The In re MSG litigation is similar in may ways to the real-world fact pattern in Empagran. (See this post for some additional context.) Here as there the issue is whether foreign plaintiffs, having bought cartelized goods (here: MSG) at inflated prices from foreign sellers, can sue for damages in the US. Here as there, the cartel agreement harmed both foreign and US customers. Here as there the harm to the foreign plaintiffs (higher prices abroad) depended economically on domestic harm (higher prices for US buyers).

In its 2004 Empagran decision, the Supreme Court avoided dealing with the issue by deciding a carefully crafted hypothetical rather than the actual case. In the Empagran hypothetical, the foreign harm was assumed to be independent of domestic harm. The Supreme Court thus left it to the D.C. Circuit to decide on remand whether dependent foreign harm is actionable in US courts. The D.C. Circuit said “no, with very few exceptions.” Claims are restricted to situations where the domestic harm proximately caused the foreign harm. Given the facts of the actual Empagran case, this is a tough standard.

In the MSG matter, the Minnesota District Court followed the D.C. Circuit on a motion for reconsideration, and dismissed the complaint (2005 WL 2810682 (D.Minn.)).

The theory Plaintiffs advance in this case is identical to that advanced in Empagran. In particular, Plaintiffs contend that MSG and nucleotides are fungible and globally marketed, which allowed Defendants to sustain super-competitive prices abroad only by maintaining super-competitive prices in the United States. Plaintiffs further allege that they would have purchased MSG and/or nucleotides at lower prices either directly from United States sellers or from arbitrageurs selling MSG and/or nucleotides imported from the United States, thereby preventing Defendants from selling abroad at inflated prices. Finally, Plaintiffs contend that Defendants accomplished their global price-fixing cartel by creating barriers to international commerce in the form of market division agreements.

This Court is persuaded by the decision and reasoning of the District of Columbia Circuit Court of Appeals in Empagran. The global price-fixing cartel theory establishes only an indirect relationship between United States prices and the prices paid in foreign markets. As such, Plaintiffs can only show that the foreign effect of price-fixing gave rise to their injuries. Because Plaintiffs are unable to show that the domestic effect proximately caused their injuries, Plaintiffs cannot state a claim under the Sherman Act.

While not necessarily disagreeing with the outcome, I find the court’s reasoning unpersuasive. There are two main policy goals here that need to be balanced. One is the protection of US consumers (”What’s our interest in deciding the case?”), the other is comity (”What’s everyone else’s interest in us not deciding the case?”). The proper place to discuss these complex issues is a jurisdictional rule of reason, not a standard of causation. There is nothing in the facts laid out above by the court that could not equally well be used to justify a finding of proximate causation. Cramming highly normative standards and balancing tests into a seemingly neutral causation analysis is a recipe for confusion and does not provide future litigants with meaningful guidance.

Technorati Tags: antitrust, extraterritoriality, Empagran, MSG

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