As economic globalization marches on, one question that emerges repeatedly is how far the U.S. legal system can and should reach beyond its own borders. Answering that question has become particularly urgent in antitrust enforcement, as the effects of cartels and business practices increasingly exceed national boundaries, and the number of active antitrust enforcement regimes around the world proliferates. Fortunately, the United States Supreme Court has noticed. In two decisions during its most recent term, the Court made clear that (1) the reach of the U.S. antitrust laws, while long, does have limits, and (2) the use of U.S. discovery tools to assist foreign jurisdictions is permitted but only when appropriate after case-by-case review.
In F. Hoffman-LaRoche Ltd. v. Empagran S.A., the Court, in an 8-0 decision, held that the Sherman Act does not apply to claims arising solely out of the foreign effect of a global cartel. This case was a follow-on to the criminal prosecutions of virtually all manufacturers of vitamins for their participation in global price-fixing activities. As is always the case, following guilty pleas by the manufacturers, a huge number of class action and individual antitrust lawsuits were filed by U.S. companies, often represented by the now well-known antitrust class action bar. With few exceptions, the defendants settled the suits for amounts collectively reaching billions of dollars.
In the Empagran complaint, however, five non-U.S. vitamin distributors located in Ukraine, Australia, Ecuador, and Panama, represented by one of the class action firms that had already brought claims on behalf of a class of U.S. companies, attempted to recover damages allegedly suffered as a result of the price-fixing. Not only were these plaintiffs located outside of the United States, but they had purchased the vitamins outside of the United States. As the district court explained, the relevant transactions were "wholly foreign." On that basis, in fact, the district court dismissed the claims of the five non-U.S. companies. But a divided panel of the United States Court of Appeals for the District of Columbia Circuit reversed, finding that exceptions in The Foreign Trade Antitrust Improvements Act of 1982 ("FTAIA") applied to the foreign claims and allowed them to proceed. Fortunately, the Supreme Court disagreed, rejecting a statutory interpretation that would turn federal courts into world courts for private antitrust claims.
The FTAIA was intended to limit the reach of the US antitrust laws; according to the language of the statute, the Sherman Act does not apply "to conduct involving trade or commerce . . . with foreign nations." The Act provides an exception, though, for conduct that significantly harms imports, domestic commerce, or American exporters and that has an effect of the sort that the Sherman Act condemns. The five foreign plaintiffs argued, first, that the FTAIA only applies to conduct involving exports, and second, that even if the FTAIA applied, their claims would fall within the rule’s exception. The Court quickly disposed of the first argument and held that the FTAIA applies "where the anticompetitive conduct at issue is foreign," as plainly it was here.
The Court then turned to the exception and, again, rejected the foreign plaintiffs’ interpretation. The Court held that the Sherman Act does not reach foreign price-fixing claims based on conduct that adversely affects both domestic and foreign customers, as long as the foreign effect is independent of the domestic effect. The Court provided two reasons for this conclusion. First, the Court cited comity considerations and the Court’s practice of construing ambiguous statutes in a way that avoids unreasonable interference with other sovereign authorities. Notably, the Court heard from many of those sovereigns, including Germany, Japan, and Canada, which filed amicus briefs urging the Court to reject an inter- pretation of the FTAIA that would convert the U.S. federal courts into world antitrust courts. The Court found that while any application of U.S. antitrust laws to foreign conduct can interfere with another nation’s sovereignty, such interference is only justified when it is done to remedy a domestic harm. The same justification does not exist when the conduct causes independent foreign harm that is then the sole basis for the claim. Second, the Court found that in passing the FTAIA, the Court did not intend to expand the Sherman Act’s scope to reach the claims made here.
Notably, in Empagran, the United States Department of Justice ("DOJ") sided with the very vitamins defendants it had prosecuted. The DOJ, together with the Federal Trade Commission and the State Department, filed an amicus brief in which they not only pointed out the flaws in the D.C. Circuit’s statutory interpretation, but also provided significant policy reasons for rejecting such an interpretation. First, the agencies expressed the concern that allowing the foreign treble damage claims would discourage foreign companies from applying for amnesty through the DOJ’s criminal amnesty program. That program arguably has been the highest contributing factor in the DOJ’s successful prosecution of international cartels and, indeed, has been copied by many national antitrust enforcement agencies. Second, the agencies warned that the D.C. Circuit’s interpretation would damage the cooperative law enforcement relationships that the United States has built with other jurisdictions. And, finally, the agencies pointed out the burdens that would be placed on U.S. federal courts if the appellate decision permitting the claims was allowed to stand.
While the decision goes a long way toward shutting the door on foreign claimants using U.S. courts to secure antitrust damages arising from foreign transactions, the Court did leave the door open a small crack. The Court based its reasoning on the assumption that the price-fixing conduct independently caused the foreign injury. It did not consider the foreign plaintiffs’ alternative argument that the domestic harm and the foreign harm were inextricably linked. Rather, the Court gave plaintiffs the option to ask the Court of Appeals to consider that claim. Not surprisingly, plaintiffs’ counsel immediately and publicly seized on that opening to declare an important victory. That the plaintiffs’ bar will use it to bring foreign antitrust claims seems virtually certain. One important question is what facts a foreign plaintiff must plead to get past a motion to dismiss. If a boilerplate statement that the alleged foreign injury is linked to the alleged domestic injury is enough, then Empagran, unfortunately, may not have as great an effect in practice as it should, at least in the short run. One hopes that the Court of Appeals on remand in the Empagran case, and other courts in other cases, will require a significant factual showing, or there is little doubt that this issue will be back in the Supreme Court again in the near future. In the meantime, cartel participants should expect that plaintiffs will seek to certify classes of domestic as well as foreign customers based on allegations that the harm to one is linked to the harm to the other.
In Intel Corporation v. Advanced Micro Devices, Inc., the Supreme Court interpreted a statute that Congress enacted to assist "foreign tribunals" in obtaining evidence in the United States. Advanced Micro Devices ("AMD") had . led an antitrust complaint against its chip-making competitor, Intel, with the Directorate-General for Competition of the European Commission ("EC"). AMD recommended that the EC seek documents that Intel had produced in a private antitrust suit in Alabama, but the EC declined to do so. AMD then went into federal court in California to try to get an order requiring Intel to produce the documents so that AMD could provide them to the EC. AMD based its petition on an old statute, 28 U.S.C. 1782(a), which provides that a federal court may order a person to give testimony or produce documents "for use in a proceeding in a foreign or international tribunal . . . upon the application of any interested person." The district court denied the petition, but the Court of Appeals for the Ninth Circuit reversed. The Supreme Court affirmed, holding that Section 1782(a) authorized but did not require the district court to aid AMD in its efforts to get discovery from Intel.
The Court first concluded that a complainant before the EC, here AMD, has significant participation rights and thus is an "interested person" under Section 1782(a), rejecting Intel’s contention that only foreign sovereigns and litigants qualify as "interested persons." The Court went on to find that the EC qualifies as a "tribunal" because it is the body that receives evidence and makes the first decision, rejecting Intel’s contrary contention. That conclusion was rather surprising, because the EC itself had filed an amicus brief in which it told the Court that it is not a tribunal! And the Court further rejected Intel’s protestation that there was no "proceeding" before the EC because the EC had not advanced beyond an investigation, holding that as long as a proceeding is reasonably contemplated, it does not have to be "pending" or "imminent."
The Court also determined that the statute imposes no requirement that the evidence requested must be discoverable in the foreign jurisdiction if it were located there, instead of in the United States. According to the Court, nothing in the statute or legislative history suggests that such a limitation was intended. Instead, any policy considerations, such as concerns about comity and parity between litigants, while not justifications for reading a foreign discoverability requirement into the statute, may be considered by the district court in exercising its discretion in a particular case.
Although the Court thoroughly rejected all of Intel’s arguments that the district court lacked authority under Section 1782(a) to order the discovery, it did not conclude that the district court necessarily should have ordered the discovery. Instead, the Court remanded the case for more thorough examination of the merits and provided a list of relevant factors to guide the district court on remand in deciding whether to order the discovery. First, the Court stated that when the object of the discovery motion — in this case, Intel — is participating in the foreign proceeding, the need to order discovery in the United States is not as obvious as when the object is not a participant. After all, the foreign tribunal itself can secure evidence that it believes it needs from the participants. Second, the district court may consider comity issues: "the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government or the court or agency abroad to U.S. federal-court judicial assistance." Included in this, the court may consider whether the discovery request is an attempt to circumvent unfavorable foreign discovery rules. Finally, as with all discovery requests, the district court may consider rejecting or reducing overly intrusive or burdensome requests.
Given that Section 1782(a) has been on the books in some form since 1948 apparently without attracting much attention, will the Court’s Intel decision have much of an effect? Justice Breyer, who dissented from the Court’s decision, apparently thinks so. In his dissenting opinion, he suggests that the decision would allow a firm that simply wants to get information from a competitor to file an antitrust complaint with the EC and then file a Section 1782(a) petition seeking discovery from the competitor in the United States. Justice Breyer could well be right. As the Microsoft case and the GE/Honeywell merger investigation demonstrated, U.S. firms that are dissatisfied with decisions by U.S. antitrust agencies do not hesitate to lodge complaints in the EC in an effort to achieve their strategic objectives. The Intel decision might have provided a new strategic avenue.
As in Empagran, the district court’s reasoning and decision on remand will provide an initial indication on how courts will apply the considerations set forth in Intel. It would appear that Intel at least some factors weigh against AMD securing the discovery it wants: Intel is a participant in the EC’s "proceeding," and the EC plainly is not receptive to U.S. court assistance, having already politely told the Supreme Court, "no, thank you."
Given the high stakes in antitrust cases, ranging from huge treble damage pay-outs to the crippling of a competitor under investigation, firms will continue to make strategic use of the antitrust laws. The proliferation of antitrust enforcement regimes around the world just adds depth and complexity to that strategy, as AMD has shown here. Fortunately, the Supreme Court has recognized the cross-border issues created as significant enough to warrant review. Empagran and Intel, Intel while hardly the last word, do provide some limits and some guidance, but these issues will be with us for years to come.
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