I went to a very interesting conference on the FTAIA a few weeks ago. I’ve been a bit busy so haven’t had a chance to post. But, FTAIA issues aren’t going to be settled anytime soon, so here goes.
On September 27 I was fortunate to be able to attend the conference Extraterritoriality of Antitrust Law in the US and Abroad: A Hot Issue. The conference was sponsored by George Washington Law School and Concurrences. Application of the Foreign Trade Antitrust Improvement Act (FTAIA) is indeed a hot issue. And with the capacitors investigation being the next big thing in international cartel enforcement, I boldly predict the FTAIA is going to continue to be a hot issue.
There was a number of interesting panels and insightful discussions at the conference. Judge Dianne P. Wood, Chief Judge of the US Seventh Circuit Court of Appeals was a terrific choice as the keynote speaker. Before the joining the Court of Appeals, Judge Wood was instrumental in many difference roles in promoting competition law internationally and fostering cooperation among the world’s competition law community. I was in the Antitrust Division when Judge Wood was a Deputy Assistant Attorney General overseeing all international matters. Judge Wood traced the history of international cartel enforcement and cooperation from when the US had a monopoly, then the US and EU had a duopoly, and now there is at least an oligopoly of cartel enforcement with more nations joining as time passes.
Judge Wood also discussed the fact that the FTAIA is not a subject-matter jurisdiction limitation on the power of the federal courts but a component of the merits of a Sherman Act claim involving nonimport trade or commerce with foreign nations. The first significant difference is that if application of the FTAIA were a jurisdictional issue it could be raised at any time. If brought to the court’s attention that the court does not have jurisdiction to hear a case, the case must be dismissed. And the court is the fact-finder. But as a substantive element of a Sherman Act offense, whether complaint satisfies the FTAIA is decided on a Motion to Dismiss with all inferences drawn in favor of the plaintiff.
Judge Wood also noted that the Seventh and Ninth Circuit have different standards for measuring whether anticompetitive conduct abroad has a direct, substantial and reasonably foreseeable effect on commerce in the United States. The Ninth Circuit has interpreted the FTAIA requirement of “direct” to mean that the effect on U.S. commerce follow as an “immediate consequence” of the defendant’s conduct. U.S. v. Hui Hsuing, 778 F. 3d 738, 758 (9th Cir. 2014). The Seventh and Second Circuits, on the other hand, have construed the term “direct” in the FTAIA to denote a “reasonably proximate causal nexus.” Motorola Mobility LLC v. AU Optronics Corp., 775 F.3d 816, 819 (7th Cir. Nov. 26, 2014), as amended (Jan. 12, 2015); Lotes Co. v. Hon Hai Precision Indus., 753 F.3d 395, 410 (2d Cir. 2014). In most cases there may not be a difference in the outcome depending upon what standard is used. In fact, the Supreme Court declined to take cert. in the Motorola and AU Optronics cases (see prior post here). But Judge Wood noted that a Supreme Court decision on FTAIA issue would be welcome.
Comity was a major theme of the conference. Judge Wood noted that comity is fundamentally an Executive Branch consideration. If a case is properly before a court, (i.e. the court has jurisdiction), it is generally not the court’s job to dismiss the case on comity grounds.
There was another observation on comity that I found insightful. Daniel Bitton was a panelist and he offered this caution regarding how the US treats foreign nationals. Imagine, he said, if other countries had sought to extradite Apple executives for the e-book conspiracy? The point being the US is not the only jurisdiction with anti-cartel laws, and the US needs to be mindful that how we foreign executives are treated under US law may become the way that US executives are treated by foreign jurisdictions.
Mr. Bitton’s example struck home to me because while the Antitrust Division prosecuted the e-books case civilly, the Division always declared Apple’s conduct to be hard-core price-fixing organized at the highest levels of the company. The Division’s opening brief reads:
“Apple conspired with five of the six largest U.S. trade book publishers to raise the prices at which consumers purchase electronic books (“e-books”) and eliminate retail price competition…..Stripped of the glitz surrounding e-books and Apple, this is an unremarkable and obvious price-fixing case appropriate for per se condemnation.”
Based on the DOJ’s charging language, the Apple case could have been brought as a criminal case (see a prior post here).
It’s most certainly not good economics that one court jurisdiction gets to fine companies from all over the world on fairly tenuous grounds. Who would really like it if Russia’s legal system extended all the way around the world? Or North Korea’s? And I’m pretty sure that the non-reciprocity isn’t good public policy either. Eventually it’s going to start getting up peoples’ noses and they’ll be looking for ways to punish American companies in their own jurisdictions under their own laws. And there won’t be all that much that the U.S. can honestly do to complain about, given their previous actions.
The degree of comity (or respect) competition agencies show (or don’t show) each other will be increasingly important. For example, I think it was a good thing that the court rejected the Antitrust Division’s request for ten-year prison sentences for certain AU Optronics individuals who were convicted in the TFT-LCD cartel. I think even seeking the maximum jail sentence request may chill foreign cooperation (including the willingness to extradite to the US).
Another good tip from one of the panelists. (Ian Simmons I believe, but pardon me if I’ve got this, or anything else wrong in this post). Mr. Simmons said anytime he is dealing with a confusing, ambiguous statute [and the FTAIA makes anyone’s top ten list], he likes to refresh himself by re-reading the statute. So here it is (and with the capacitors investigation heating up, many of us will be re-reading the statute often):
§ 6a. Conduct involving trade or commerce with foreign nations
This Act [15 U.S.C. §§ 1 et seq.] shall not apply to conduct involving trade or commerce (other than import trade or import commerce) with foreign nations unless—
(1) such conduct has a direct, substantial, and reasonably foreseeable effect—
(A) on trade or commerce which is not trade or commerce with foreign nations, or on import trade or import commerce with foreign nations; or
(B) on export trade or export commerce with foreign nations, of a person engaged in such trade or commerce in the United States; and
(2) such effect gives rise to a claim under the provisions of this Act, other than this section.
Thanks for reading.
PS. For those who might be interested, New York University School of Law and Concurrences Review will host the 2nd Edition of the Conference “Antitrust in Emerging and Developing Economies” at NYU School of Law in New York City on Friday, October 23, 2015. The conference will feature the law, practice and policy in several of the most antitrust-prominent developing nations, including China, India, Brazil, Mexico, and Africa. More information here.