3 Antitrust Law Enforcement

Transcription

1 3 Antitrust Law Enforcement 3.01 GEOGRAPHIC SCOPE OF ENFORCEMENT When General Noriega was hauled out of Panama by U.S. forces, then brought to Miami to stand trial for drug trafficking there, many people wondered how it was that American jurisdiction seemed to extend clear to Panama (other than diplomatically through the Monroe Doctrine). The fact is the drug trade in Panama, largely aimed at American patrons, substantially affected American commerce. Hence, jurisdiction was conferred, and now General Noriega continues to preside only over his 8 10 square foot fiefdom located somewhere in the U.S. federal prison archipelago. Similarly, when the tragedy of 9/11 descended on America, some people, though probably fewer, wondered how it was that terrorists operating wholly outside the United States could be brought to justice in U.S. courts. Much like the drug trade, the terrorist trade, too, substantially affects U.S. commerce. Accordingly, the jurisdiction of the U.S. courts extends over those who so trade in this industry. 1 The antitrust laws, like the anti-drug and anti-terrorist laws, are similarly expansive in their international focus. Indeed, the Sherman Act itself refers expressly to commerce with foreign nations. What now limits American intrusion into foreign matters to enforce our antitrust laws is a concern for international comity, i.e., reciprocated deference, which now proves to be the reed on which a foreign firm may lean if it is accused of violating the U.S. antitrust laws. That said, conspiratorial conduct occurring only in a foreign country still may be actionable under U.S. antitrust laws if a court here believes those activities have had 1 The Antiterrorism and Effective Death Penalty Act of 1996, 18 U.S.C. 2339A and 2339B; Comprehensive Crime Control Act of 1984, 18 U.S.C

2 substantial and intended effects within the United States. 2 The Foreign Trade Antitrust Improvements Act (15 U.S.C. 6a) formally bars certain incursions of the Sherman Act into foreign commerce unless such conduct has a direct, substantial and reasonably foreseeable effect...on trade or commerce which is not trade or commerce with foreign nations that gives rise to a claim. Under the FTAIA, a conspiracy engineered by an American defendant to prevent an American plaintiff from competing in America, even though it exclusively involved the defendant s interference with foreign shipments, can violate the Sherman Act. The injury inflicted on the American competitor in this context did not amount to trade or commerce with foreign nations. 3 To recover for foreign misconduct under the Sherman Act, in light of the FTAIA, it is imperative that the plaintiff (or government surrogate) be the direct victim of the conspiracy. Therefore, a global price-fixing conspiracy s injurious effects on some other potential party in the United States will not support jurisdiction over Sherman Act claims asserted by foreign purchasers who were injured only by the conspiracy s effects on otherwise unreachable foreign commerce. In a recent case brought concerning foreign purchases of vitamin products, the foreign plaintiffs alleged that the defendant U.S. and foreign sellers operated a worldwide price-fixing cartel that had adverse effects in both U.S. and foreign markets. The alleged cartel did have a sufficient effect on domestic commerce to satisfy the Sherman Act, but only for the U.S. purchasers if they chose to sue, which they did not. So, per the Supreme Court s decision in F. Hoffman-LaRoche Ltd. v. Empagran SA, 542 U.S. 155 (2004), plaintiffs, only foreign purchasers, were set back. It is now insufficient for a foreign plaintiff to point to a potential U.S. claimant in order to confer on it jurisdiction for its U.S.-based claim. However, where the foreign effects of the conspiracy are intertwined with the domestic effects of that conspiracy, U.S. jurisdiction over the challenged foreign conduct may lie. With that second look Empagran s claims live on. 4 2 See United States v. Nippon Paper Indus. Co., 109 F.3d 1 (1st Cir. 1997), cert. denied, 522 U.S (1998). But see, contra, Dee-K Enterprises, Inc. v. Heveafil, 299 F.3d 281 (4th Cir. 2002), cert. denied, 539 U.S. 969 (2003). 3 Carpet Group Int l v. Oriental Rug Importers Ass n, Inc., 227 F.3d 62 (3d Cir. 2000). 4 Empagran S.A. v. F. Hoffman-LaRoche, 388 F.3d 337 (D.C. Cir. 2004).

3 Since Empagran, supra, just one other reported case has come down in which a foreign commerce Sherman Act claim was permitted despite the applicability of the FTAIA. In that case, former distributors of Union Carbide products in India, who were coerced into fixing resale prices, were permitted to sue here. However, one plaintiff was Texasbased, and it was further determined that the India-based price-fixing could impact U.S. pricing of the same products ( domestic spillover effects, as pleaded). 5 The United States Department of Justice and Federal Trade Commission s Antitrust Enforcement Guidelines for International Operations, 4 Trade Reg. and Rep. (CCH) 13,107 (1995), round out the story. Those guidelines free the government to challenge a merger between two foreign firms if it has the requisite impact on U.S. commerce. To date, however, there have been no such challenges, the government being careful about enforcing it to this limit, in light of foreign copycats that will almost certainly serve to bite sprawling U.S. companies back since reciprocity now seems to rule the day. Private parties need not feel so constrained, however. In 1994 Congress also enacted the International Antitrust Enforcement Assistance Act (15 U.S.C ). This Act permits the government to obtain foreign discovery with the help of the antitrust agencies in those countries, at the same time offering our support for the comparable needs of such agencies here. To date, there has been scant interest internationally in entering into such reciprocal agreements. They have been entered into with the Commission of the European Communities, Australia, Brazil, Canada, Germany, Israel, Japan (a watered-down version), and Mexico. 6 No new countries have signed on since the last edition of this book (2003). Perhaps this is unsurprising, given the U.S. government s announced hostility to foreign jurisdictions enforcing their antitrust law equivalents more aggressively against American companies than it would, or has. In general, it is fair to conclude that offshore anticompetitive activity 5 MM Global Services, Inc. v. Dow Chemical Co., 329 F.Supp.2d 337 (D. Conn. 2004); see contra., In re Monosodium Glutamate Antitrust Litig., 2005 U.S. Dist. LEXIS (D. Minn. 2005), aff d, 2007 U.S. App. LEXIS 2772 (8th Cir. 2007) (plaintiffs must show that domestic effects caused their injuries. Foreign effects of price fixing insufficient.) 6 If any new agreements are reached, they will pop up at the following internet location:

4 The antitrust laws may be enforced criminally against corporations, partnerships, other noncorporate business entities, and individuals. In- affecting the United States is not exempt from our antitrust laws. 7 As a practical matter, however, the ultimate enforcement decision turns on the ability of the government or private party plaintiff to find reachable assets in the United States owned by the accused offshore law violator. The United States may rely on those assets to assert control over the foreign competitor for injunctive or other purposes. The private plaintiff can, of course, more readily collect on a judgment from domestic, rather than foreign, assets. 3.02(a) Antitrust Division 3.02 CRIMINAL ENFORCEMENT 3.02(a)(1) Penalties The U.S. antitrust laws may be enforced civilly or criminally. The United States Department of Justice s Antitrust Division has sole federal authority for the criminal enforcement of federal antitrust statutes in the United States, 8 including the Sherman Act and section 3 of the Robinson-Patman Act (15 U.S.C. 13a). The criminal enforcement of the Robinson-Patman Act has not occurred for decades. However, criminal enforcement under the Sherman Act is another matter. Nearly all criminal enforcement of the antitrust laws concerns horizontal price fixing or bid rigging, both Sherman Act violations. All Sherman Act violations are felonies, as are violations of comparable antitrust laws in many states. 7 There is one notable exception. OPEC cannot be served in the U.S. for price fixing, unless it agrees to be served. It has yet to so agree. Why does it enjoy this immunity? It turns out OPEC is an Austrian organization, which is explicitly excluded from international service protocols under Austrian law. See Prewitt Enterprises Inc. v. Organization of Petroleum Exporting Countries, 353 F.3d 916 (11th Cir. 2003), cert. denied, 543 U.S. 814 (2004). Wonder if gasoline, net of taxes, is less expensive in Austria than it is in nearby Germany? 8 It should be noted that with the recent rise in activity by the European Commission, criminal acts offensive to the Sherman Act often offend EC law as well or, at least, its law enforcers. A notable instance of the application of this double whammy befell price fixers Sotheby s and Christie s. The U.S. company, Sotheby s, was fined and its CEO jailed, under the U.S. antitrust laws. Perhaps while Sotheby s was licking its wounds, the EC evaluated the same conspiracy under its comparable competition, then also fined Sotheby s. U.S. v. Brooks, 6 Trade Reg. Rep. (CCH) 45,100 at 45,509 (S.D.N.Y. 2001); EEC Case No. 1P/02/1585 (October 30, 2002).

5 dividuals may be liable not only as sole proprietors or partners, but even for their conduct as officers, directors, or employees of corporations. If entangled in the federal criminal web, individuals can be jailed for up to 10 years and fined up to $1 million. Corporations can be fined up to $100 million or twice the gain achieved by them or the loss inflicted on others by their violations (18 U.S.C. 3571). Along with the twice the gain twice the loss law, the Justice Division has also thrived by inflicting the Federal Sentencing Guidelines on malefactors. 9 The Antitrust Division now routinely collects tens of millions of dollars in fines from the malefactors it nails and jails under these regulations. Indeed, in 1999 the Division settled a criminal action against price-fixing vitamin manufacturers and distributors, collecting nearly $1 billion for its efforts from just a handful of malefactors. 10 One defendant alone coughed up $500 million! The bar graph nearby reflects the substantial fines collected by the Antitrust Division over the years. No secret message is intended by the bar graph pattern here was just a great year. 9 See United States v. Andreas, 216 F.3d 645 (7th Cir.), cert. denied, 531 U.S (2000) (two-year prison sentences to ringleaders of lysine price-fixing conspiracy were remanded to lower court for enhancement). 10 To add insult to injury, the European Union s comparable antitrust enforcement unit recently leveled $752 million in fines against the same companies.