After Empagran: A Survey of Recent Cases
In order to bring a claim for treble damages in U.S. courts, a foreign plaintiff, having suffered antitrust injury abroad (for example, higher prices from a cartel), must show, among other things, that the defendant’s conduct had a “direct, substantial, and reasonably foreseeable effect” on U.S. commerce, §(1) FTAIA, and that “the domestic effect gave rise to, that is, caused, the plaintiff’s claim,” §(2) FTAIA. If nothing else, that much can be derived from the Supreme Court’s decision in Hoffman-La Roche v. Empagran. Since Empagran, a number of related cases have reached the lower courts, Sniado v. Bank Austria, MM Global Services v. The Dow Chemical Company, and In re Monosodium Glutamate Antitrust Litigation. Each of these cases takes a slightly different look at the the causal relationship between domestic harm and foreign harm that is required by §(2) FTAIA. The chart below illustrates four variants of that relationship:
- In (1), the control case, the domestic effect (”DE”) directly causes the harm to the plaintiff. U.S. law applies under the (substantial) effects test, developed in U.S. v. Alcoa and Hartford Fire Insurance Co. v. California.
- In (2), the foreign cartel leads to a DE and to a foreign effect (”FE”), which is entirely independent of the DE. The FE alone causes the harm to the plaintiff. This is the fact pattern decided in Empagran. And according to the Second Circuit, Sniado also fit that mold.
- In (3), the DE causes the FE and the FE causes the plaintiff’s harm. Put differently, the plaintiff’s harm is caused directly by the FE and indirectly by the DE. This is the situation contemplated in dictum by the Empagran court and relied upon explicitly in the Monosodium Glutamate Antitrust Litigation.
- Lastly, in (4), the DE is not the indirect cause of the plaintiff’s harm, rather, both DE and plaintiff’s harm are direct causes of the FE. In addition, there is some unspecified positive feedback between FE and DE, so that DE is not only the effect of FE but also and to some extent the cause of FE. The court in MM Global Services v. The Dow Chemical Company found this to be sufficient for §(2) FTAIA. Of all cases, this one pushes the extraterritoriality envelope the furthest. In a sense, the MM v. Dow case remains faithful to the exceedingly narrow Empagran holding, which only stipulates that type (2) cases do not qualify under §(2) FTAIA. Empagran does not speak to whether a finding of dependence requires DE to cause FE or vice versa.
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January 23rd, 2006 at 3:30 pm
[...] This survey puts the cases above in context. [...]
February 4th, 2006 at 1:17 pm
[...] While many details of the extraterritorial application of the US antitrust laws are still very much subject to debate, the basics are relatively straightforward, if one strips away a number of potentially confusing concepts. Since Alcoa (1945), the most important jurisdictional trigger is the effect of the anticompetitive conduct on US commerce. In price fixing cases, the effect is identical to the harm suffered by the plaintiff. In other words, the overcharge (= harm) is the price effect. Why is that important? Because the harm is geographically tied to the customer, i.e., wherever the customer is located at the time of the purchase, that’s where the harm and the anticompetitive effect occur. Thus, it is misleading to analyze a foreign cartel problem as follows: The conspiracy had price effects both in the US and in Germany, i.e., prices were inflated in both territories. I understand that customer C, based in the US, can recover for goods that he purchased in the US. But can he also recover for goods that he ordered from Germany? [...]
March 15th, 2006 at 8:53 am
[...] 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). [...]