In the aftermath of the international Graphite Electrodes cartel, the US sought the extradition of former Morgan Crucible Co. Chief Executive Officer Ian Norris from the UK on the theory that price fixing is a criminal conspiracy to defraud (which is punishable both in the US and in the UK). The House of Lords disagreed. According to Bloomberg, Norris

won a ruling from the U.K.’s highest court that hinders attempts to extradite him for a trial in Pennsylvania. … The House of Lords today ruled he couldn’t be extradited on the antitrust claims because price-fixing wasn’t a crime in the U.K. at the time of the alleged misconduct. “Mere price fixing was not at any time” a criminal offense in the U.K. when the cartel operated, the House of Lords said.

While Norris doesn’t have to face U.S. antitrust charges, the Lords said he may be extradited over the obstruction of justice claim and sent the issue to a lower court for review.

Technorati Tags: antitrust, extradition

The always interesting Sports Law Blog wonders if Michael Vick will also be banned from the Canadian Football League as well as the NFL. 

Since the NFL announced its suspension of Michael Vick, many of my esteemed colleagues have presumed that Vick will also get banned from the Canadian Football League (”CFL”) based on the “Ricky Williams Rule,” which prevents any player suspended by the NFL from entering the CFL.

But is there an antitrust problem?

Isn’t it true that an agreement amongst all of the teams in a pro sports league to boycott a class of players would indicate a prima facie case of an antitrust violation? Isn’t it also the case that the CFL has market power in the labor market for players banned by the NFL (presuming that issue is even relevant) because NFL teams are not part of the viable market for such players’ services?

… under antitrust law, there are less restrictive alternatives for the CFL to prevent the entry of troublesome players, such as for the CFL to review the candidacy of each prospective player on a case-by-case basis. A case-by-case review of players banned by the NFL would make more sense given that the CFL has already “grandfathered” players that are currently playing in the CFL but previously banned from the NFL. In a statement that may prove especially damning to the CFL, the CFL in November of 2006 stated that “one of the reasons for the ban is to maintain a good relationship with the NFL.”

Indeed, the biggest challenge to bringing a suit against the CFL may involve proving U.S.-based anti-competitive effects given that much of this allegedly anti-competitive conduct occurred outside of the United States.  However, given that most of the football players that would be banned from the CFL under this rule live in the United States, as well as that some of the CFL fans reside in the United States, and that CFL games are broadcast into the American market through Dish Network, DirecTV and America One, these concerns should not prevent a bona fide antitrust challenge against the Ricky Williams Rule in United States federal courts.

Of course, the question is a slightly premature as Vick will have to serve twelve to eighteen (at least) first.

Yesterday, the House held a hearing on House Bill 1902 which would “prohibit brand name drug companies from compensating generic drug companies to delay the entry of a generic drug into the market ….”  The House Committee on Energy and Commerce heard from FTC Commissioner Leibowitz, Mike Wroblewski of Consumers Union, Professor Scott Hemphill (Columbia Law), Phillip Proger of Jones Day, Ted Whitehouse of Willkie Farr, and Bernard Sherman, CEO of Apotex.  The AP (via Forbes.com) has a short article about the hearing.

In other Congressional antitrust news, last week the Senate Judiciary Committee passed Senate Bill 879 which would “amend the Sherman Act to make oil-producing and exporting cartels illegal.”  As Trade Regulation Talk explains, the bill

would allow the federal government to take legal action against foreign states, including members of OPEC, for price fixing and artificially limiting the amount of available oil. … The bill, which would amend the Sherman Act, would clear the way for the federal courts to hear antitrust suits against OPEC, according to Senator Herb Kohl, the bill’s sponsor and chairman of the Judiciary Committee’s Antitrust, Competition Policy and Consumer Rights Subcommittee.

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.

Technorati Tags: antitrust, extraterritoriality, Empagran, MSG

UPDATE (2/20/06): A revised version of this entry will be posted soon.

On January 9, 2006 the Supreme Court denied to review the D.C. Circuit’s decision on remand in Empagran v. Hoffman-LaRoche. The Empagran plaintiffs have thus come to the end of the line. Since Empagran and questions of extraterritoriality have featured prominently on this blog, here is a little self-referential roundup of previous posts:

1. Empagran I

• Discussion of the Supreme Court’s Empagran I decision.
• Here is a graphical Empagran walkthrough.

1. After Empagran I

• Discussion of MM Global Services v. The Dow Chemical Co. (2004)
• Discussion of Sniado v. Bank Austria (2004)
• Discussion of In re MSG Antitrust Litigation (2005)
• This survey puts the cases above in context.

1. Empagran II

• Discussion of the D.C. Circuits Empagran II decision.

1. Extraterritoriality

• A brief overview of the extraterritorial application of US antitrust law in general.

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?

1. As a result of A’s and B’s domestic price fixing (= conduct), C, a domestic buyer, pays inflated prices (= harm = effect). C can sue for damages under §1 of the Sherman Act and §4 of the Clayton Act.
2. As a result of A’s and B’s foreign price fixing, C, a foreign buyer, pays inflated prices. If that’s all, then C has no standing to sue in the US.
3. As a result of A’s and B’s foreign price fixing, C, a domestic buyer, pays inflated prices. C can sue for damages under §1 of the Sherman Act and §4 of the Clayton Act, provided that C’s harm (= effect) was “direct, substantial, and reasonably foreseeable.” That’s the law since Alcoa (1945) and the FTAIA.
4. As a result of A’s and B’s domestic price fixing, C, a foreign buyer, pays inflated prices. If that’s all, then C has no standing to sue in the US. Export cartels are exempt from US antitrust scrutiny under the FTAIA. (Why? Because the only politically relevant constituency in this situation are the domestic producers. The harmed foreign customers don’t vote in the US.)
5. This is the Empagran (2004) situation, which is a combination of (3) and (2). As a result of A’s and B’s foreign price fixing, D, a foreign buyer, pays inflated prices. But D is not the only one harmed by the cartel. C, a domestic buyer, also pays inflated prices. In that situation, does D have standing to sue in the US for its (foreign) harm? The answer to this question is still subject to controversy, but a conservative answer is: “Yes, provided that harm to C (= domestic harm) is the proximate cause of D’s (foreign) harm.” (But not vice versa.)

On June 28, 2005, the court of appeals for the District of Columbia ruled for the Empagran defendants on remand (Empagran v. F. Hoffman-La Roche, 417 F.3d 1267 (D.C. Cir. 2005) “Empagran II“). To briefly restate the facts. Empagran, an Ecuadorian company, bought vitamins from BASF (Germany) and Hoffmann-La Roche (Switzerland). BASF and LaRoche, as members of the Vitamins, Inc. cartel, had fixed the prices for vitamins around the world. Empagran sued LaRoche and BASF in the US for treble damages. The district court dismissed the lawsuit for lack of subject matter jurisdiction. The court of appeals for the District of Columbia reversed the district court, and the Supreme Court, in June 2004, reversed and remanded in a somewhat cryptic opinion. The following was clear after the Supreme Court’s Empagran I decision:

In order to bring a claim for treble damages in US courts, a plaintiff who suffered injuries abroad, must show that the defendant’s conduct had a “direct, substantial, and reasonably foreseeable effect” on U.S. commerce, &#167(1) FTAIA, and that “the domestic effect gave rise to, that is, caused, the plaintiff’s claim,” &#167(2) FTAIA. In short: The defendant’s conduct (i) injured the plaintiff abroad, (ii) injured others in the US, and (iii) the domestic injury caused the plaintiff’s foreign injury.

It was unclear, however, how close the causal connection between domestic injury and foreign injury had to be. In Empagran II, the court of appeals held that:

The statutory language (”gives rise to”) indicates a direct causal relationship, that is, proximate causation, and is not satisfied by a mere but-for “nexus.” (Id., 1271).

Of course, nothing in the language of the FTAIA (”gives rise to”) suggests anything of that nature. It is perfectly fine to say the that “the cartel gave rise to lawsuits by customers” or that “the desire to end all wars between Germany and France gave rise to the formation of the European Community,” etc. Proximate causation between X and Y is simply not implied in the the claim that “X gave rise to Y.” Be that as it may, the court draws the line between those foreign plaintiffs who can sue in the US and those who can’t on the basis of the central substantive issue in the Empagran I opinion: prescriptive comity. The Sherman Act thus only applies to those foreign plaintiffs, whose injury was proximately caused by the domestic harm. Held against that standard, the Empagran plaintiffs lost. Time will tell how hard it is to meet the Empagran II standard in practice. It is difficult to imagine a court brushing aside direct econometric evidence of foreign injury being linked to domestic harm. In contrast, economic a priori reasoning (e.g., higher prices abroad would have been eroded by arbitrage had it not been for higher prices in the US) appears to be insufficient after Empagran II, at least in the D.C. Circuit.

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:

1. 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.
2. 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.
3. 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.
4. 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 &#167(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 &#167(2) FTAIA. Empagran does not speak to whether a finding of dependence requires DE to cause FE or vice versa.

The Sniado case began with the suicide of Gerhard Praschak, the head of the (state owned) Austrian Kontrollbank in April 1997. In a suicide note, he confessed “that Austria’s banking system was rife with price-fixing of exchange rate fees for Euro-currencies.” Sniado v. Bank Austria AG, 352 F.3d 73, 75-76 (2d. Cir. 2003). According to the European Commission, the “Lombard Club,” as the cartel was called by the CEO’s of the participating banks who met every month at the Hotel Bristol in Vienna,

covered the entire Austrian territory ‘down to the smallest village’, … with a view to fixing deposit, lending and other rates to the detriment of businesses and consumers in Austria.

The case was a roller-coaster ride through the federal court system. First, Sniado lost in the Southern District of New York, where the court dismissed his case for lack of subject matter jurisdiction. Sniado v. Bank Austria AG, 174 F. Supp. 2d. 159 (S.D.N.Y. 2001). On appeal, the Second Circuit sided with Snaido, based on its recent decision in Kruman v. Christie’s (2002), where the court had endorsed a broad view of &#1676a(1) and (2) of the FTAIA. Kruman, however, following on the heels of the 5th Circuit’s decision in Den Norske v. HeereMac (2001), led to the circuit split that in June 2004 prompted the Supreme Court’s decision in Hoffman-La Roche v. Empagran. In Empagran, the Supreme Court refused to adopt the Second Circuit’s broad view. Thus, when Sniado petitioned for review by the Supreme Court, the Supreme Court, just seven days after its Empagran decision, sent the case back to the Second Circuit “for further consideration in light of [Empagran].” Bank Austria AG v. Sniado, 124 S.Ct. 2870. Less than two months later, in August 2004, the Second Circuit decided Sniado’s case on remand. Sniado lost, and the matter had come full-circle.

Based on the pleadings and the standard set out in Empagran, the Second Circuit’s decision is hardly surprising. Snidao suffered foreign harm, when he paid inflated exchange fees in Europe. Others suffered domestic harm, when they paid inflated exchange fees in the U.S. There are two ways in which a plaintiff can meet the requirement that domestic harm give rise to his or her claims: (i) the plaintiff, in addition to having suffered foreign harm, also suffered domestic harm; and (ii) the domestic harm (to others) caused the plaintiff’s foreign harm (i.e., foreign harm is dependent on domestic harm). Neither alternative was available to Sniado. He hadn’t exchanged money in the U.S. and thus did not suffer direct domestic injury. And he did not allege sufficient facts upon which the court could have found that higher rates in the U.S. had somehow caused (or “helped to bring about”) higher rates in Europe.

One of the reasons for the continuing debate about Hoffman-La Roche v. Empagran is that the Supreme Court’s decision doesn’t spell out critical steps in the flow of its argument. Particularly confusing is how the court suddenly introduces the distinction between independent and dependent foreign harm. That distinction only makes sense if &#167(2) requires that domestic harm give rise to the foreign plaintiff’s claim, but not that the foreign plaintiff must have suffered domestic harm directly. Rather, it is sufficient for the foreign plaintiff to have suffered foreign harm, if the foreign harm is in some way dependent on domestic harm. In that instance, it makes sense to say the the plaintiff indirectly suffered domestic harm. Following the great tradition of text-adventure game walkthroughs, here is a chart that maps out the court’s argument in Empagran in a (hopefully somewhat more) logical fashion, while tying it as closely as possible to the language of the decision.

Note that the walkthrough does not contain any discussion of the merits and policy arguments, the goal is merely to identify the place of each argument in the process of the court’s interpretation of the FTAIA.

In MM Global Services v. The Dow Chemical Company, 329 F. Supp.2d 337 (D.Conn. 2004), the court sided with the foreign plaintiffs and allowed their claim based on §1 of the Sherman Act to proceed. The facts are somewhat different from the standard global price fixing conspiracy fare that has sustained most of the development of the extraterritorial application of the U.S. antitrust laws. The primary defendants are Union Carbide and the Dow Chemical Company, two U.S. entities. The plaintiff is MM Global Services (”MM”) a local distributor of Union’s products (chemicals, polymers, etc.) in India. When an accident at one of Union’s chemical plants in Bhopal killed thousands of people in December 1984 (for which Union was made to pay $470 million in damages), Union stopped selling products to customers in India directly. Instead, it appointed MM as its distributor. After Union merged with Dow in 2001, Union started distributing its products in India through Dow’s distribution network, which was “untainted by the Bhopal tragedy.” (Id., 399). As a consequence, Dow terminated MM’s distributorship. MM now alleges that Union/Dow breached its contract and, more importantly, that Union/Dow violated §1 of the Sherman Act by forcing MM to adhere to minimum resale prices, which is per se illegal. Thus, the stage is set for the question of extraterritorial application of the Sherman Act under Empagran, for which we need three elements: conduct, foreign harm, and domestic harm. The conduct in question, resale price maintenance, took place in India. The foreign harm consists of higher prices in India. And the domestic harm is higher prices in the U.S. How do higher prices in India translate into higher prices in the U.S.? By preventing U.S. buyers from purchasing cheaper products in India, that is, geographic arbitrage from India into the U.S. (Id., 340).

The court’s opinion focuses on §(2) FTAIA, the “domestic injury exception” to the Sherman Act. If the exception applies, then the Sherman Act applies to Dow/Union’s conduct. It the exception does not apply, then the Sherman Act does not apply to Dow/Union’s conduct. (For background on the confusing “exception to the exception” framework, see this and this entry.) The court decided that the exception (and with it the Sherman Act) applies, and therefore denied Dow/Union’s motion to dismiss. (Id., 343).

In Empagran, the Supreme Court held that domestic harm cannot give rise to the plaintiff’s claim (i.e., help to bring about the foreign injury), if the plaintiff’s foreign harm is independent of domestic harm. Conversely, if the foreign harm is dependent on domestic harm, plaintiffs might have a claim. Note that the causality implied by Empagran flows from domestic harm (= cause) to foreign harm (= effect). In MM v. Dow, the situation is reversed. Because of higher prices in India (= foreign harm; cause), U.S. customers paid higher prices (= domestic harm; effect). As a result of higher prices in the U.S., prices in India remained at elevated levels, etc. Clearly, in MM v. Dow foreign and domestic harm are not independent. At the same time, the foreign harm doesn’t seem to to be dependent on domestic harm. Rather, domestic harm depends on foreign harm, at least initially. The court summarizes the core arguments of the parties as follows:

[T]he defendants argue that the plaintiffs have not and cannot now assert that domestic effects on commerce led to their [foreign] injuries, as required by Empagran, because the “[p]laintiffs have built their case around the proposition that Indian resale price maintenance led to higher prices in the United States, not the other way around.” In other words, the defendants assert that it is impossible for the plaintiffs to allege both that their injuries gave rise to domestic effects on commerce and that domestic effects also gave rise to their injuries. The plaintiffs respond that the Empagran decision “was expressly limited to whether the Sherman Act conferred jurisdiction over foreign effects that are ‘entirely independent’ of domestic effect[s].” In the plaintiffs’ view, “there is nothing in [Empagran] that precludes jurisdiction over domestic effects ‘flowing’ to and from foreign effects.” In other words, the plaintiffs assert that their injuries were not independent from effects on U.S. commerce, and contend that it is possible for their [foreign] injuries to both arise from and give rise to effects on domestic commerce.

There are a couple of ancillary questions raised by this case. First, is there really a “direct, substantial, and reasonably foreseeable effect” on U.S. commerce, as required by §(1)? (The court acknowledges that MM’s allegations “amount to little more than activities directed at a foreign market with domestic spill-over effects.” (2004 WL 556577, at 6). But considering the procedural posture (motion to dismiss), the court allowed the case to proceed.) Second, what exactly is MM’s antitrust injury, given that it was a party to the RPM conspiracy and as a seller of Union’s products presumably benefitted from the elevated prices? Third, is the question of whether the Sherman Act applies to certain foreign conduct really an issue of subject matter jurisdiction? This issue will require a separate discussion, as it affects not only MM v. Dow, but also In re MSG litigation, and very likely the D.C. Circuit’s upcoming Empagran decision on remand.

On June 14, 2004, the U.S. Supreme Court rendered a highly anticipated decision in F. Hoffman-La Roche Ltd. v. Empagran S. A., No. 03-724. The case was about a world-wide cartel of vitamin manufacturers that fixed prices for vitamins and vitamin products throughout the 1990s. The price-fixing resulted in higher prices for vitamin products in the U.S. and abroad. The plaintiffs in Empagran were foreign purchasers of vitamin products (from Ukraine, Australia, Panama, and Ecuador) who were harmed by the inflated prices. When they brought suit against the cartel participants for treble damages in the U.S., the district court dismissed their claims for lack of subject matter jurisdiction. The Court of Appeals for the District of Columbia reversed. The Supreme Court agreed to hear the case and, vacating the Court of Appeal’s decision, held that antitrust claims that are based entirely on “independent foreign harm” are not recognizable under the Sherman Act.

The issue of extraterritorial application of the U.S. antitrust laws has a long and confusing history. The Courts of Appeals have routinely disagreed about the standards that would bring foreign claims under the jurisdiction of U.S. courts. In 1982, Congress passed the “Foreign Trade Antitrust Improvements Act” (”FTAIA“) in order to clarify the issue. Unfortunately, the FTAIA, a notoriously ill-drafted statute, only deepened the confusion. Here is the text of the statute:

Sections 1 to 7 of this title [the Sherman Act] 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 sections 1 to 7 of this title, other than this section. If sections 1 to 7 of this title apply to such conduct only because of the operation of paragraph (1)(B), then sections 1 to 7 of this title shall apply to such conduct only for injury to export business in the United States. (15 U. S. C. §).

Plaintiffs (may) have a claim involving foreign commerce under the Sherman Act if:

(1) the conduct in question has a direct, substantial, and reasonably foreseeable effect (A) on domestic commerce or on import commerce; or (B) on American export commerce; and (2) such effect gives rise to a claim under the Sherman Act.

(1) significant foreign anticompetitive conduct with (2) an adverse domestic effect and (3) an independent foreign effect giving rise to the claim,” (Empagran., at 2.)

Suppose that the same commodity (say, for example, vitamins) is sold in country A for $1/unit and in country B for $2/unit. Suppose further that transportation and transaction costs are low. What happens? The price discrimination scheme collapses because of arbitrage. Buyers in country A will purchase greater quantities for $1/unit and resell the product to buyers in country B. If there are competing arbitrageurs in country A, resale prices to buyers in country B will approach $1/unit plus transaction and transportation cost. In other words, “foreign effects” cannot be sustained but for the existence of “domestic effects.” Put differently, an international manufacturer cartel cannot charge monopoly prices in, say, Ecuador if the same good is available in the U.S. at lower prices. Conversely, if the manufacturer cartel is, in fact, able to sustain monopoly prices in Ecuador and is also charging monopoly prices in the U.S., then the foreign effects (higher prices in Ecuador) are dependent on domestic effects (higher prices in the U.S.).

The Supreme Court expressly did not decide whether a foreign effect that could not exist (in that magnitude) “but for” a domestic effect would constitute an independent foreign effect. In the next to last paragraph of the opinion, the Supreme Court defined dependence in terms of a supporting cause. (”We have assumed that the anticompetitive conduct here independently caused foreign injury; that is, the conduct’s domestic effects did not help to bring about that foreign injury.”) (Id., at 19. Emphasis added.) On the basis of that definition, it seems that a foreign effect that could not exist (in that magnitude) but for the domestic effect cannot be independent.

The implications of the Supreme Court’s narrow definition of independence (or broad definition of dependence) are considerable. Every successful price-fixing conspiracy or market allocation agreement for products in a global geographic market will, by definition, cause foreign harm that is dependent on domestic harm. The connection is a conceptual one, because if the foreign harm was, in fact, independent of the domestic harm, then the geographic market would not be global. The Supreme Court applied a jurisdictional category (domestic/foreign), which is based on the notion of political borders, to a phenomenon of global commerce that disregards such borders (in the absence of tariffs) entirely.

The bottom line is that the Supreme Court in Empagran expressly refrained from deciding the Empagran fact pattern. The decision only applies to a narrow category of cases where international cartels affect a number of strictly national markets; region-coded content comes to mind as an example. For the vast majority of cases involving homogenous products, Empagran has not brought legal certainty.