Trade Antitrust Improvements Act of 1982 (FTAIA) exclude from the Sherman Antitrust Act claims arising out of foreign injury that are completely independent of the domestic effects of the allegedly anticompetitive conduct?
(Breyer, J.) Yes. The Foreign Trade Antitrust Improvements Act of 1982 (FTAIA) excludes from the Sherman Antitrust Act claims arising out of foreign injury that are completely independent of the domestic effects of the allegedly anticompetitive conduct. The domestic plaintiffs are not part of this appeal. Regarding the foreign plaintiffs, where their claim is based on the independent foreign effect of the price fixing scheme, they have no claim under the Sherman Act. The purpose of the FTAIA was to inform American exporters that the Sherman Act does not prevent them from engaging in business practices that may be anti-competitive as long as those practices only affect foreign markets. There is an exception for conduct that both (1) has a direct, substantial and reasonably foreseeable effect on American commerce and (2) has an effect of a kind the Sherman Act considers unlawful. The root of this case is that while the price fixing scheme may have a domestic effect, the foreign plaintiffs’ claims arise only from the independent foreign effects of the scheme. Therefore, the FTAIA exception will not apply. Because of principles of comity between nations, our nation’s antitrust laws should not apply to conduct causing foreign harm. Doing so would interfere with another nation’s ability to regulate its own commercial industries. Furthermore, applying our antitrust laws in this case would give incentive for foreign plaintiffs to use this nation’s courts and treble damages laws to obtain favorable rulings. Congress created the FTAIA to limit and not to expand the scope of the Sherman Act. Again, our holding is limited to those claims that arise only from independently caused foreign injuries. Lastly, we have assumed in this case that the domestic effects of the pricing scheme did not relate or give rise to the foreign plaintiffs’ claims. The foreign plaintiffs argue the higher prices in the United States allowed the manufacturers to maintain their international price-fixing scheme and therefore gave rise to the foreign injury. The Court of Appeals did not address this issue. The Court will therefore remand the case for a determination whether the issue was properly preserved and, if so, whether there is a related domestic effect giving rise to the foreign plaintiffs’ claims. Reversed and remanded.
(Scalia, J.) The court’s interpretation of FTAIA is correct. Statutes should be read with deference to the desire of other countries to apply their own laws to conduct within their own territories.
On remand, the D.C. Court of Appeals found the maintenance of high prices in the United States did not give rise to the injuries claimed by the foreign plaintiffs. The significance of this 8-0 decision (Justice O’Connor recused herself) was the Court’s reliance on comity among nations to support its decision.