F. Hoffman-La Roche Ltd. v. Empagran S.A.
The Supreme Court restricts the applicability of U.S. antitrust laws with regard to injuries suffered abroad independently from effects on the U.S. market
Can victims injured by a worldwide price-fixing conspiracy bring suit before U.S. federal courts under U.S. antitrust law, even if they suffered their injuries outside the U.S. market and independently from effects on the domestic U.S. market? The Supreme Court, in an 8:0 decision (with Justice O’Connor recused), held that they cannot, but remanded the case for further inquiry into whether the plaintiffs’ damages were truly independent from the U.S. market, and for analysis whether this would change anything in the outcome. The opinion is significant both for its implications on international antitrust law and because it writes another chapter in the Supreme Court’s efforts to determine the appropriate role of international law in decisions involving United States law.
The decision in Empagran deals with the economically biggest worldwide price-fixing conspiracy ever detected. Members of the conspiracy, producers of vitamin products from various countries, had fixed their prices worldwide over a period of several years. Both the United States and foreign antitrust agencies set record fines against the members. In addition, a class of both domestic and foreign victims brought a lawsuit in the United States. Jurisdiction posed no problem for the domestic victims. Thus, before the Court now were only the plaintiffs who had suffered their injuries outside the U.S. market, namely in Ecuador, Ukraine, Panama, and Australia.
The relevant federal statute, the Federal Trade Improvement Antitrust Act (FTAIA) of 1982, provides that U.S. antirust law only applies to foreign conduct if such conduct has (a) a “direct, substantial, and reasonably foreseeable effect” on the U.S. market, and (b) “such effect gives rise to a claim under the provisions of” the Sherman Act. Everyone conceded that the worldwide conspiracy satisfied (a), the long established “effects doctrine” which focuses, in international antitrust law, not on the place of conduct, but instead on the place of effects. What was doubtful was whether, regarding (b), the plaintiffs’ injury must stem from these U.S.-market effects, or whether jurisdiction over foreign claims would lie so long as the conduct generating the effects was actionable under the Sherman Act, period.
Lower courts had struggled over this question of statutory interpretation, but Justice Breyer spent little time on the literal meaning of the provision. Instead, he focused mostly on the question whether international law, more specifically comity, limits the prescriptive jurisdiction of U.S. law. In doing so, he relied on a longstanding presumption of statutory interpretation, according to which acts of Congress will not be given an interpretation that would violate international law (the “Charming Betsy” doctrine).
Thus, international law and comity were relevant tools for statutory interpretation. Under the Restatement of Foreign Relations, as well as earlier decisions, comity would require a multi-factor analysis. Justice Breyer, however, did not engage in such an analysis. Several foreign nations (Japan, Germany, Belgium, Canada, UK, Ireland) had, in amicus briefs, expressed fear that extensive extraterritorial jurisdiction could interfere with their own antitrust enforcement policies, especially amnesty programs for whistleblowers, but also different opinions as to the adequacy of treble damages (which, under foreign antitrust laws, are unavailable to private plaintiffs). The U.S. Department of Justice, in its own brief, had feared similar effects on its own leniency program. Justice Breyer, apparently, considered these fears sufficient to establish that comity mandated a narrow assumption of jurisdiction. In deferring to these briefs, the court avoided the need to develop a more subtle, case-specific comity analysis. While acknowledging that price fixing is unanimously condemned, Justice Breyer saw problems for other cases in which there is no international agreement as to the legality of the relevant conduct. Even in the case at hand, he found the differences in the appropriate remedies and the interference with foreign amnesty programs sufficient to counsel against extension of jurisdiction to plaintiffs injured in foreign markets. A case-by-case test would be “too complex to prove workable.”
In addition, because Congress, in passing the FTAIA in 1982, wanted to limit, not expand, the territorial scope of U.S. antitrust law, and because no case before 1982 had in a meaningful way endorsed the broad interpretation of the effects doctrine endorsed by the plaintiffs, Congress could be presumed not to have intended to give a remedy for injuries suffered abroad. There had been cases that assumed jurisdiction regarding foreign injuries, but they had been brought by the Government, and are therefore distinguishable from private claims, because private plaintiffs generally show less restraint.
The decision remedied, almost in passing, two problems of international antitrust law stemming from the Court’s last decision on international antitrust law, Hartford Fire Insurance Co. v. California. First, the majority in Hartford Fire had all but abolished comity as a meaningful element in the analysis of jurisdictional issues. Without explicitly overruling Hartford Fire, the Court now re-established the role of comity in determining the territorial scope of U.S. antitrust law, by referring explicitly to relevant case law and provisions from the Restatement on Foreign Relations Law. Second, after Hartford Fire it had been unclear whether any restraint to jurisdiction should be considered a restraint to subject-matter jurisdiction of courts (thus J. Souter for the majority) or prescriptive / legislative jurisdiction of Congress (thus J. Scalia in dissent). In Empagran, Justice Breyer did not address this question explicitly, but, in phrasing the comity problem as one of “prescriptive comity,” suggested that the test should be one of prescriptive jurisdiction.
Was this thus a complete victory for the defendants, and therefore worldwide cartels? Not quite. The Supreme Court, like the D.C. Circuit below, assumed for its decision that the plaintiffs’ injuries were completely independent from the effects on the U.S. market. It suggested that a different result might ensue if the injuries were not independent from such effects because, absent adverse effects on the U.S. market, plaintiffs could have imported their vitamins from the United States and would not have suffered their injuries. For enquiry into this question, the case was remanded. In a way, this leaves the biggest question in the case undecided. Arguably, for many products national markets can no longer be separated; instead, there is one world market, and a price fixing conspiracy needs to be worldwide in order to succeed. Where markets are separable, it makes sense that each country should restrain itself to regulating its own market. Yet where such separation is impossible, the effects doctrine breaks down, and new, alternative instruments of determining and restricting jurisdiction will be necessary. The Court did not address this problem, yet in assuming separable markets it may have decided a case that was only hypothetical. Whether worldwide cartels are now safe from worldwide class action law suits remains to be seen.
The author, Ralf Michaels, is an Associate Professor at Duke University School of Law, specializing in comparative law, conflict of laws and the globalization of jurisdiction. He co-authored an amicus curiae brief in Empagran for respondents.
