Order Code RS21877
Updated June 30, 2005
CRS Report for Congress
Received through the CRS Web
FTAIA Limits Availability of U. S. Courts to
Foreign Antitrust Plaintiffs: F. HoffmanLaRoche, Ltd. v. Empagran, S.A.
American Law Division
When the Supreme Court decided F. Hoffman-LaRoche, Ltd. v. Empagran, S.A.
(542 U.S. 155 (2004)), it narrowed the degree to which the Federal Circuits were split
concerning the availability of U.S. courts to foreign plaintiffs seeking relief for
violations of U.S. antitrust laws; it also lessened the concern of foreign governments,
global commercial entities and U.S. antitrust enforcement officials that the Foreign
Trade Antitrust Improvements Act of 1982 (FTAIA) could be a vehicle for extending
the reach of U.S. antitrust laws. A unanimous Court ruled that the FTAIA’s general
Sherman Act non-applicability to foreign commerce “other than import trade or ...
commerce” is not necessarily displaced by the act’s exception for anticompetitive
conduct that has a “direct, substantial, and reasonably foreseeable effect” on U.S.
domestic commerce, and that “gives rise to a [Sherman Act] claim.” Where a foreign
plaintiff’s claim arises independently of the harm to U.S. commerce, even though the
underlying conduct may have had such a harmful effect, the Court said, U.S. courts may
not be used to pursue a Sherman Act claim, even if a U.S. plaintiff might have a valid
Sherman Act claim arising out of the conduct’s effect on U.S. commerce.
The Foreign Trade Antitrust Improvements Act of 1982 was enacted as part of P.L.
97-290,1 a measure directed at encouraging American exports. Title III of the larger
measure authorizes the establishment of export trading companies and outlines the
procedure for obtaining assurance that the resulting entity will be immune to Government
FTAIA, Title IV of P.L. 97-290, is codified, with respect to the Sherman Act (15 U.S.C. §§ 17), at 15 U.S.C. § 6a; and, with respect to section 5 of the Federal Trade Commission Act
(FTCA), at 15 U.S.C. § 45(a)(3). FTAIA as it amends the Federal Trade Commission Act states
that that act “shall not apply to unfair methods of competition ....” For purposes of this Report,
we shall refer to FTAIA as codified at 15 U.S.C. § 6a, and which references the Sherman Act.
Congressional Research Service ˜ The Library of Congress
prosecution and most civil suits under the antitrust laws.2 Title IV (FTAIA) mandates that
the Sherman Act3 “shall not apply to conduct involving trade or commerce with foreign
nations (other than import ... commerce).” But that broad mandate contains an exception
for otherwise-immunized conduct that
(1) has a direct, substantial, and reasonably foreseeable effect [on the U.S. market, U.S.
import trade or commerce, or U.S. exporters] and
(2) such effect gives rise to a claim under [the Sherman Act].4
The FTAIA language, and the legislative history that produced it, have been
inconsistently interpreted by various federal courts of appeals. In Den Horske Stats
Oljeselskap As v. HeereMac Vof, for example, the U.S. Court of Appeals for the Fifth
Circuit held that FTAIA did not authorize a suit in U.S. courts by a Norwegian Oil
Company asserting that it had been overcharged for heavy-lift barge services in the North
Sea, even though a global antitrust conspiracy among providers of oil platform services
had resulted in inflated prices -- including prices in the United States -- for those services.5
... Statoil has sufficiently alleged that the defendants’ conduct -- that is, the agreement
among heavy-lift service providers to divide territory, rig bids, and fix prices -- had a
direct, substantial, and reasonably foreseeable effect on the United States market. ... the
agreement compelled Americans to pay supra-competitive prices for oil. These
allegations are sufficient to satisfy the first requirement of the FTAIA. [But] Statoil
fails to show that this effect ... in any way ‘gives rise’ to its antitrust claim.6
The U.S. Court of Appeals for the Second Circuit, on the other hand, found that
FTAIA did sanction the use of U.S. courts by a non-U.S. person to pursue an antitrust claim
where the defendants’ conduct adversely impacted U.S. commerce, notwithstanding that
the adverse effect on domestic commerce was not “the basis for ... plaintiff’s injury.”7
Opting for an interpretation of FTAIA that focuses on the act’s deterrent effect on
violations of U.S. antitrust law (as had the dissent in Den Norske in the Fifth Circuit), the
Second Circuit ruled that
Our markets suffer when the foreign scheme is not deterred because the domestic
scheme may have greater chance of success when it is supplemented by the foreign
The Export Trading Company Act of 1982 is Title III of P.L. 97-290, codified at 15 U.S.C. §§
4001- 4021. 15 U.S.C. § 4016 confers immunity against civil and all criminal antitrust suits on
properly certified Export Trading Companies; private plaintiffs may sue for injunctive relief or
actual damages on account of conduct specified in a certificate if that certificate was improperly
15 U.S.C. §§ 1-7.
15 U.S.C. § 6a(1)(A), 6a(1)(B), 6a(2).
241 F.3d 420 (5th Cir. 2001).
Id. at 426, 427 (emphasis added). In a prior note, the court had rejected plaintiff’s argument that
the exception was satisfied if “the domestic effect give[s] rise to any antitrust claim, not
necessarily the plaintiff’s claim.” Footnote 19 at 426 (emphasis in original).
Kruman v. Christie’s International Plc, 284 F.3d 384, 400 (2d Cir. 2002).
scheme. ... A course of conduct in the United States ... would affect all purchasers of
the target products or services, whether the purchaser is foreign or domestic.8
The Empagran Case
Foreign plaintiffs, who claimed that a global cartel to fix vitamin prices sufficiently
affected the prices they paid for vitamins purchased abroad to bring their claim within the
FTAIA exception (see the argument accepted by the Second Circuit in Kruman v.
Christie’s, supra), were not successful at the district court level:
Plaintiffs argue that Congress intended only to limit recovery under the FTAIA
to conduct that had some domestic effect and that it did not intend to limit the Court’s
jurisdiction to cases where plaintiffs’ injuries involved those domestic effects.
Plaintiffs may indeed have a remedy against these defendants abroad. However, the
issue here is not whether these defendants are in fact guilty of the conduct alleged,
but whether this Court has jurisdiction over the[se] plaintiffs’ claims.9
That “critical question” was answered by the district court in the negative. Moreover, as
the court noted, there is not yet any “customary international law of antitrust” that was
violated by defendants’ conduct.10
Reversing, the U.S. Court of Appeals for the District of Columbia Circuit held that it
is sufficient, for FTAIA purposes, if the anticompetitive conduct violates the Sherman Act
“and the conduct’s harmful effect on United States commerce ... give[s] rise to ‘a claim’
by someone, even if not the foreign plaintiff who is before the court.”11 The Fifth Circuit’s
view in Den Norske was “overly rigid,” the court stated, but the Second Circuit’s opinion
in Kruman v. Christie’s “seems to reach too far,” it opined. Nevertheless, the D.C. Circuit
acknowledged that its ruling was probably “somewhat closer to the latter than the former.”12
The appeals court relied as well on the legislative history of FTAIA to support its “middle
ground,” albeit fairly liberal, jurisdictional interpretation of the act. It noted, in support of
its position, that the House Report had mentioned with approval the Supreme Court opinion
in Pfizer, Inc. v. Government of India,13 which found that allowing foreign governments to
sue for treble damages would further the deterrent effect of the antitrust laws’ damage
provision.14 And, although the court admitted of possible alternative interpretations of the
Report’s language concerning “Imports and Purely Foreign Transactions,” it found
Id. at 403.
Empagran S.A. v. F. Hoffman-LaRoche, Ltd., 2001 WL 761360 at *4 (D.C.D.C. June 7, 2001)
(emphasis added); opinion not reported in F. Supp. 2d.
After the district court dismissed the foreign plaintiffs’ claims, the domestic claimants who had
been a part of the original suit, transferred their claims to another suit pending before the district
Empagran S.A. v. F. Hoffman-LaRoche, Ltd., 315 F.3d 338, 341 (D.C. Cir. 2003).
434 U.S. 308 (1978).
H.Rept. 97-686 (hereinafter referred to as “House Report”) at 10; the damage provision in the
antitrust law is found at 15 U.S.C. § 15.
additional support for its position in language in the “Type of Domestic Effect” section of
the Report: “the domestic effect that may serve as the predicate for jurisdiction ... must be
of the type the antitrust laws prohibit.”15
In the Supreme Court, Justice Breyer, for a unanimous Court,16 continued to “focus
upon anticompetitive price-fixing activity that is in significant part foreign, that causes
some domestic antitrust injury, and that independently causes separate foreign injury.”17
Although the court of appeals had, in effect, said that it does not matter whether plaintiffs’
harm is wholly independent of the domestic effect -- in this case, higher domestic prices for
vitamins, the Supreme Court decision stands for the proposition that it does matter.18
Justice Breyer quotes from the House Report to emphasize that FTAIA’s general nonapplicability to U.S. export commerce, indeed, extends to “transactions within, between,
or among other nations”:
Such foreign transactions [i.e., transactions “between two foreign firms”] should, for
the purposes of this legislation, be treated in the same manner as export transactions -that is, there should be no American antitrust jurisdiction absent a direct, substantial and
reasonably foreseeable effect on domestic commerce or a domestic competitor.19
Concurring with the district court opinion, and therefore, the interpretation given
FTAIA by the Fifth Circuit in Den Norske, the Court concluded that “the exception does not
apply where the plaintiff’s claim rests solely on the independent foreign harm,”20 and
reversed the court of appeals ruling.
The opinion accorded much weight to the practice of interpreting “ambiguous statutes
to avoid unreasonable interference with the sovereign authority of other nations,” presuming
that Congress did not intentionally act in violation of the “customary international law” that
discourages the “unreasonable exercise of prescriptive jurisdiction with respect to a person
or activity having connections with another State.”21 U.S. courts have held, at least since
the opinion in United States v. Aluminum Company of America,22 that application of U.S.
antitrust laws where foreign conduct has adverse effects on U.S. commerce does no violence
to principles of prescriptive, jurisdictional comity, according to the Court. But it “can find
House Report at 11, quoted at 315 F.3d 353.
The decision was 8-0, Justice O’Connor not participating.
F. Hoffman-LaRoche Ltd. v. Empagran S.A., 542 U.S. 155, , 124 S.Ct. 2359,2363 (2004),
(emphasis added): “[plaintiffs] have never asserted that they purchased any vitamins in the
United States or in transactions in United States commerce, and the relevant ‘transactions
occurr(ed) entirely outside U.S. commerce.” 124 S.Ct. at 2364.
“We can find no good answer to the ‘basic’ question,” “Why is it reasonable to apply this law
to conduct that is significantly foreign insofar as that conduct causes independent foreign harm
and that foreign harm alone gives rise to the plaintiffs’ claim?” 124 S.Ct. at 2367 (emphasis in
124 S.Ct. at 2365, quoting, House Report at 9, 10.
Id. at 2363.
Id. at 2366.
148 F.2d 416 (2d Cir. 1945); the Second Circuit was designated to hear the case by the
Supreme Court because the Court did not have a quorum.
no good answer” to why American law should apply to conduct that causes no harm to U.S.
commerce or exporters.23 It cited, and quoted with approval, a respected treatise’s critical
summary of the court of appeals opinion as one that would effectively allow United States
courts to “provide worldwide subject matter jurisdiction,” irrespective of any harm caused
by a challenged transaction to U.S. commerce: “It does not seem excessively rigid to infer
that Congress would not have intended that result.”24
In addition, for practical reasons, the Court did not agree with plaintiffs that there is
“minimal” likelihood that affirmance of the court of appeals decision would unduly interfere
with other nations’ interests. First, with the possible exception of statutes prohibiting price
fixing, there is not yet anything like universal agreement concerning either practices to be
made unlawful under competition laws, or appropriate remedies for those practices deemed
to be illegal. Second, several foreign nations filed briefs with the Court to underscore their
assessments that extending the reach of U.S. antitrust law in the way envisioned by the court
of appeals would “upset ... a balance of competing considerations that their own domestic
antitrust laws embody.”25 Third, even the United States filed a brief in opposition to the
decision below, arguing that serious damage would be done to the amnesty program (and,
therefore, to antitrust deterrence) under which the Department of Justice offers substantial
immunity to members of antitrust conspiracies who come forward to expose unlawful
activities, if those entities were exposed to potential, private treble-damage liability.
Finally, the Court dismissed as inapplicable all six of the cases plaintiffs (respondents
in the Supreme Court) cited in their attempt to illustrate that courts have, in fact, found
jurisdiction to hear cases similar to this one. In three, the Court noted, the plaintiff was the
Government; and in the three involving private plaintiffs, either the issue of harm to foreign
plaintiffs independent of harm to U.S. commerce was not discussed, or the court specifically
found a nexus between the foreign harm and injury to U.S. commerce:
The upshot is that no pre-1982 case provides significant authority for application of the
Sherman Act in the circumstances we here assume.26
The Court noted that although its opinion and reasoning assumed the independence of
plaintiffs’ foreign harm from harm to U.S. commerce, plaintiffs’ contrary assertion27 was
never addressed by the appeals court. Accordingly, while it vacated the lower court opinion,
the Court remanded the case so that the D.C. Circuit could consider that issue. On June 28,
2005, the appeals court rejected that argument, affirming the original district court opinion
(supra, page 3).28
124 S.Ct. at 2367.
Id., citing and quoting P. Areeda & H. Hovenkamp, ANTITRUST LAW, ¶ 273.
124 S.Ct. at 2368.
Id. at 237.
Empagran argued that “because vitamins are fungible and easily transportable, without an
adverse domestic impact (i.e., higher prices in the U.S.), the sellers could not have maintained
their international price-fixing arrangement and [that they, the foreign plaintiffs in this case]
would not have suffered their foreign injury.” 124 S.Ct. 2372.
The D.C. Circuit opinion, written by the dissenter in that court’s prior decision, rested upon
Justice Scalia, joined by Justice Thomas, concurred specifically to emphasize that the
Court’s interpretation of FTAIA is the only one “consistent with the principle that statutes
should be read in accord with the customary deference to the application of foreign
countries’ laws within their own territories.”29
the proposition that although Empagran’s “but for” argument (set out in note 26, supra) was
“plausable,” it was “simply not sufficient to bring [foreign] anti-competitive conduct within the
FTAIA exception” that allows claims based on certain U.S. foreign trade activity that “gives rise
to” a Sherman Act claim. Basing its conclusion on “principles of ‘prescriptive comity,’” the D.C.
Circuit held on remand that “[t]he statutory language -- ‘gives rise to’ -- indicates a direct causal
relationship, that is, proximate causation, and is not satisfied by the mere but-for ‘nexus’ the
appellants advanced ....” Empagran S.A. v. F. Hoffman-LaRoche, Ltd., F.3d , slip opinion
at 7 (emphasis added).
124 S.Ct. at 2373.
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