Foreign Trade Antitrust Improvement Act of 1982 (FTAIA)

1
Foreign Trade Antitrust Improvement Act of 1982
(FTAIA)
General Rule Sherman 1-7 not apply to conduct
involving trade or commerce (other than import
trade or import commerce) with foreign
nations. Exception Two prongs 1.
Conduct has direct, substantial, reasonable
foreseeable effecton non-foreign trade or
commerce, import trade or commerce, or export
commerce of a person engaged in such commerce in
U.S., and 2. Such effect gives rise to
claim under Sherman 1 7.
2
Empagran S.A. v. F Hoffman-LaRoche,LTD (D.C. Cir
2003)

• Basic Facts Ds, manufactures of vitamins,
  conspired to fix vitamin prices around the world.
  Ps were foreign purchasers of vitamins. Ps
  claim was based on theory that FTAIA exclusion
  not apply. Two arguments General FTAIA rule not
  apply because limited to exports not here.
  Even if apply, the domestic effects exception
  apply because both prongs of test satisfied.
• D.C. Circuit Holding Where anticompetitive
  conduct has requisite effect on US, foreigners
  who are injured solely by conducts effect on
  foreign commerce (independent of US injury) may
  sue under US antitrust.
• Legislative history supports broader reading.
• Broader reading creates greater deterrence
  against global conspiracies.
• Foreign Ps direct victims so have standing.
• Query What position did DOJ and FTC take? Why?

3
Empagran S.A. v. F Hoffman-LaRoche,LTD (Sup. Ct
2004)

• Cite 124 S.Ct.2359
• Holding Vacated D.C. Cir. holding. General
  FTAIA rule not limited to exports. Second prong
  of domestic effects exception not satisfied if
  foreign injury independent of domestic injury.
  Remanded for independence determination.
• FTAIA purpose to exempt activities from
  antitrust laws to extent only impact foreign
  markets.
• Court construes ambiguities against unreasonable
  interference with sovereign
• authority of other nations. Not reasonable to
  apply US law to foreign parties
• who are injured in foreign lands. Undermine
  laws of other lands.
• Intent and legislative history not support
  broader reading. Policy arguments
• support narrower interpretation.

4
United States v. Aluminum Co. of America
(Alcoa) (1945)

• Tough issues on market definition
• - Alcoa produced ingot and sheet produced from
  ingot, and sold ingot to others that produced
  sheet in competition with Alcoa.
• If in-house captive ingot production excluded,
  ingot market share 60. If included, 90. Court
  included because Alcoa controlled how ingot used.
• Should secondary ingot refabricated from junk
  be factored into market share? Court said no
  because Alcoa could impact recycling flows.
• Should off-shore ingot be factored in. Court
  held only portion that excluded tariffs and other
  barriers.
• Bottom Line Justice Hand analytically
  determined Alcoa had 90 market share of ingot
  and showed monopoly power. Two step analytical
  process
• 1. Define relevant market
• 2. Evaluate power within relevant market.

5
United States v. Aluminum Co. of America
(Alcoa) (1945)

• More from Hand
• Size itself isnt unlawful if monopoly thrust on
  a party. The successful competitor must not be
  turned on when he wins.
• Alcoa used its size to build and strengthen
  monopoly.
• Section 2 requires both power to monopolize and
  intent, but no monopolist monopolizes
  unconscious of what he is doing.
• Unlawful practice of using power to raise ingot
  prices while squeezing sheet prices not part of
  unlawful monopoly reasoning. Separate offense.

6
United States v. Aluminum Co. of America
(Alcoa) (1945)

• Why did district court not bust up Alcoa?
• Strong aluminum industry vital to national
  security.
• Strength requires size and economies of scale.
• Government had sold its aluminum facilities to
  Reynolds and Kaiser so there were new
  competitors.
• Dividing vertically integrated company may do
  more harm than good inefficiencies, management,
  less research, etc.
• - Court ended Alcoas control of its Canadian
  sub. This, with government sales, did the job of
  creating competitive market.