I. Welcome—Why We Are Together
Mark Popofsky: Your company, which operates in Europe, has purchased inputs for its business from sellers located in the United States and around the world. Your company, in turn, exports worldwide. You uncover evidence that the input sellers engaged in price-fixing in their sales to you. Does your company potentially have a claim for damages under American antitrust law? Does your supplier face the potential of criminal or civil liability under those laws?
Hello, and thank you for joining us on this Ropes & Gray “Competition Corner” podcast, a series on antitrust developments. I’m Mark Popofsky, a partner in our Washington, D.C. antitrust practice and an Adjunct Professor of Antitrust at Harvard, Georgetown, NYU, Penn, and GW. I’m joined by my partner Samer Musallam, who’s also based in Washington, D.C. Both Samer and I previously served as Senior Counsel in the Antitrust Division of the U.S. Department of Justice.
Let’s jump in.
Firms operate in an integrated worldwide economy. What they may forget is that the reach of U.S. antitrust law, depending on the facts, is not necessarily confined to our shores. Today, we are going to give you a thumb-nail sketch of when and why.
Samer, can you give our listeners a roadmap here?
II. Extraterritoriality Basics
Samer Musallam: Sure, Mark. The basic idea is that U.S. antitrust law has long applied what we may call an “effects” principle. The classic case is Alcoa from 1945. Judge Learned Hand said essentially that conduct outside the United States can still be reached by U.S. antitrust law, when it has a “substantial intended effect” in the United States. So, a useful shorthand is, for antitrust purposes, you may be treated as operating where your competitive effects are felt. Now, that’s just the starting point, and, as we’ll discuss, the actual analysis depends heavily on the facts.
Mark Popofsky: Samer, how did other nations react to Alcoa and its application by the U.S. courts after 1945?
Samer Musallam: Well, they weren’t thrilled. Many countries enacted so-called “blocking statutes” which were designed to resist aspects of U.S. extraterritorial enforcement. And you can understand the basic objection—their view was, “Hey, if the conduct occurred in France” for example, “why should American law regulate it rather than French law?”
Mark Popofsky: Did Congress listen to that complaint?
Samer Musallam: It did. In 1982, Congress passed a statute called the Foreign Trade Antitrust Improvements Act, which thankfully, everyone just refers to as the FTAIA.
Mark Popofsky: And Samer, what did the FTAIA do?
Samer Musallam: It did a couple of important things.
First, it left what’s called “import commerce” alone—that’s still covered by Alcoa. So, to use an example from the Motorola case we’re going to discuss, if cartel members are fixing the price of LCD screens outside the United States and then selling those panels directly into the United States, that conduct generally remains subject to ordinary U.S. antitrust principles.
Second—and painting with a fairly broad brush here—the FTAIA says that other conduct involving foreign trade or commerce generally falls outside U.S. antitrust law, unless two separate requirements are met. Mark, why don’t you walk us through those?
Mark Popofsky: Thanks, Samer—sure.
First, the conduct itself must meet an “objective” version of the Alcoa test. It must have a “direct, substantial, and reasonably foreseeable effect” on U.S. domestic or export commerce.
So, you might ask: What do those requirements, “direct, substantial, and reasonably foreseeable effect in U.S.” mean? Let’s take an example from a real-world case involving, of all things, tomato seeds. Two companies—one Israeli, one American—entered into a joint venture to develop genetically altered long shelf-life tomatoes. Their joint venture agreement allocated the North American territory to the American company, and the seeds were to be planted in Mexico, and exported throughout the Western hemisphere.
The United States Department of Justice sued, challenging the restriction in the agreement on the Israeli company’s ability to market seeds in Mexico as an unlaw restraint under U.S. antitrust law. The government argued that if the Israeli seeds could be planted in Mexico, they would ripen into tomatoes that would be sold in the United States, improving tomato competition in the United States. The defense from the other side was that any impact on U.S. tomato prices from the restriction of the Israeli company operating in Mexico planting seeds there was too “indirect” —and too speculative—for U.S. law to apply under the FTAIA.
Samer, how did the Ninth Circuit rule?
Samer Musallam: Well, the Ninth Circuit Court of Appeals agreed with the defense and dismissed the government’s case. The Court basically said the chain of events was too speculative—you had a restriction involving tomato seeds in Mexico which might affect the production of tomatoes in Mexico, which in turn might affect tomatoes sold in the United States. That was simply too indirect to satisfy the FTAIA.
Mark Popofsky: Did it matter that the company subject to the restriction was Israeli?
Samer Musallam: No, and that’s an important point. These principles don’t turn on the nationality of the parties involved. What matters is (i) the nature and location of the conduct—whether we’re dealing with “trade or commerce with foreign nations,” and critically, (ii) what effects that conduct has in the United States. In the tomato seed case, the alleged U.S. effects were simply too speculative and too indirect.
You mentioned a second requirement under the FTAIA, Mark. What is that?
Mark Popofsky: Well, you mentioned, Samer, that the FTAIA first requires an in-U.S. direct effect. Showing such effects might be enough depending on the setting in a government case, but, critically, not for a private party. The FTAIA’s second requirement requires that those in-U.S. effects—those “direct, substantial, and reasonably foreseeable” effects on U.S. domestic commerce—must also “give rise to a claim” under the antitrust laws.
III. FTAIA Prong 2 and Private Actions
And this is one of the trickier parts of the FTAIA.
This second requirement—that the effects “give rise to a claim”—sounds a little like ordinary antitrust standing, but the distinction between the two is important. Even if the private plaintiff can show standing, the FTAIA is potentially another hurdle a private plaintiff must get over to sustain a claim.
And that hurdle asks a threshold question: What is the relationship between the plaintiff’s injury and the “effects” on U.S. commerce we were talking about? Does the plaintiff’s injury reflect and flow from those in-U.S. anticompetitive effects, or does the plaintiff’s injury just happen to coincide with them?
If it’s the former—the injury flows from the in-U.S. effects—it gets through the FTAIA hurdle. If not, there’s no claim. That is what the Supreme Court held in its 2004 Empagran decision. Samer, can you give us an example?
Samer Musallam: Yes, and examples are helpful in this context. So, suppose there is a worldwide cartel fixing the price of a component used to manufacture televisions. A television manufacturer in Europe buys that component in Europe at a price inflated by the cartel. It then puts the component into televisions in Europe and ships some of those finished televisions to the United States for sale.
Now, the cartel may very well have an effect on U.S. commerce. The price-fixed component is embedded in televisions ultimately sold to U.S. consumers, and the inflated component price may contribute to higher television prices in the United States.
But suppose the European manufacturer wants to sue in the United States for the overcharge it paid when it bought the component in Europe.
The FTAIA asks a separate question: Did the effect on U.S. commerce give rise to that European purchaser’s injury?
And the answer may be “no.”
Why? The key is that the European manufacturer’s injury occurred when it bought the price-fixed component in Europe—its injury didn’t result from what later happened in the United States. So, the fact that the component eventually ended up in a television that was sold in the United States may establish an effect on U.S. commerce, but that U.S. effect isn’t necessarily what caused the manufacturer to pay an inflated price for the component in Europe.
So, the same cartel can produce two different injuries: the European manufacturer may be injured when it overpays abroad, and the U.S. purchaser may later be injured when it pays an inflated price for the finished product here in the United States.
The fact that the second injury occurs in the United States doesn’t mean that the U.S. effect caused the first injury.
Mark Popofsky: So, let me get this straight, Samer: there can be a sufficient effect on U.S. commerce to satisfy the first requirement of the FTAIA—the “direct, substantial, and reasonably foreseeable effects”—and thus, the DOJ, for example, may be able to bring an action; but the foreign purchaser still might not have a claim because its injury did not result from those in-U.S. effects. Is that right?
Samer Musallam: Exactly right. For a private plaintiff, the question isn’t simply whether the conduct affected U.S. commerce—the question is whether that U.S. effect is what caused the injury for which the plaintiff is seeking damages.
And this becomes particularly important when you have global supply chains or global pricing. If the price paid abroad was independently fixed abroad, then the effect in the U.S. may simply exist alongside the foreign injury. But if, for example, a supply restriction in the U.S. or a pricing decision made in the U.S. actually determined the price paid by the foreign purchaser, then you may have a very different causal relationship. Remember when I said the analysis depends heavily on the facts? That factual distinction is one reason the cases don’t all come out the same way.
Mark Popofsky: Does that mean that, if you lead a company suspected of an antitrust violation, you only have to worry about buyers suing your company under the federal antirust laws if they buy in the United States?
Samer Musallam: That’s a really interesting question, because the cases do go in different directions depending on the facts.
Judge Posner, a very respected federal judge, answered essentially “yes” in a case involving an alleged conspiracy over LCD panels. There, the price-fixing occurred in Asia—foreign subsidiaries of Motorola bought the panels in Asia. Even assuming the cartel had the necessary effect on U.S. commerce, the court held that those U.S. effects did not give rise to the foreign subsidiaries’ injury. Why? Because the subsidiaries were injured when they purchased the price-fixed panels abroad. The fact that some of those panels were later incorporated into finished products sold in the United States didn’t mean that the U.S. effect caused the subsidiaries’ foreign overcharge.
Other cases involving different facts, however, have gone the other way. So, in a case involving an alleged worldwide Potash cartel, plaintiffs who bought potash in Canada were allowed to pursue claims under U.S. antitrust laws, because they alleged that the price increases they suffered flowed from a potash shortage created, at least in part, in the United States.
Mark Popofsky: And that is potentially very different from Motorola. In Motorola, the in-U.S. effects flowed from the foreign injury; in Potash, the plaintiffs alleged that the in-U.S. effects were part of what caused the inflated price they paid abroad. So, unlike Motorola, there was at least an alleged causal connection between the in-U.S. harm and the foreign plaintiffs’ injury, which is precisely what the FTAIA’s “give rise to” requirement asks us to look for.
Samer mentioned that the cases can go different directions. There’s also a very recent decision from the Ninth Circuit, Seagate Technology, that went the other way from Motorola. There, the plaintiffs alleged that the prices paid by foreign affiliates were determined by prices set in the United States. So, again, the critical issue under the FTAIA is: Did the in-U.S. anticompetitive effects merely occur alongside the foreign plaintiffs’ injury, or did those in-U.S. anticompetitive effects help cause the foreign plaintiffs’ injury? The defendants contended that the decision creates a conflict with Motorola. The Supreme Court is currently considering whether to take the case and has asked the solicitor general for its views. Stay tuned.
Stepping back, Samer, let’s suppose you have met both FTAIA requirements: first, the conduct has caused the requisite in-U.S. effects—those that are “direct, substantial, and reasonably foreseeable;” and second, that the injury gives rise to a claim—that is, the injury to the particular plaintiff before the court flows from those in-U.S. anticompetitive effects. Is that enough to get a plaintiff over the line and to state a claim?
Samer Musallam: Well, not necessarily. Even if you get through both parts of the FTAIA, there can still be other reasons why U.S. antitrust law doesn’t apply—and, of course, the plaintiff still has to satisfy all the ordinary requirements for standing and a viable claim. Depending on the circumstances, doctrines like International Comity, Act of State, or Foreign Sovereign Compulsion can come into play.
And one of the big themes in the Supreme Court’s Empagran decision was precisely this concern. Courts need to be cautious about applying U.S. antitrust law to foreign conduct in ways that create unnecessary conflicts with other countries’ competition laws—that was, after all, part of what triggered the backlash and the blocking statutes we talked about earlier.
There’s another wrinkle as well—state antitrust law can be particularly important for indirect purchaser claims, and there are questions about the extent to which state law is constrained by the FTAIA or by the principles underlying Alcoa.
So, this can become a complicated analysis pretty quickly, and for companies dealing with global pricing, global supply chains, or potentially anticompetitive conduct across jurisdictions, it’s something we’re thinking about early rather than after a problem arises.
IV. The Effects Principle and Non-U.S. Competition Law
In that connection, Mark, what’s happened with this broader “effects” principle outside the Untied States?
Mark Popofsky: Justice Brennan once quipped that the most successful U.S. exports are “blue jeans, rock and roll, and American Law,” and the “effects” principle underlying both Alcoa and the FTAIA is a shining example. Once other jurisdictions adopted American-style competition law, they abandoned their blocking statutes and embraced the principle “You are where your effects are.” So, the European Commission, for example, applies European law to conduct that has a substantial effect within the European Union no matter where located. The same is true, for example, of Korean law.
So, the broader lesson is not merely that foreign companies sometimes need to worry about U.S. antitrust law—all companies operating globally increasingly need to think about where their conduct produces effects, because more than one jurisdiction may claim an interest in, in effect, regulating that conduct.
Samer Musallam: And that brings us back to the hypothetical you started with, Mark. If your European company bought price-fixed inputs abroad, the fact that the cartel also affected the United States may not, standing alone, give you a U.S. damages claim. The critical questions include whether the conduct involved import commerce, whether it produced the required effects in the United States, and particularly in a private case, whether those U.S. effects actually gave rise to your injury.
Mark Popofsky: And that is where we are going to leave it.
For more information on this topic, please do not hesitate to contact any member of the Ropes & Gray antitrust team or visit our website. You can also subscribe and listen to other Ropes & Gray podcasts wherever you regularly listen to your podcasts, including Apple Podcasts and Spotify.
Thank you for joining “Competition Corner”—we will see you next time.
Mark Popofsky: Your company, which operates in Europe, has purchased inputs for its business from sellers located in the United States and around the world. Your company, in turn, exports worldwide. You uncover evidence that the input sellers engaged in price-fixing in their sales to you. Does your company potentially have a claim for damages under American antitrust law? Does your supplier face the potential of criminal or civil liability under those laws?
Hello, and thank you for joining us on this Ropes & Gray “Competition Corner” podcast, a series on antitrust developments. I’m Mark Popofsky, a partner in our Washington, D.C. antitrust practice and an Adjunct Professor of Antitrust at Harvard, Georgetown, NYU, Penn, and GW. I’m joined by my partner Samer Musallam, who’s also based in Washington, D.C. Both Samer and I previously served as Senior Counsel in the Antitrust Division of the U.S. Department of Justice.
Let’s jump in.
Firms operate in an integrated worldwide economy. What they may forget is that the reach of U.S. antitrust law, depending on the facts, is not necessarily confined to our shores. Today, we are going to give you a thumb-nail sketch of when and why.
Samer, can you give our listeners a roadmap here?
II. Extraterritoriality Basics
Samer Musallam: Sure, Mark. The basic idea is that U.S. antitrust law has long applied what we may call an “effects” principle. The classic case is Alcoa from 1945. Judge Learned Hand said essentially that conduct outside the United States can still be reached by U.S. antitrust law, when it has a “substantial intended effect” in the United States. So, a useful shorthand is, for antitrust purposes, you may be treated as operating where your competitive effects are felt. Now, that’s just the starting point, and, as we’ll discuss, the actual analysis depends heavily on the facts.
Mark Popofsky: Samer, how did other nations react to Alcoa and its application by the U.S. courts after 1945?
Samer Musallam: Well, they weren’t thrilled. Many countries enacted so-called “blocking statutes” which were designed to resist aspects of U.S. extraterritorial enforcement. And you can understand the basic objection—their view was, “Hey, if the conduct occurred in France” for example, “why should American law regulate it rather than French law?”
Mark Popofsky: Did Congress listen to that complaint?
Samer Musallam: It did. In 1982, Congress passed a statute called the Foreign Trade Antitrust Improvements Act, which thankfully, everyone just refers to as the FTAIA.
Mark Popofsky: And Samer, what did the FTAIA do?
Samer Musallam: It did a couple of important things.
First, it left what’s called “import commerce” alone—that’s still covered by Alcoa. So, to use an example from the Motorola case we’re going to discuss, if cartel members are fixing the price of LCD screens outside the United States and then selling those panels directly into the United States, that conduct generally remains subject to ordinary U.S. antitrust principles.
Second—and painting with a fairly broad brush here—the FTAIA says that other conduct involving foreign trade or commerce generally falls outside U.S. antitrust law, unless two separate requirements are met. Mark, why don’t you walk us through those?
Mark Popofsky: Thanks, Samer—sure.
First, the conduct itself must meet an “objective” version of the Alcoa test. It must have a “direct, substantial, and reasonably foreseeable effect” on U.S. domestic or export commerce.
So, you might ask: What do those requirements, “direct, substantial, and reasonably foreseeable effect in U.S.” mean? Let’s take an example from a real-world case involving, of all things, tomato seeds. Two companies—one Israeli, one American—entered into a joint venture to develop genetically altered long shelf-life tomatoes. Their joint venture agreement allocated the North American territory to the American company, and the seeds were to be planted in Mexico, and exported throughout the Western hemisphere.
The United States Department of Justice sued, challenging the restriction in the agreement on the Israeli company’s ability to market seeds in Mexico as an unlaw restraint under U.S. antitrust law. The government argued that if the Israeli seeds could be planted in Mexico, they would ripen into tomatoes that would be sold in the United States, improving tomato competition in the United States. The defense from the other side was that any impact on U.S. tomato prices from the restriction of the Israeli company operating in Mexico planting seeds there was too “indirect” —and too speculative—for U.S. law to apply under the FTAIA.
Samer, how did the Ninth Circuit rule?
Samer Musallam: Well, the Ninth Circuit Court of Appeals agreed with the defense and dismissed the government’s case. The Court basically said the chain of events was too speculative—you had a restriction involving tomato seeds in Mexico which might affect the production of tomatoes in Mexico, which in turn might affect tomatoes sold in the United States. That was simply too indirect to satisfy the FTAIA.
Mark Popofsky: Did it matter that the company subject to the restriction was Israeli?
Samer Musallam: No, and that’s an important point. These principles don’t turn on the nationality of the parties involved. What matters is (i) the nature and location of the conduct—whether we’re dealing with “trade or commerce with foreign nations,” and critically, (ii) what effects that conduct has in the United States. In the tomato seed case, the alleged U.S. effects were simply too speculative and too indirect.
You mentioned a second requirement under the FTAIA, Mark. What is that?
Mark Popofsky: Well, you mentioned, Samer, that the FTAIA first requires an in-U.S. direct effect. Showing such effects might be enough depending on the setting in a government case, but, critically, not for a private party. The FTAIA’s second requirement requires that those in-U.S. effects—those “direct, substantial, and reasonably foreseeable” effects on U.S. domestic commerce—must also “give rise to a claim” under the antitrust laws.
III. FTAIA Prong 2 and Private Actions
And this is one of the trickier parts of the FTAIA.
This second requirement—that the effects “give rise to a claim”—sounds a little like ordinary antitrust standing, but the distinction between the two is important. Even if the private plaintiff can show standing, the FTAIA is potentially another hurdle a private plaintiff must get over to sustain a claim.
And that hurdle asks a threshold question: What is the relationship between the plaintiff’s injury and the “effects” on U.S. commerce we were talking about? Does the plaintiff’s injury reflect and flow from those in-U.S. anticompetitive effects, or does the plaintiff’s injury just happen to coincide with them?
If it’s the former—the injury flows from the in-U.S. effects—it gets through the FTAIA hurdle. If not, there’s no claim. That is what the Supreme Court held in its 2004 Empagran decision. Samer, can you give us an example?
Samer Musallam: Yes, and examples are helpful in this context. So, suppose there is a worldwide cartel fixing the price of a component used to manufacture televisions. A television manufacturer in Europe buys that component in Europe at a price inflated by the cartel. It then puts the component into televisions in Europe and ships some of those finished televisions to the United States for sale.
Now, the cartel may very well have an effect on U.S. commerce. The price-fixed component is embedded in televisions ultimately sold to U.S. consumers, and the inflated component price may contribute to higher television prices in the United States.
But suppose the European manufacturer wants to sue in the United States for the overcharge it paid when it bought the component in Europe.
The FTAIA asks a separate question: Did the effect on U.S. commerce give rise to that European purchaser’s injury?
And the answer may be “no.”
Why? The key is that the European manufacturer’s injury occurred when it bought the price-fixed component in Europe—its injury didn’t result from what later happened in the United States. So, the fact that the component eventually ended up in a television that was sold in the United States may establish an effect on U.S. commerce, but that U.S. effect isn’t necessarily what caused the manufacturer to pay an inflated price for the component in Europe.
So, the same cartel can produce two different injuries: the European manufacturer may be injured when it overpays abroad, and the U.S. purchaser may later be injured when it pays an inflated price for the finished product here in the United States.
The fact that the second injury occurs in the United States doesn’t mean that the U.S. effect caused the first injury.
Mark Popofsky: So, let me get this straight, Samer: there can be a sufficient effect on U.S. commerce to satisfy the first requirement of the FTAIA—the “direct, substantial, and reasonably foreseeable effects”—and thus, the DOJ, for example, may be able to bring an action; but the foreign purchaser still might not have a claim because its injury did not result from those in-U.S. effects. Is that right?
Samer Musallam: Exactly right. For a private plaintiff, the question isn’t simply whether the conduct affected U.S. commerce—the question is whether that U.S. effect is what caused the injury for which the plaintiff is seeking damages.
And this becomes particularly important when you have global supply chains or global pricing. If the price paid abroad was independently fixed abroad, then the effect in the U.S. may simply exist alongside the foreign injury. But if, for example, a supply restriction in the U.S. or a pricing decision made in the U.S. actually determined the price paid by the foreign purchaser, then you may have a very different causal relationship. Remember when I said the analysis depends heavily on the facts? That factual distinction is one reason the cases don’t all come out the same way.
Mark Popofsky: Does that mean that, if you lead a company suspected of an antitrust violation, you only have to worry about buyers suing your company under the federal antirust laws if they buy in the United States?
Samer Musallam: That’s a really interesting question, because the cases do go in different directions depending on the facts.
Judge Posner, a very respected federal judge, answered essentially “yes” in a case involving an alleged conspiracy over LCD panels. There, the price-fixing occurred in Asia—foreign subsidiaries of Motorola bought the panels in Asia. Even assuming the cartel had the necessary effect on U.S. commerce, the court held that those U.S. effects did not give rise to the foreign subsidiaries’ injury. Why? Because the subsidiaries were injured when they purchased the price-fixed panels abroad. The fact that some of those panels were later incorporated into finished products sold in the United States didn’t mean that the U.S. effect caused the subsidiaries’ foreign overcharge.
Other cases involving different facts, however, have gone the other way. So, in a case involving an alleged worldwide Potash cartel, plaintiffs who bought potash in Canada were allowed to pursue claims under U.S. antitrust laws, because they alleged that the price increases they suffered flowed from a potash shortage created, at least in part, in the United States.
Mark Popofsky: And that is potentially very different from Motorola. In Motorola, the in-U.S. effects flowed from the foreign injury; in Potash, the plaintiffs alleged that the in-U.S. effects were part of what caused the inflated price they paid abroad. So, unlike Motorola, there was at least an alleged causal connection between the in-U.S. harm and the foreign plaintiffs’ injury, which is precisely what the FTAIA’s “give rise to” requirement asks us to look for.
Samer mentioned that the cases can go different directions. There’s also a very recent decision from the Ninth Circuit, Seagate Technology, that went the other way from Motorola. There, the plaintiffs alleged that the prices paid by foreign affiliates were determined by prices set in the United States. So, again, the critical issue under the FTAIA is: Did the in-U.S. anticompetitive effects merely occur alongside the foreign plaintiffs’ injury, or did those in-U.S. anticompetitive effects help cause the foreign plaintiffs’ injury? The defendants contended that the decision creates a conflict with Motorola. The Supreme Court is currently considering whether to take the case and has asked the solicitor general for its views. Stay tuned.
Stepping back, Samer, let’s suppose you have met both FTAIA requirements: first, the conduct has caused the requisite in-U.S. effects—those that are “direct, substantial, and reasonably foreseeable;” and second, that the injury gives rise to a claim—that is, the injury to the particular plaintiff before the court flows from those in-U.S. anticompetitive effects. Is that enough to get a plaintiff over the line and to state a claim?
Samer Musallam: Well, not necessarily. Even if you get through both parts of the FTAIA, there can still be other reasons why U.S. antitrust law doesn’t apply—and, of course, the plaintiff still has to satisfy all the ordinary requirements for standing and a viable claim. Depending on the circumstances, doctrines like International Comity, Act of State, or Foreign Sovereign Compulsion can come into play.
And one of the big themes in the Supreme Court’s Empagran decision was precisely this concern. Courts need to be cautious about applying U.S. antitrust law to foreign conduct in ways that create unnecessary conflicts with other countries’ competition laws—that was, after all, part of what triggered the backlash and the blocking statutes we talked about earlier.
There’s another wrinkle as well—state antitrust law can be particularly important for indirect purchaser claims, and there are questions about the extent to which state law is constrained by the FTAIA or by the principles underlying Alcoa.
So, this can become a complicated analysis pretty quickly, and for companies dealing with global pricing, global supply chains, or potentially anticompetitive conduct across jurisdictions, it’s something we’re thinking about early rather than after a problem arises.
IV. The Effects Principle and Non-U.S. Competition Law
In that connection, Mark, what’s happened with this broader “effects” principle outside the Untied States?
Mark Popofsky: Justice Brennan once quipped that the most successful U.S. exports are “blue jeans, rock and roll, and American Law,” and the “effects” principle underlying both Alcoa and the FTAIA is a shining example. Once other jurisdictions adopted American-style competition law, they abandoned their blocking statutes and embraced the principle “You are where your effects are.” So, the European Commission, for example, applies European law to conduct that has a substantial effect within the European Union no matter where located. The same is true, for example, of Korean law.
So, the broader lesson is not merely that foreign companies sometimes need to worry about U.S. antitrust law—all companies operating globally increasingly need to think about where their conduct produces effects, because more than one jurisdiction may claim an interest in, in effect, regulating that conduct.
Samer Musallam: And that brings us back to the hypothetical you started with, Mark. If your European company bought price-fixed inputs abroad, the fact that the cartel also affected the United States may not, standing alone, give you a U.S. damages claim. The critical questions include whether the conduct involved import commerce, whether it produced the required effects in the United States, and particularly in a private case, whether those U.S. effects actually gave rise to your injury.
Mark Popofsky: And that is where we are going to leave it.
For more information on this topic, please do not hesitate to contact any member of the Ropes & Gray antitrust team or visit our website. You can also subscribe and listen to other Ropes & Gray podcasts wherever you regularly listen to your podcasts, including Apple Podcasts and Spotify.
Thank you for joining “Competition Corner”—we will see you next time.
