Today, we’re resuming our series on the antitrust law of transactions taking place on foreign soil. This post completes our review of the antitrust law of foreign transactions prior to the passage of the Foreign Trade Antitrust Improvement Act. First, a ground rule that I should have clarified earlier – our purpose here is a historical survey of the law – so readers should of course thoroughly check the background (and subsequent treatment) of the cases we discuss before relying on them. With the seven cases below, we’re carrying our survey up to the enactment of the FTAIA.
Industria Siciliana Asfalti, Bitumi v. Exxon Research and Engineering Co., 1977 WL 1353 (S.D.N.Y. 1977) – The plaintiff in Industria was an Italian corporation organized to erect and operate a petroleum refinery in Siracusa, Italy. The plaintiff alleged that it received a bid from the defendant for the engineering and technical licensing work on the refinery, but another bid was $845,000 lower. According to the contract, Exxon then offered a sweetener, coupling their bid for the engineering work with a favorable refining contract with a second-level subsidiary, Italiana. The refining contract included a right of first refusal at the prevailing market price on put-through and processing of Italiana crude oil. *2. The plaintiff alleged that it was coerced into accepting the reciprocal arrangement because of Exxon’s market power. *2. The plaintiff and defendant entered into a licensing agreement whereby the defendant Exxon Research granted the plaintiff a license for certain patented refining processes. *2. Italiana ultimately repudiated its agreement with the plaintiff. Three weeks after the defendant completed its obligations under the engineering agreement, the plaintiff filed suit, alleging that the “joint agreement” coupling offers from multiple Exxon subsidiaries was reciprocal dealing in violation of Section 1 of the Sherman Act, using Exxon’s purchasing power to restrain competition for the refinery design and engineering market. *3. Plaintiff further alleged that Italiana never intended to perform under its contract, and that Exxon and its engineering sub knew or should have known that. The defendants moved to dismiss, arguing that because there was no U.S. commerce involved, there was no jurisdiction. The trial court found that plaintiff had failed to show market power in the refining market and dismissed and the Court of Appeals affirmed, but the Supreme Court reversed and remanded. *7. On remand, the defendants once again argued that the plaintiff had failed to allege any impact on U.S. commerce, but the district court held that the allegation of harm to the market for export of design and engineering services was sufficient. The court dismissed, but granted leave to the plaintiff to replead. *19-20.
Dominicus Americana Bohio v. Gulf & Western Industries, Inc., 473 F. Supp. 680 (S.D.N.Y. 1979) – The complaint in Dominicus alleged monopolization of tourist facilities in the La Romana section of the Dominican Republic. The defendant moved to dismiss for lack of jurisdiction, since all of the challenged conduct occurred in the Dominican Republic. The district court found that American Banana’s holding on jurisdiction was “obsolete” and had been superseded by the “effects test.” 687. The court noted that it was not necessary that an impact on U.S. commerce be substantial and direct, so long as it wasn’t de minimis. 687. The court ultimately denied the motion to dismiss as premature, noting that discovery was necessary before it could decide the various factors relating to comity. 688.
Mannington Mills, Inc. v. Congoleum Corporation, 595 F.2d 1287 (3rd Cir. 1979) – The plaintiff in Mannington Mills filed suit, alleging that the defendant’s licensing practices in foreign countries violated Section 2 of the Sherman Act. 1290. Citing the effects test, the Court of Appeal held that acts overseas by an American citizen which have a substantial effect on US foreign commerce are within US antitrust jurisdiction. 1292. Citing Timberlane, the court cited various factors as relevant to the issue of comity: (1) the degree of conflict with foreign law or policy; (2) the nationality of the parties; (3) the relative importance to the alleged violation of conduct in the U.S. compared to conduct abroad; (4) the availability of a remedy abroad and the pendency of litigation there; (5) whether the plaintiff alleges an intent to affect American commerce, and the foreseeability of such an effect; (6) the possible effect upon foreign relations if the court exercises jurisdiction and grants relief; (7) whether the court can make its order effective; (8) whether this country would accept a judgment from the other country involved in the case; and (9) whether there’s an applicable treaty. 1287-1288.
Zenith Radio Corporation v. Matsushita Corporation, 494 F Supp. 1161 (ED Pa. 1980) – In this case (which ultimately reached the U.S. Supreme Court), the plaintiffs alleged that home electronics manufacturers from Asia had artificially lowered prices on exported products in order to destroy domestic manufacturers and reap monopoly profits. The court found that a nexus with domestic or international commerce was both a jurisdictional and substantive element of a Sherman Act claim. 1171. Five principles governed exterritorial jurisdiction, according to the court: (1) the jurisdiction where the offense was committed; (2) the nationality of the offender; (3) conduct threatening national security or operation of government functions; (4) whether the crime involved universal interest, such as piracy; and (5) the nationality of the victim. 1179. The court wrote that courts have universally rejected American Banana, commenting that it had been “effectively limited to its specific factual pattern.” 1181, 1185.
Montreal Trading Ltd. v. Amax Inc., 661 F. 2d 864 (10th Cir. 1981) – The plaintiff in Montreal Trading, a Canadian corporation, traded commodities. The defendants were involved in potash mining and production in New Mexico and Canada. The plaintiff sued, claiming that the defendants’ refusal to sell to them was a concerted refusal to deal intended to limit production and drive up prices. 865-66. The court wrote that although it had jurisdiction over acts which affect domestic trade or commerce or foreign commerce, even if jurisdiction was present, a court must heed comity. 869. Citing Timberlane, the Court balanced five factors with respect to comity: (1) the vital national interests of each state; (b) the extent and the nature of the hardship that inconsistent enforcement actions would impose upon the defendant; (c) the extent to which the required conduct is to take place in the territory of the other state; (d) the nationality of the person; and (e) the extent to which enforcement by action of either state can reasonably be expected to achieve compliance with the rule prescribed by that state. 869. The court ultimately held that plaintiffs had not shown more than a speculative and insubstantial effect on U.S. commerce. 870. However, American courts should not take jurisdiction over foreign activities “which have no direct or intended effect on US consumers or export opportunities” since this would encroach on the jurisdiction of a foreign state without any overriding justification based on legitimate U.S. interests. 870.
National Bank of Canada v. Interbank Card Association, 666 F.2d 6 (2nd Cir. 1981) – The court in National Bank criticized Timberlane, arguing that acts of minimal but not zero effect on U.S. commerce might trigger jurisdiction although the anticompetitive effect was entirely felt abroad. *8. The test for jurisdiction was whether the restraint had, or was intended to have, any anticompetitive effect on U.S. commerce. *8.
Restatement of the Foreign Relations Law of the United States, Section 403 – The Restatement listed eight conditions which should be weighed to determine whether jurisdiction over foreign conduct or a foreign actor is reasonable: (1) the link between the activity and the territory of the regulating state – whether because the conduct occurred there or it has a substantial, direct and foreseeable effect upon or in the state; (2) the connections between the regulating state and the person principally responsible for the conduct; (3) the character of the activity to be regulated and the importance of regulation to the regulating state; (4) the existence of justified expectations that might be either protected or hurt by the regulation; (5) the importance of the regulation to the international political, legal or economic system; (6) the extent to which the regulation is consistent with the traditions of the international system; (7) the extent to which another state may have an interest in regulating the activity; and (8) the likelihood of conflict with regulations of another state.