A recent decision by Judge Richard Sullivan of the United States District Court for the Southern District of New York concerned the unusual question of whether anticompetitive conduct occurring entirely outside of the United States can support claims for damages for violations of U.S. antitrust laws. Judge Sullivan determined that the plaintiff's allegations could not support antitrust liability and dismissed the case, with prejudice. Biocad, JSC v. F. Hoffman-La-Roche, Ltd. et al., No. 15 Civ. 4226 (RJS) (S.D.N.Y. Sept. 30, 2017).
Biocad JSC (Biocad), a Russian pharmaceutical manufacturer brought an antitrust action in 2016 alleging that the Defendant manufacturers of oncology drugs engaged in an elaborate anticompetitive scheme in Russia that had the effect of blocking Biocad's efforts to enter the U.S. oncology drug market.
According to Biocad, the Defendants, among other conduct, engaged in a predatory-pricing scheme by increasing the pricing of the drugs in the United States while selling the drugs at below-cost prices in Russia, bribing doctors and pharmacies in Russia to prescribe and request their drugs from state-sponsored insurance programs, and limiting the distribution of the drugs to prevent testing of biosimilars.
The defendants moved to dismiss, challenging Biocad's standing to bring the antitrust claims and arguing that the U.S. antitrust laws did not reach the Russia-based conduct in which the Defendants were alleged to have engaged. Judge Sullivan agreed and dismissed the complaint.
Intention and Preparedness
To establish standing to pursue antitrust claims, a plaintiff must allege that it suffered an actual injury causally linked to the defendants' allegedly anticompetitive conduct. Biocad argued that Defendants illegally prevented it from engaging in business in the United States. Judge Sullivan, however, questioned whether Biocad could tie its failure to release its products in the United States to the Defendants' conduct when it could not demonstrate its "intention and preparedness" to enter the market even aside from Defendants' allegedly anticompetitive acts.
Judge Sullivan found that Biocad not only failed even to allege that it filed for FDA approval, but it also failed to "supply any facts whatsoever" regarding an FDA approval process for its biosimilars. Simply, "[Biocad] has provid[ed] little information from which the Court may assess the likelihood of approval of its biosimilars" and failed to allege more than a "hope" or expectation of coming to the U.S. market.
Foreign Locus Too Attenuated for Antitrust Action in U.S.
Judge Sullivan also determined that even if Biocad possessed antitrust standing, U.S. antitrust laws would not reach Defendants’ Russia-based conduct.
First, Judge Sullivan found that Biocad's allegations, which "unambiguously pertain to conduct involving commodities sold in Russia," did not provide the court a jurisdictional basis to consider its claims for violations of the Clayton Act or Robinson-Patman Act.
Judge Sullivan also disregarded Biocad's claims under the Foreign Trade Antitrust Improvements Act (FTAIA), which limits the reach of the Sherman Act in cases involving activities outside the United States to conduct that targets import commerce or that has "a direct, substantial, and foreseeable effect on import trade or import commerce."
Judge Sullivan noted that the Complaint alleged foreign acts that caused foreign injuries, but failed to allege that those same activities caused an injury within the United States or involved U.S. import commerce. Biocad's allegations did not establish a "sufficient nexus" between defendants' conduct and the domestic effects of that conduct to satisfy the strict construction requirements of the FTAIA's import exception. "The relationship between Defendant' acts and their effect on U.S. important commerce is too attenuated for Defendants acts to be considered 'directed at' a U.S. import market."
Judge Sullivan also found that Biocad's "attenuated chain of causation," under which its inability to compete in Russia would harm competition in the United States, was insufficient to establish a direct, substantial, and reasonably foreseeable domestic effect.
Ultimately, the decision to dismiss Biocad's complaint reaffirms that in order for a competitor or potential competitor to assert an antitrust injury, it needs to show that a defendant's conduct, and not deficiencies in its own business, prevented it from competing. Because Biocad was not competing or capable of showing "intention and preparedness" to compete in the U.S. market, it lacked standing to pursue antitrust claims. Furthermore, if a plaintiff's foreign claims are too attenuated and do not firmly plead either U.S. actions or injuries, the claims may not survive early dismissal.