A major development in antitrust law over the last 25 years has been the adoption and increased enforcement of antitrust laws by jurisdictions around the world, and particularly the prosecution of international price-fixing cartels. While cartel enforcement was once pursued almost solely by U.S. regulators and in U.S. courts, today any large-scale cartel activity typically attracts the attention of regulators from several countries. For example, a cartel in the vitamins market led to enforcement actions by authorities in the U.S., Canada, the EU, Korea, Australia, Brazil and Mexico. Investigations in markets ranging from marine hose to air cargo have involved different combinations of the same cast of characters, as well as others such as Japan and New Zealand.

Some antitrust regulators describe this as a symbiotic process, marked by increased cooperation and harmonization among law enforcement agencies in different countries. At the same time, however, such overlapping enforcement may lead to disagreements over the limits of each regulator or court system’s jurisdiction, and risks punishing defendants multiple times for the same conduct. Recent developments suggest that such tension may increase as new players enter the field, while U.S. enforcement widens rather than contracts to allow room for others.

China’s Entry Into Cartel Enforcement and Criticism of U.S., EU Regulators

One of the more significant recent entrants into the antitrust enforcement field has been China, which in 2008 passed its first comprehensive antitrust statute, the Anti-Monopoly Law. In January 2013, China’s National Development and Reform Commission announced its first ever enforcement action against non-Chinese firms for price-fixing conduct. The NDRC imposed fines and restitution payments totaling $56 million against Korean companies Samsung and LG Display, and Taiwanese firms AU Optronics, Chunghwa Picture Tubes, Chimei InnoLux and HannStar.  

The sanctions were based on price-fixing of LCD panels that allegedly occurred as a result of regular meetings between these companies in Taiwan from 2001 to 2006. This same conduct was previously investigated by the U.S. Department of Justice, the European Commission and the Korean Fair Trade Commission, resulting in more than $2 billion in total fines. The NDRC noted that since the liquid crystal display cartel activity predated the implementation of the Anti-Monopoly Law in 2008, the enforcement action was based on China’s older and more limited Price Law, and that the fines would likely have been higher under the new law.

This announcement has been widely viewed as an important first step, signaling that Chinese authorities intend to become active players in international cartel enforcement. In an article in China Daily, a semi-official English-language publication in China, a researcher at China’s Ministry of Commerce emphasized China’s intent to assert the extraterritorial reach of Chinese law and noted that “overseas companies that want to expand their operations on the mainland should understand that their actions, even if taken outside China, fall within the purview of Chinese economic laws if they have a large enough impact on the Chinese market.”

At the same time, the article criticizes the penalties imposed by the U.S. and EU authorities, stating that these “astronomical” fines are “usually based on the global sales of the enterprises involved, which [is] tantamount to plundering other countries’ wealth.” The author states that “[s]uch unfair practices are undesirable for China and fated to meet with growing opposition.” It remains to be seen whether the article represents the views of the relevant Chinese authorities more broadly, and if so, in what form China might express its opposition to the practices of U.S. and other regulators.

Recent U.S. Court Decisions Take Expansive View of Sherman Act Jurisdiction

U.S. courts have long grappled with the proper limits on what behavior occurring outside the U.S. should be subject to the Sherman Act. After initially precluding any extraterritorial application, beginning in 1945 courts adopted the view that conduct occurring abroad was covered by the Sherman Act so long as it had an “intended effect” in the U.S. In 1982, Congress passed the Foreign Trade Antitrust Improvement Act, limiting the reach of the Sherman Act to conduct that has a “direct, substantial, and reasonably foreseeable effect” on U.S. commerce. The legislative history of the FTAIA suggests that one of its purposes was to prevent “foreign animosity toward U.S. antitrust enforcement” by “limit[ing] the reach of our antitrust laws in a manner consistent with our major trading partners.”

The U.S. Supreme Court emphasized the need for international comity in its major decision construing the FTAIA, Hoffman-LaRoche Ltd. v. Empagran SA, 542 U.S. 155 (2004). As the court put it, where foreign anti-competitive conduct causes foreign injury, “Congress might have hoped that America’s antitrust laws … would commend themselves to other nations as well.” But if not, “Congress, we must assume, would not have tried to impose them, in an act of legal imperialism, through legislative fiat.”

Nevertheless, some recent decisions have interpreted the FTAIA in ways that exacerbate the problems created by multijurisdictional enforcement. For example, in Minn-Chem Inc. v. Agrium Inc., 683 F.3d 845, 850 (7th Cir. 2012), an en banc panel of the Seventh Circuit adopted a lenient definition of the “direct” effect requirement, finding that it means only “a reasonably proximate causal nexus.” This standard was satisfied, according to the Seventh Circuit, when Belarusian, Canadian and Russian potash producers allegedly fixed prices to customers in Brazil, China and India, which prices in turn became benchmarks for sales in the U.S.

The province of Saskatchewan filed an amicus brief asking the Supreme Court to grant certiorari and reverse the Seventh Circuit, arguing that Minn-Chem violates both comity and the purpose of the FTAIA to provide U.S. trading partners with “certainty in assessing the applicability of American antitrust law to international business transactions and proposed transactions.”

Saskatchewan notes that Canadian competition law expressly permits joint conduct that relates solely to the export of products from Canada, and Saskatchewan has accordingly adopted regulations allowing potash producers to form an organization for the joint export, marketing, and distribution of potash to overseas markets, but not to the U.S. Minn- Chem’s broad and amorphous “reasonably proximate causal nexus” standard, Saskatchewan argues, exposes its potash makers to Sherman Act liability for conduct that is legal and encouraged by Canadian law.

The district court hearing the civil litigation arising from the LCD cartel investigation has gone even further, holding that a “direct effect” can occur where the defendants sold the price-fixed goods outside the U.S., if they could anticipate that some of those goods would become components of other products that would eventually be sold by third parties in the U.S. In re TFT-LCD (Flat Panel) Antitrust Litigation, 822 F.Supp.2d 953 (N.D. Cal. 2011). The same court held that the applicability of the FTAIA was a jury issue when defendants sold the price-fixed good to the foreign affiliate of a U.S.-based plaintiff, even if price negotiations and delivery occurred outside the U.S. In re TFT-LCD (Flat Panel) Antitrust Litigation (N.D. Cal. 2012).

Time for a More Restrained Approach?

In the past, aggressive assertions of U.S. jurisdiction might have been understood, if not necessarily justified, on an assumption that if the U.S. did not punish anti-competitive conduct, no other country would. Such an assumption, however, does not hold in the current global antitrust enforcement landscape. Putting aside substantial questions of whether these courts are correctly interpreting the FTAIA, future aggressive U.S. actions in policing cartel conduct abroad may escalate tension or provoke opposition from the regulatory authorities or court systems of foreign jurisdictions that have become more active in this field. Where enforcement efforts around the world are more than sufficient, U.S. hegemony in this area is becoming more problematic.

This article first appeared in Law360, February 20, 2013.