[Federal Register Volume 59, Number 201 (Wednesday, October 19, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-25765]


[[Page Unknown]]

[Federal Register: October 19, 1994]


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DEPARTMENT OF JUSTICE
Antitrust Division

 

Request for Comments on Draft Antitrust Enforcement Guidelines 
for International Operations

agency: Department of Justice.

action: Notice.

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summary: The Department of Justice (Department) and the Federal Trade 
Commission (Commission) have drafted proposed new Antitrust Enforcement 
Guidelines for International Operations. The Guidelines, when adopted 
in final form by the Department and the Commission, will state the 
antitrust enforcement policy of the Department and the Commission with 
respect to the international aspects of business operations. The 
Department's 1988 Antitrust Guidelines for International Operations 
will be withdrawn when these draft Guidelines are adopted in final 
form. Portions of the 1988 guidelines will also be superseded by the 
Department's proposed Antitrust Guidelines for the Licensing and 
Acquisition of Intellectual Property, which recently have been 
published for public comment in the Federal Register. See 59 FR 41,339 
(Aug. 11, 1994). [Comments on these draft Antitrust Enforcement 
Guidelines for International Operations should be submitted in writing 
within 60 days of their publication.]

for further information: Persons wishing to comment on the proposed 
Guidelines must submit their views to both Ms. Diane P. Wood, Deputy 
Assistant Attorney General, Antitrust Division, Department of Justice, 
Tenth and Pennsylvania Avenue, N.W., Washington, D.C. 20530, 202-514-
2404; and Mr. Walter T. Winslow, Associate Director, Bureau of 
Competition, Federal Trade Commission, Washington, D.C. 20580, 202-326-
2560.

supplementary information: These proposed Guidelines were drafted to 
state the current views of the Department and the Commission on 
antitrust enforcement policy with respect to international business 
operations. The Guidelines are not intended to create or recognize any 
legally enforceable right in any person. They are not intended to 
affect the admissibility of evidence or in any other way necessarily to 
affect the course or conduct of any present or future litigation. 
Moreover, changes in the relevant statutory framework, legal precedent, 
and methods of internal Department and Commission analysis may occur 
over time, and these changes will not always be simultaneously 
reflected in amendments to the Guidelines. Parties seeking to know the 
Department's or the Commission's specific enforcement intentions should 
consider using the Department's Business Review Procedure, see 28 CFR 
50.6 (1993), or the Commission's Advisory Opinion procedure. See 16 
C.F.R. Secs. 1.1-1.4 (1993).

    Dated: October 13, 1994.
Diane P. Wood,
Deputy Assistant Attorney General, Antitrust Division, Department of 
Justice.

Antitrust Enforcement Guidelines for International Operations 1994

1. Introduction

    For more than a century, the U.S. antitrust laws have stood as the 
ultimate protector of the competitive process that underlies our free 
market economy. Through this process, society as a whole benefits from 
the best possible allocation of resources, which in turn maximizes 
consumer choice and maintains competitive prices.
    Although the federal antitrust laws have always applied to foreign 
commerce, that application is particularly important today. Throughout 
the world, the importance of antitrust law as a means to ensure open 
and free markets, protect consumers, and prevent conduct that impedes 
competition is becoming more apparent. The Department of Justice (``the 
Department'') and the Federal Trade Commission (``the Commission'' or 
``FTC'') (when referred to collectively, ``the Agencies''), as the 
federal agencies charged with the responsibility of enforcing the 
antitrust laws, thus have made enforcement of the antitrust laws with 
respect to international operations a top priority. In furtherance of 
this priority, the Agencies have revised and updated the Department's 
1988 Antitrust Enforcement Guidelines for International Operations, 
which are hereby withdrawn.\1\
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    \1\The U.S. Department of Justice Antitrust Guidelines for the 
Enforcement and Acquisition of Intellectual Property (Proposed), the 
U.S. Department of Justice and Federal Trade Commission Horizontal 
Merger Guidelines (1992), and the Statements of Antitrust 
Enforcement Policy and Analytical Principles Relating to Health Care 
and Antitrust, Jointly Issued by the U.S. Department of Justice and 
Federal Trade Commission (1994), are not qualified, modified, or 
otherwise amended by the issuance of these Guidelines.
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    The 1994 Antitrust Enforcement Guidelines for International 
Operations (hereinafter ``Guidelines'') are intended to provide 
antitrust guidance to businesses engaged in international operations on 
questions that relate specifically to the Agencies' international 
enforcement policy.\2\ They do not, therefore, provide a complete 
statement of the Agencies' general enforcement policies. The topics 
covered include the Agencies' subject matter jurisdiction over conduct 
and entities outside the United States and the considerations, issues, 
policies, and processes that govern their decision to exercise that 
jurisdiction; comity; mutual assistance in international antitrust 
enforcement; and the effects of foreign governmental involvement on the 
antitrust liability of private entities. In addition, the Guidelines 
discuss the relationship between antitrust and international trade 
initiatives. Finally, to illustrate how these principles may operate in 
certain contexts, the Guidelines include a number of examples.
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    \2\Readers should separately evaluate the risk of private 
litigation by competitors, consumers and suppliers, as well as the 
risk of enforcement by state prosecutors under state and federal 
antitrust laws.
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    As is the case with all guidelines, users should rely on qualified 
counsel to assist them in evaluating the antitrust risk associated with 
any contemplated transaction or activity. No set of guidelines can 
possibly indicate how the Agencies will assess the particular facts of 
every case. Persons seeking more specific advance statements of 
enforcement intentions with respect to the matters treated in these 
Guidelines should use the Department's Business Review procedure, the 
Commission's Advisory Opinion procedure, or one of the more specific 
procedures described below for particular types of transactions.

2. Antitrust Laws Enforced by the Agencies

    Foreign commerce cases can involve almost any provision of the 
antitrust laws.\3\ The Agencies do not discriminate in the enforcement 
of the antitrust laws on the basis of the nationality of the parties. 
Once jurisdictional requirements and considerations of international 
comity have been considered and satisfied, the same substantive rules 
apply to all.
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    \3\Certain exceptions may arise due to jurisdictional 
limitations. For example, the Robinson-Patman Act, 15 U.S.C. Sec. 13 
(1988), applies only to purchases involving commodities ``for use, 
consumption, or resale within the United States.'' It has been 
construed not to apply to sales for export See, e.g., General Chem., 
Inc. v. Exxon Chem. Co., 625 F.2d 1231, 1234 (5th Cir. 1980). 
Intervening domestic sales, however, would be subject to the Act. 
See Raul Int'l Corp. v. Sealed Power Corp., 586 F. Supp. 349, 351-55 
(D.N.J.) 1984).
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    The following is a brief summary of the laws enforced by the 
Agencies that are likely to have the greatest significance for 
international transactions.
2.1  Sherman Act
    Section 1 of the Sherman Act, 15 U.S.C. Sec. 1, sets forth the 
basic antitrust prohibition against contracts, combinations, and 
conspiracies in restraint of trade or commerce among the several States 
or with foreign nations. Section 2 of the Act, 15 U.S.C. Sec. 2, 
prohibits monopolization, attempts to monopolize, and conspiracies to 
monopolize any part of trade or commerce among the several States or 
with foreign nations. Section 6a of the Sherman Act, 15 U.S.C. Sec. 6a, 
defines the jurisdictional reach of the Act with respect to non-import 
foreign commerce.
    Violations of the Sherman Act may be prosecuted as civil or 
criminal offenses. Conduct that the Department prosecutes criminally is 
limited to traditional per se offenses of the law, which typically 
involve price-fixing, customer allocation, bid-rigging or other cartel 
activities that would also be violations of the law in many countries. 
Criminal violations of the Act are punishable by fines and 
imprisonment. The Sherman Act provides that corporate defendants may be 
fined up to $10 million, other defendants may be fined up to $350,000, 
and individuals may be sentenced to up to 3 years' imprisonment.\4\ The 
Department has sole responsibility for the criminal enforcement of the 
Sherman Act. In a civil proceeding, the Department may obtain 
injunctive relief against prohibited practices. It may also obtain 
treble damages if the U.S. government is the purchaser of affected 
goods or services.\5\ Private plaintiffs may also obtain injunctive and 
treble damage relief for violations of the Sherman Act. Before the 
Commission conduct that violates the Sherman Act may be challenged 
pursuant to the Commission's power under Section 5 of the Federal Trade 
Commission Act, described below.
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    \4\Defendants may be fined up to twice the gross pecuniary gain 
or loss caused by their offense in lieu of the Sherman Act fines, 
pursuant to 18 U.S.C. Sec. 3571(d) (1988 & Supp. 1993). In addition, 
the U.S. Sentencing Commission Guidelines provide further 
information about possible criminal sanctions for individual 
antitrust defendants in Sec. 2R1.1 and for organizational defendants 
in Chapter Eight.
    \5\See 15 U.S.C. Sec. 4 (1988) (injunctive relief); 15 U.S.C. 
Sec. 15a (1988 & Supp. 1993) (damages).
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2.2  Clayton Act
    The Clayton Act, 15 U.S.C. Sec. 12 et seq., expands on the general 
prohibitions of the Sherman Act and addresses anticompetitive problems 
in their incipiency.\6\ Section 7 of the Clayton Act, 15 U.S.C. 
Sec. 18, prohibits any merger or acquisition of stock or assets ``where 
in any line of commerce or in any activity affecting commerce in any 
section of the country, the effect of such acquisition may be 
substantially to lessen competition, or to tend to create a 
monopoly.''\7\ Section 15 of the Clayton Act empowers the Attorney 
General, and Section 13(b) of the FTC Act empowers the Commission, to 
seek a court order enjoining consummation of a merger that would 
violate Section 7. In addition, the Commission may seek a cease and 
desist order in an administrative proceeding against a merger under 
either Section 11 of the Clayton Act or Section 5 of the FTC Act, or 
both. Private parties may also seek injunctive relief under 15 U.S.C. 
Sec. 26.
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    \6\Under the Clayton Act, ``commerce'' includes ``trade or 
commerce among the several states and with foreign nations* * *.'' 
``Persons'' include corporations or associations existing under or 
authorized either by the laws of the United States or any of its 
states or territories, or by the laws of any foreign country. 15 
U.S.C. Sec. 12 (1988 & Supp. 1993).
    \7\15 U.S.C. Sec. 18 (1988). The asset acquisition clause 
applies to ``person[s] subject to the jurisdiction of the Federal 
Trade Commission'' under the Clayton Act.
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    Section 3 of the Clayton Act prohibits any person engaged in 
commerce from conditioning the lease or sale of goods or commodities 
upon the purchaser's agreement not to use the products of a competitor, 
if the effect may be substantially to lessen competition or to tend to 
create a monopoly in any line of commerce.\8\ In evaluating 
transactions, the trend of recent authority is to use the same analysis 
employed in the evaluation of tying under Sherman Act Section 1 to 
assess a defendant's liability under Section 3 of the Clayton Act.\9\
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    \8\15 U.S.C. Sec. 14 (1988).
    \9\See, e.g., Mozart Co. v. Mercedes-Benz of N. Am., Inc., 833 
F.2d 1342, 1352 (9th Cir. 1987), cert. denied, 488 U.S. 870 (1988).
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    Section 2 of the Clayton Act, known as the Robinson-Patman Act,\10\ 
prohibits price discrimination in certain circumstances. Historically, 
the Commission has enforced this provision.
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    \10\15 U.S.C. Secs. 13-13b, 21a (1988).
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2.3  Federal Trade Commission Act
    Section 5 of the Federal Trade Commission Act (``FTC Act'') 
declares unlawful ``unfair methods of competition in or affecting 
commerce, and unfair or deceptive acts or practices in or affecting 
commerce.''\11\ Pursuant to its authority over unfair methods of 
competition, the Commission may take administrative action against 
conduct that violates the Sherman Act and the Clayton Act, as well as 
anticompetitive practices that do not fall within the scope of the 
Sherman or Clayton Acts. The Commission may also seek injunctive relief 
in federal court against any such conduct under Section 13(b) of the 
FTC Act. Although enforcement at the Commission relating to 
international deceptive practices has become increasingly important 
over time, these Guidelines are limited to the Commission's antitrust 
authority under the unfair methods of competition language of Section 
5.
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    \11\15 U.S.C. Sec. 45 (1988 & Supp. 1993).
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2.4  Hart-Scott-Rodino Antitrust Improvements Act of 1976
    Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 
1976 (``HSR Act''), 15 U.S.C. Sec. 18a, provides the Department and the 
Commission with several procedural devices to facilitate enforcement of 
the antitrust laws with respect to anticompetitive mergers and 
acquisitions.\12\ The HSR Act requires persons engaged in commerce or 
in any activity affecting commerce to notify the Agencies of proposed 
mergers or acquisitions that would exceed statutory size-of-party and 
size-of-transaction thresholds,\13\ to provide certain information 
relating to reportable transactions, and to wait for a prescribed 
period--15 days for cash tender offers and 30 days for all other 
transactions--before consummating the transaction.\14\ The Agency may, 
before the end of the waiting period, request additional information 
concerning a transaction (make a ``Second Request'') and thereby extend 
the waiting period beyond the initial one prescribed, to a specified 
number of days after the receipt of the material required by the Second 
Request--10 days for cash tender offers and 20 days for all other 
transactions.\15\
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    \12\The scope of the Agencies' jurisdiction under Clayton Sec. 7 
exceeds the scope of those transactions subject to the premerger 
notification requirements of the HSR Act. Whether or not the HSR Act 
premerger notification thresholds are satisfied, either Agency may 
request the parties to a merger affecting U.S. commerce to provide 
information voluntarily concerning the transaction. In addition, the 
Department may issue Civil Investigative Demands (``CIDs'') pursuant 
to the Antitrust Process Act, 15 U.S.C. Secs. 1311-1314 (1988), and 
the Commission may issue administrative CIDs pursuant to the Act of 
Aug. 26, 1994, Pub. L. No. 103-312, Sec. 7; 108 Stat. 1691 (1994). 
The Commission may also issue administrative subpoenas and orders to 
file special reports under Sections 9 and 6(b) of the FTC Act, 
respectively. 15 U.S.C. Secs. 49, 46(b) (1988). Authority in 
particular cases is allocated to either the Department or the 
Commission pursuant to a voluntary clearance protocol. See Antitrust 
& Trade Reg. Daily (BNA), Dec. 6, 1993.
    \13\Unless exempted pursuant to the Act, the parties must 
provide premerger notification to the Agencies if (1) the acquiring 
person, or the person whose voting securities or assets are being 
acquired, is engaged in commerce or any activity affecting commerce; 
and (2)(a) any voting securities or assets of a person engaged in 
manufacturing which has annual net sales or total assets of $10 
million or more are being acquired by any person which has total 
assets or annual net sales of $100 million or more, or (b) any 
voting securities or assets of a person not engaged in manufacturing 
which has total assets of $10 million or more are being acquired by 
any person which has total assets or annual sales of $100 million or 
more; or (c) any voting securities or assets of a person with annual 
net sales or total assets of $100 million or more are being acquired 
by any person with total assets or annual net sales of $10 million 
or more; and (3) as a result of such acquisition, the acquiring 
person would hold (a) 15 percent or more of the voting securities or 
assets of the acquired person, or (b) an aggregate total amount of 
the voting securities and assets of the acquired person of $15 
million. 15 U.S.C. Sec. 18a(a) (1988). The size of the transaction 
test set forth in (3) supra must be read in conjunction with 16 CFR 
802.20 (1994). This Section exempts asset acquisitions valued at $15 
million or less. It also exempts voting securities acquisitions of 
$15 million or less unless, as a result of the acquisition, the 
acquiring person would hold 50 percent or more of the voting 
securities of an issuer that has annual net sales or total assets of 
$25 million or more. The HSR rules are necessarily technical, and 
should be consulted, rather than relying on this summary.
    \14\15 U.S.C. Sec. 18a(b) (1988 & Supp. 1993); 16 CFR 803.1 
(1994).
    \15\15 U.S.C. Sec. 18a(e) (1988).
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    The HSR Act and the FTC rules implementing the HSR Act\16\ exempt 
from the premerger notification requirements certain international 
transactions (typically those having little nexus to U.S. commerce) 
that otherwise meet the statutory thresholds.\17\ Failure to comply 
with the HSR Act is punishable by court-imposed civil penalties of up 
to $10,000 for each day a violation continues. The court may also order 
injunctive relief to remedy a failure substantially to comply with the 
HSR Act. Businesses may seek an interpretation of their obligations 
under the HSR Act from the Commission.\18\
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    \16\16 CFR 801-803 (1994).
    \17\16 CFR 801.1(e), (k), 802.50-52 (1994). See Section 4.22 
infra.
    \18\See 16 CFR 803.30 (1994).
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2.5  National Cooperative Research and Production Act
    The National Cooperative Research and Production Act (``NCRPA''), 
15 U.S.C. Secs. 4301-06, clarifies the substantive application of the 
U.S. antitrust laws to joint research and development activities and 
joint production activities. Originally drafted to encourage research 
and development by providing a special antitrust regime for research 
and development (``R&D'') joint ventures, the NCRPA requires U.S. 
courts to judge the competitive effects of a challenged joint R&D or 
joint production venture, or a combination of the two, in properly 
defined relevant markets and under a rule-of-reason standard. The 
statute specifies that the conduct ``shall be judged on the basis of 
its reasonableness, taking into account all relevant factors affecting 
competition, including, but not limited to, effects on competition in 
properly defined, relevant research, development, product, process, and 
service markets.'' 15 U.S.C. Sec. 4302. This approach is consistent 
with the Agencies' general analysis of joint ventures.\19\
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    \19\See, e.g., U.S. Department of Justice Antitrust Guidelines 
for the Enforcement and Acquisition of Intellectual Property 
(Proposed), Sec. 4; Statements of Antitrust Enforcement Policy and 
Analytical Principles Relating to Health Care and Antitrust, Issued 
by the U.S. Department of Justice and the Federal Trade Commission, 
Sept. 27, 1994, Statement 2 (outlining a four-step approach for 
joint venture analysis). See generally National Collegiate Athletic 
Ass'n v. Board of Regents of Univ. of Okla., 468 U.S. 85 (1984); 
F.T.C. v. Indiana Fed'n of Dentists, 476 U.S. 447 (1986).
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    The NCRPA also establishes a voluntary procedure pursuant to which 
the Attorney General and the FTC may be notified of a joint R&D or 
production venture. The statute limits the monetary relief that may be 
obtained in private civil suits against the participants in a notified 
venture to actual rather than treble damages, if the challenged conduct 
is within the scope of the notification. With respect to joint 
production ventures, the National Cooperative Production Amendments of 
1993, Pub. L. No. 103-42, 107 Stat. 117, 119, provide that the benefits 
of the limitation on recoverable damages for claims resulting from 
conduct within the scope of a notification are not available unless (1) 
the principal facilities for the production are located within the 
United States or its territories, and (2) ``each person who controls 
any party to such venture (including such party itself) is a United 
States person, or a foreign person from a country whose law accords 
antitrust treatment no less favorable to United States persons than to 
such country's domestic persons with respect to participation in joint 
ventures for production.'' 15 U.S.C. Sec. 4306(2) (Supp. 1993).
2.6  Webb-Pomerene Act
    The Webb-Pomerene Act, 15 U.S.C. Secs. 61-65, provides a limited 
antitrust exemption for the formation and operation of associations of 
otherwise competing businesses to engage in collective export sales. 
The exemption applies only to the export of ``goods, wares, or 
merchandise.''\20\ It does not apply to conduct that has an 
anticompetitive effect in the United States or that injures domestic 
competitors of the members of an export association. Nor does it 
provide any immunity from prosecution under foreign antitrust laws.\21\ 
Associations seeking an exemption under the Webb-Pomerene Act must file 
their articles of agreement and annual reports with the Commission, but 
pre-formation approval from the Commission is not required.
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    \20\15 U.S.C. Sec. 61 (1988).
    \21\See, e.g., Cases 89/85, etc., Ahlstrom v. Comm'n (``Wood 
Pulp'') (E.C.J., Sept. 27, 1988), 1988 E.C.R. 5193, [1988] 4 
C.M.L.R. 901.
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2.7  Export Trading Company Act of 1982
    The Export Trading Company Act of 1982 (the ``ETC Act''), Pub. L. 
No. 97-290, 96 Stat. 1234, is designed to increase U.S. exports of 
goods and services. It addresses that goal in several ways. First, in 
Title II, it encourages more efficient provision of export trade 
services to U.S. producers and suppliers by reducing restrictions on 
trade financing provided by financial institutions.\22\ Second, in 
Title III, it reduces uncertainty concerning the application of the 
U.S. antitrust laws to export trade through the creation of a procedure 
by which persons engaged in U.S. export trade may obtain an export 
trade certificate of review (``ETCR'').\23\ Third, in Title IV, it 
clarifies the jurisdictional rules applicable to non-import cases 
brought under the Sherman Act and the FTC Act.\24\ The Title III 
certificates are discussed briefly here; the jurisdictional rules are 
treated below in Section 3.1.
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    \22\See 12 U.S.C. Secs. 372, 635 a-4, 1841, 1843 (1988 & Supp. 
1993) (Because Title II does not implicate the antitrust laws, it is 
not discussed further in these Guidelines.)
    \23\15 U.S.C. Secs. 4011-21 (1988 & Supp. 1993).
    \24\15 U.S.C. Sec. 6a (1988); 15 U.S.C. Sec. 45(a)(3) (1988).
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    Export trade certificates of review are issued by the Secretary of 
Commerce with the concurrence of the Attorney General. Persons named in 
the ETCR obtain limited immunity from suit under both state and federal 
antitrust laws for activities that are specified in the certificate and 
that comply with the terms of the certificate. To obtain an ETCR, an 
applicant must show that proposed export conduct will:
    (1) Result in neither a substantial lessening of competition or 
restraint of trade within the United States nor a substantial restraint 
of the export trade of any competitor of the applicant;
    (2) Not unreasonably enhance, stabilize, or depress prices in the 
United States of the class of goods or services covered by the 
application;
    (3) Not constitute unfair methods of competition against 
competitors engaged in the export of the class of goods or services 
exported by the applicant; and
    (4) Not include any act that may reasonably be expected to result 
in the sale for consumption or resale in the United States of such 
goods or services.\25\
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    \25\15 U.S.C. Sec. 4013(a) (1988).
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Congress intended that these standards ``encompass the full range of 
the antitrust laws,'' as defined in the ETC Act.\26\
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    \26\H.R. Rep. No. 924, 97th Cong., 2d Sess. 26 (1982). See 15 
U.S.C. Sec. 4021(6).
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    Although an ETCR provides significant protection under the 
antitrust laws, it has certain limitations. First, conduct that falls 
outside the scope of a certificate remains fully subject to private and 
governmental enforcement actions. Second, an ETCR that is obtained by 
fraud is void from the outset and thus offers no protection under the 
antitrust laws. Third, any person that has been injured by certified 
conduct may recover actual (though not treble) damages if that conduct 
is found to violate any of the statutory criteria described above. In 
any such action, certified conduct enjoys a presumption of legality, 
and the prevailing party is entitled to recover costs and attorneys' 
fees.\27\ Fourth, an ETCR does not constitute, explicitly or 
implicitly, an endorsement or opinion by the Secretary of Commerce or 
by the Attorney General concerning the legality of such business plans 
under the laws of any foreign country.
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    \27\See 15 U.S.C. Sec. 4016(b)(1) (1988) (injured party) and 
Sec. 4016(b)(4) (1988) (party against whom claim is brought).
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    The Secretary of Commerce may revoke or modify an ETCR if the 
Secretary or the Attorney General determines that the applicant's 
export activities have ceased to comply with the statutory criteria for 
obtaining a certificate. The Attorney General may also bring suit under 
Section 15 of the Clayton Act to enjoin conduct that threatens ``a 
clear and irreparable harm to the national interest,''\28\ even if the 
conduct has been pre-approved as part of an ETCR.
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    \28\15 U.S.C. Sec. 4016(b)(5) (1988).
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    The Commerce Department, in consultation with the Department, has 
issued guidelines setting forth the standards used in reviewing ETCR 
applications.\29\ The ETC Guidelines contain several examples 
illustrating application of the certification standards to specific 
export trade conduct, including the use of vertical and horizontal 
restraints and technology licensing arrangements. In addition, the 
Commerce Department's Export Trading Company Guidebook\30\ provides 
information on the functions and advantages of establishing or using an 
export trading company, including factors to consider in applying for a 
certificate of review. The Commerce Department's Office of Export 
Trading Company Affairs provides advice and information on the 
formation of export trading companies and facilitates contacts between 
producers of exportable goods and services and firms offering export 
trade services.
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    \29\See Department of Commerce, International Trade 
Administration, Guidelines for the Issuance of Export Trade 
Certificates of Review (2d ed.), 50 Fed. Reg. 1786 et seq. 
(hereinafter ``ETC Guidelines'').
    \30\U.S. Department of Commerce, International Trade 
Administration, The Export Trading Company Guidebook (March 1984).
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2.8  Related Legislation
2.81  Wilson Tariff Act
    The Wilson Tariff Act, 15 U.S.C. Secs. 8-11, prohibits ``every 
combination, conspiracy, trust, agreement, or contract'' made by or 
between two or more persons or corporations, either of whom is engaged 
in importing any article from a foreign country into the United States, 
where the agreement is intended to restrain trade or increase the 
market price in any part of the United States of the imported articles, 
or of ``any manufacture into which such imported article enters or is 
intended to enter.'' Violation of the Act is a misdemeanor, punishable 
by a maximum fine of $5,000 or one year in prison. The Act also 
provides for seizure of the imported articles.\31\
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    \31\Sec. 15 U.S.C. Sec. 11 (1988).
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2.82  Antidumping Act of 1916
    The Revenue Act of 1916, better known as the Antidumping Act, 15 
U.S.C. Secs. 71-74, is not an antitrust statute, but its subject matter 
is closely related to the antitrust rules regarding predation. It is a 
trade statute that creates a private claim against importers who sell 
goods into the United States at prices substantially below the prices 
charged for the same goods in their home market. In order to state a 
claim, a plaintiff must show both that such lower prices were commonly 
and systematically charged, and that the importer had the specific 
intent to injure or destroy an industry in the United States, or to 
prevent the establishment of an industry. Dumping cases are more 
commonly brought using the administrative procedures of the Tariff Act 
of 1930, discussed below.
2.83  Tariff Act of 1930
    A comprehensive discussion of the trade remedies available under 
the Tariff Act is beyond the scope of these Guidelines. However, 
because antitrust questions sometimes arise in the context of trade 
actions, it is appropriate to describe these laws briefly.
2.831  Countervailing Duties
    Pursuant to Title VII.A of the Tariff Act,\32\ U.S. manufacturers, 
producers, wholesalers, unions and trade associations may petition for 
the imposition of offsetting duties on subsidized foreign imports.\33\ 
The Department of Commerce's International Trade Administration 
(``ITA'') must make a determination that the foreign government in 
question is subsidizing the imports, and in most cases the 
International Trade Commission (``ITC'') must determine that a domestic 
industry is materially injured or threatened with material injury by 
reason of these imports.
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    \32\See 19 U.S.C. Secs. 1671 et seq. (1988 & Supp. 1993).
    \33\An alternative procedure exists under Tariff Act Sec. 303 
for countries that have not subscribed to the Subsidies Code or 
measures equivalent to it. See 19 U.S.C. Sec. 1303(a)(1). CF. Cabot 
Corp. v. United States, 694 F. Supp. 949, 955 (Ct. Int'l Trade, 
1988).
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2.832  Antidumping Duties
    Pursuant to Title VII.B of the Tariff Act,34 parties 
designated in the statute may petition for antidumping duties, which 
must be imposed on foreign merchandise that is being, or is likely to 
be, sold in the United States at ``less than fair value'' (``LTFV''), 
if the U.S. industry is materially injured or threatened with material 
injury by imports of the foreign merchandise. The ITA makes the LTFV 
determination, and the ITC is responsible for the injury decision.
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    \3\4See 19 U.S.C. 1673 et seq. (1988 & Supp. 1993).
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2.833  Section 337
    Section 337 of the Tariff Act, 19 U.S.C. 1337, prohibits ``unfair 
methods of competition and unfair acts in the importation of articles 
into the United States,'' if the effect is to destroy or substantially 
injure a U.S. industry, or where the acts relate to importation of 
articles infringing U.S. patents, copyrights, trademarks, or registered 
mask works.35 Complaints are filed with ITC. The principal 
remedies under Section 337 are an exclusion order directing that any 
offending goods be excluded from entry into the United States, and a 
cease and desist order directed toward any offending U.S. firms and 
individuals.36 The ITC is required to give the Agencies an 
opportunity to comment before making a final determination.37 In 
addition, the Department participates in the interagency group that 
prepares recommendations for the President to approve, disapprove, or 
allow to take effect the import relief proposed by the ITC.
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    \3\519 U.S.C. 1337 (1988 & Supp. 1993).
    \3\619 U.S.C. 1337 (d), (f) (1988 & Supp. 1993).
    \3\719 U.S.C. 1337(b)(2) (1988).
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2.84  Trade Act of 1974
2.841  Section 201
    Section 201 of this Act, 19 U.S.C. 2251 et seq., provides that 
American businesses claiming serious injury due to significant 
increases in imports may petition the ITC for relief or modification 
under the so-called ``escape clause.'' If the ITC makes a determination 
that ``an article is being imported into the United States in such 
increased quantities as to be a substantial cause of serious injury, or 
the threat thereof, to the domestic industry producing an article like 
or directly competitive with the imported article,'' and formulates its 
recommendation for appropriate relief, the Department participates in 
the interagency committee that conducts the investigations and advises 
the President whether to adopt, modify, or reject the import relief 
recommended by the ITC.
2.842  Section 301
    Section 301 of this Act, 19 U.S.C. 2411, provides that the U.S. 
Trade Representative (``USTR''), subject to the specific direction, if 
any, of the President, may take action, including restricting imports, 
to enforce rights of the United States under any trade agreement, to 
address acts inconsistent with the international legal rights of the 
United States, or to respond to unjustifiable, unreasonable or 
discriminatory practices of foreign governments that burden or restrict 
U.S. commerce. Interested parties may initiate such actions through 
petitions to the USTR, or the USTR may itself initiate 
proceedings.38 Of particular interest to antitrust enforcement is 
Section 301(d)(3)(B)(III), which includes among the ``unreasonable'' 
practices of foreign governments that might justify a proceeding the 
``toleration by a foreign government of systematic anticompetitive 
activities by private firms or among enterprises in the foreign country 
that have the effect of restricting * * * access of United States goods 
[or services] to purchasing by such firms.''39 The Department 
participates in the interagency committee that makes recommendations to 
the President on what actions, if any, should be taken.
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    \3\819 U.S.C. 2412(a), (b) (1988); see also Identification of 
Trade Expansion Priorities, Exec. Order No. 12, 901, 59 Fed. Reg. 
10,727 (1994).
    \3\919 U.S.C. 2411(d)(3)(B)(i)(III)(1988).
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2.9  Relevant International Agreements
    To further the twin goals of promoting enforcement cooperation 
between the United States and foreign governments and of reducing any 
tensions that may arise in particular proceedings, the Agencies have 
developed close bilateral relationships with antitrust and competition 
policy officials of many different countries. In some instances, 
understandings have been reached with respect to notifications, 
consultations, and cooperation in antitrust matters. In other 
instances, more general rules endorsed by multilateral organizations 
such as the Organization for Economic Cooperation and Development 
(``OECD'') provide the basis for the Agencies' cooperative policies. 
Finally, even in the absence of specific or general international 
understandings or recommendations, the Agencies often seek cooperation 
with foreign authorities.
2.91  Bilateral Cooperation Agreements
    Formal written bilateral arrangements exist between the United 
States and the Federal Republic of Germany, Australia, and 
Canada.40 International antitrust cooperation can also occur 
through mutual legal assistance treaties (``MLATs''), which are 
treaties of general application pursuant to which the United States and 
a foreign country agree to assist one another in criminal law 
enforcement matters. MLATs currently are in force with nearly 20 
foreign countries, and many more are in the process of ratification or 
negotiation. However, only the MLAT with Canada has been used to date 
to cover antitrust offenses.41 The Agencies also hold regular 
consultations with the antitrust officials of Canada, the European 
Commission, and Japan, and have close, informal ties with the antitrust 
authorities of many other countries. Since 1990, they have cooperated 
closely with countries in the process of establishing competition 
agencies, assisted by funding provided by the Agency for International 
Development.
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    \4\0See Agreement Relating to Mutual Cooperation Regarding 
Restrictive Business Practices, June 23, 1976, U.S.-F.R.G., 27 
U.S.T. 1956, T.I.S. No. 8291, reprinted in 4 Trade Reg. Rep. (CCH) 
13,501; Agreement Between the Government of the United States of 
America and the Government of Australia Relating to Cooperation on 
Antitrust Matters, June 29, 1982, U.S.-Austrl., T.I.A.S. No. 10365, 
reprinted in 4 Trade Reg. Rep. (CCH) 13,502; and Memorandum of 
Understanding as to Notification, Consultation, and Cooperation with 
Respect to the Application of National Antitrust Laws, March 9, 
1984, U.S.-Can., reprinted in 4 Trade Reg. Rep. (CCH) 13,503. The 
Agencies also signed a similar agreement with the Commission of the 
European Communities in 1991. See Agreement Between the Government 
of the United States of America and the Commission of the European 
Communities Regarding the Application of Their Competition Laws, 
Sept. 23, 1991, 30 ILM 1491 (Nov. 1991), reprinted in 4 Trade Reg. 
Rep. (CCH) 13,504. However, on August 9, 1994, the European Court 
of Justice ruled that the Agreement did not comply with 
institutional requirements of the law of the European Union 
(``EU''). Under the Court's decision, action by the EU Council of 
Ministers is necessary for this type of agreement. See French 
Republic v. Commission of European Communities (No. C-327/91) (Aug. 
9, 1994).
    \4\1Treaty with Canada on Mutual Legal Assistance in Criminal 
Matters, S. Exec. Rep. No. 100-114, 100th Cong., 2d Sess. (1989).
---------------------------------------------------------------------------

    During the week of October 3, 1994, Congress passed H.R. 4781, the 
International Antitrust Enforcement Assistance Act of 1994, see n.95 
infra, which authorizes the Agencies to enter into antitrust mutual 
assistance agreements in accordance with the legislation.
2.92  International Guidelines and Recommendations
    The Agencies have agreed with respect to member countries of the 
OECD to consider the legitimate interests of other nations in 
accordance with relevant OECD recommendations.42 Under the terms 
of a 1986 recommendation, the United States agency with responsibility 
for a particular case notifies a member country whenever an antitrust 
enforcement action may affect important interests of that country or 
its nationals.43 Examples of potentially notifiable actions 
include requests for documents located outside the United States, 
attempts to obtain information from potential witnesses located outside 
the United States, and cases or investigations with significant foreign 
conduct or involvement of foreign persons.
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    \4\2See Revised Recommendations of the OECD Council Concerning 
Cooperation Between Member Countries on Restrictive Business 
Practices Affecting International Trade, OECD Doc. No. C(86)44 
(Final) (May 21, 1986). The Recommendation also calls for countries 
to consult with each other in appropriate situations, with the aim 
of promoting enforcement cooperation and minimizing differences that 
may arise.
    \4\3The OECD has 25 member countries and the European Union is 
represented as an observer. The OECD's membership includes many of 
the most advanced market economies in the world. The OECD also has 
several observer nations, who have rapid progress toward open market 
economies. The Agencies follow recommended OECD practices with 
respect to all member countries.
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3. Threshold International Enforcement Issues

3.1  Jurisdiction
    Just as the acts of U.S. citizens in a foreign nation ordinarily 
are subject to the law of the country in which they occur, the acts of 
foreign citizens in the United States ordinarily are subject to U.S. 
law. The reach of the U.S. antitrust laws is not limited, however, to 
conduct and transactions that occur within the boundaries of the United 
States. Anticompetitive conduct that affects U.S. domestic or foreign 
commerce may violate the U.S. antitrust laws regardless of where such 
conduct occurs or the nationality of the parties involved. In a world 
in which economic transactions observe no boundaries, international 
recognition of the ``effects doctrine'' of jurisdiction has become 
widespread.\44\
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    \44\The test adopted in the European Court of Justice usually 
produces the same outcomes as the ``effects'' test employed in the 
U.S. See Cases 89/85, etc., Ahlstrom v. Comm'n, note 21 supra. The 
merger laws of the European Union, Canada, Germany, France, 
Australia, and the Czech and Slovak Republics, among others, take a 
similar approach.
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3.11  Jurisdiction Over Conduct Involving Import Commerce
    With respect to foreign import commerce, the Supreme Court has 
recently in Hartford Fire Insurance Co. v. California that `'the 
Sherman Act applies to foreign conduct that was meant to produce and 
did in fact produce some substantial effect in the United States.''\45\ 
Imports intended for sale in the United States by definition affect the 
U.S. domestic market directly, and will, therefore, almost invariably 
satisfy the intent part of the Hartford test. Whether they in fact 
produce the requisite substantial effects will depend on the facts of 
each case.
---------------------------------------------------------------------------

    \45\113 S.CT. 2891, 2909 (1993).
---------------------------------------------------------------------------

Illustrative Example A\46\

    Situation: A, B, C, and D, are foreign companies that produce a 
product in various foreign countries. None has any U.S. production, 
nor any U.S. subsidiaries. They organize a cartel for the purpose of 
raising the price for the product in question. Collectively, the 
cartel members make substantial sales into the United States, both 
in absolute terms and relative to total U.S. consumption.
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    \46\The examples incorporated into the text are intended solely 
to illustrate how the Agencies would apply the principles 
articulated in the Guidelines in differing fact situations. In each 
case, of course, the ultimate outcome of the analysis, i.e., whether 
or not a violation of the antitrust laws has occurred, would depend 
on the specific facts and circumstances of the case. These examples, 
therefore, do not address many of the factual and economic questions 
the Agencies would ask in analyzing particular conduct or 
transactions under the antitrust laws. Therefore, certain 
hypothetical situations presented here may, when fully analyzed, not 
violate any provision of the antitrust laws.
---------------------------------------------------------------------------

    Discussion: These facts present the straightforward case of 
cartel participants selling products directly into the United 
States. In this situation, the transaction is unambiguously an 
import into the U.S. market, and the sale is not complete until the 
goods reach the United States. Thus, U.S. jurisdiction is clear 
under the general principles of antitrust law expressed most 
recently in Hartford Fire. The facts presented here demonstrate 
actual and intended participation in U.S. commerce.\47\
---------------------------------------------------------------------------

    \47\See Section 3.13 infra.
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3.12  Jurisdiction Over Mergers and Acquisitions Subject to Section 7 
of the Clayton Act
    The general jurisdictional reach of Section 7 is co-extensive with 
the reach of the Sherman Act, as a result of the 1980 amendment of the 
Clayton Act extending it to all matters affecting commerce, which 
includes trade or commerce with foreign nations.\48\ Thus, the Agencies 
would apply the same principles regarding their foreign commerce 
jurisdiction to Clayton Section 7 cases as they would apply in Sherman 
Act cases.
---------------------------------------------------------------------------

    \48\See note 6 supra; Antitrust Procedural Improvements Act of 
1980, Pub. L. No. 96-349, 94 Stat. 1154 (1980).
---------------------------------------------------------------------------

Illustrative Example B

    Situation: Two foreign firms, one in Europe and the other in 
Canada, account together for 80% of U.S. sales of a particular 
product. Neither firm has a U.S. subsidiary, and neither has 
productive assets in the United States; instead, both serve the U.S. 
market purely through direct imports. They enter into an agreement 
to merge.
    Discussion: As noted above, the jurisdictional provisions of 
Section 7 of the Clayton Act reach the stock and asset acquisitions 
of persons engaged in ``any activity affecting commerce.'' In 
assessing jurisdiction under Section 7 for international 
transactions the Agencies analyze the question of effects on 
commerce in a manner consistent with the foreign Trade Antitrust 
Improvements Act of 1982 (``FTAIA'')\49\: that is, they look to see 
whether the effects on U.S. domestic or import commerce are direct, 
substantial, and reasonably foreseeable.\50\ It is appropriate to do 
so because the FTAIA sheds light on the type of effects Congress 
considered necessary for foreign commerce cases, even though the 
FTAIA itself did not amend the Clayton Act. On the facts of this 
example, the Agencies would conclude that Section 7 jurisdiction 
exists.\51\ While the transaction may be subject to the terms of the 
HSR Act (assuming size of person and size of transaction thresholds 
are met), it would appear to be exempted by 16 CFR 802.51(b). See 
Section 4.22 infra.
---------------------------------------------------------------------------

    \49\15 U.S.C. Sec. 6a (1988) (Sherman Act) and Sec. 45(a)(3) 
(1988) (FTC Act).
    \50\See Section 3.131 infra.
    \51\If it appears in a particular case that effective relief may 
be difficult to obtain, the case may be one in which the Agencies 
would seek to coordinate their efforts with other authorities who 
are examining the transaction. Through concepts such as ``positive 
comity,'' one country's authorities may ask another country to take 
measures that address possible harm to competition in the requesting 
country's market.
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3.13  Jurisdiction Over Conduct Involving Other Commerce
    With respect to foreign commerce other than imports, the 
jurisdictional limits of the Sherman Act and the FTC Act are delineated 
in the FTAIA.
3.131  The Foreign Trade Antitrust Improvements Act of 1982
    The FTAIA provides, in nearly identical language in both the 
Sherman Act and the FTC Act, that the statutes:

    * * * shall not apply to conduct involving trade or commerce 
(other than import trade or import commerce) with foreign nations 
unless--
    (1) such conduct has a direct, substantial, and reasonably 
foreseeable effect--
    (A) on trade or commerce which is not trade or commerce with 
foreign nations, or on import trade or import commerce with foreign 
nations; or
    (B) on export trade or export commerce with foreign nations, of 
a person engaged in such trade or commerce in the United States;\52\ 
and
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    \52\If the Sherman Act or the FTC Act applies to such conduct 
only because of the operation of paragraph (1)(B), then the Act 
shall apply to such conduct only for injury to export business in 
the United States. (15 U.S.C. Secs. 6a, 45(a)(3) (1988).
---------------------------------------------------------------------------

    (2) such effect gives rise to a claim under the provisions of 
[the Sherman Act or the FTC Act], other than this Section.

Illustrative Example C

    Situation: Companies E and F are the only producers of product Q 
in country Epsilon, one of the biggest markets for sales of Q in the 
world. E and F together account for 90% of the sales of product Q in 
Epsilon. In order to prevent a competing U.S. producer from entering 
the market in Epsilon, E and F agree that neither one of them will 
purchase or distribute the U.S. product, and that they will take 
``all feasible'' measures to keep the U.S. company out of their 
market. Without specifically discussing what other measures they 
will take to carry out this plan, E and F meet with their 
distributors and, through a variety of threats and inducements, 
obtain agreement of all the distributors not to carry the U.S. 
product. There are no commercially feasible substitute distribution 
channels available to the U.S. producer. Because of the actions of E 
and F, the U.S. producer cannot find any distributors to carry its 
product and is unable to enter the market in Epsilon.
    Discussion: The agreement between E and F not to purchase or 
distribute the U.S. product would clearly have a direct and 
reasonable foreseeable effect on U.S. export commerce, since it is 
aimed at a U.S. exporter. The substantiality of the effects on U.S. 
exports would depend on the significance of E and F as purchasers 
and distributors of Q, although on these facts virtually total 
foreclosure from the Epsilon market would almost certainly qualify 
as a substantial effect for jurisdictional purposes.
3.132  Jurisdiction in Cases Under Subsection 1(A) of FTAIA
    To the extent that conduct in foreign countries does not 
``involve'' import commerce but does have an ``effect'' on either 
import transactions or commerce within the United States, the Agencies 
apply the ``direct, substantial, and reasonable foreseeable'' standard 
of the FTAIA. That standard is applied, for example, in cases in which 
a cartel of foreign enterprises, or a foreign monopolist, reaches the 
U.S. market through any mechanism that goes beyond direct sales, such 
as the use of an unrelated intermediary, as well as cases in which 
foreign vertical restrictions or intellectual property licensing 
arrangements have an anticompetitive effect on U.S. commerce.

Illustrative Example D

    Situation: As in Illustrative Example A, the foreign cartel 
produces a product in several foreign countries. None of its members 
have any U.S. production, nor do any of them have U.S. subsidiaries. 
They organize a cartel for the purpose of raising the price for the 
product in question. Rather than selling directly into the United 
States, however, the cartel sells to an intermediary outside the 
United States, which they know will resell the product in the United 
States.
    Discussion: The jurisdictional analysis would change slightly 
from the one presented in Example A, because not only is the conduct 
being challenged entered into by cartelists in a foreign country, 
but it is also initially implemented through a sale made in a 
foreign country. Despite the different test, however, the outcome 
would remain the same. The existence of the intermediary would 
trigger the application of the FTAIA because the conduct would not 
involve import commerce within the meaning of the FTAIA and the 
Agencies would have to determine whether the challenged conduct had 
``direct, substantial and reasonably foreseeable effects'' on U.S. 
domestic or import commerce. Furthermore, in keeping with the 
Supreme Court's admonition in Summit Health, Ltd. v. Pinhas, 111 S. 
Ct. 1842, 1847 (1991), the Agencies would focus on the potential 
harm that would ensue if the conspiracy were successful, not on 
whether the alleged unlawful conduct itself had the prohibited 
effect upon interstate or foreign commerce.

Illustrative Example E

    Situation: Widgets are manufactured in both the United States 
and various other countries around the world. The non-U.S. 
manufacturers get together privately outside the United States and 
agree among themselves to raise prices to specified levels and take 
measures to restrict imports into their respective countries, but 
specifically indicate that sales in the United States are not 
covered, and that each company will be free independently to set its 
prices for the U.S. market. Over time, however, the cartel members 
unilaterally begin to sell excess production into the United States 
as a means by which to stabilize the existing pact. The resulting 
sales into the United States affect output and price in the United 
States and U.S. exports are impaired.
    Discussion: This example is intended to highlight the type of 
effects on U.S. commerce that can result from a price-fixing 
agreement that expressly excludes sales in the United States and 
thus does not involve import commerce within the meaning of the 
FTAIA. The jurisdictional issue presented, therefore, is whether the 
consequence of each party's unilateral decision to sell into the 
United States in order to stabilize the agreement is sufficiently 
direct and reasonably foreseeable under the FTAIA to satisfy the 
jurisdictional standard. If the facts showed that certain members of 
the cartel independently sold in a manner that was not attributable 
to the agreement, the Agencies would not have jurisdiction to 
challenge the underlying agreement.\53\ However, if the facts showed 
that the cartel anticipated affecting the U.S. market as a necessary 
and indispensable aspect of the original conspiracy, then the 
express exclusion of the U.S. market in the price-fixing agreement 
would be pretextual. In that case, the cartel would be affecting 
output and price in the United States, and the sales into the United 
States to alleviate pressure on the cartel would be considered 
sufficiently direct to satisfy the requirements of the FTAIA. In 
addition, because the illegal agreement incorporated provisions 
designed to restrict access to foreign markets and stymied efforts 
by U.S. firms to export, the facts would support a conclusion that 
the agreement's restraints had a ``direct, substantial and 
reasonably foreseeable effect'' on the commerce of U.S. exporters. 
See infra Sec. 3.133.
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    \53\If the Agencies lack jurisdiction under the FTAIA to 
challenge the cartel, the facts of this example would nonetheless 
lend themselves well to cooperative enforcement action among 
antitrust agencies. Virtually every country with an antitrust law 
prohibits horizontal cartels and the Agencies would willingly 
cooperate with foreign authorities taking direct action against the 
cartel in the countries where the agreement has raised the price of 
widgets to the extent such cooperation is allowed under U.S. law and 
any agreement executed pursuant to U.S. law with foreign agencies.
---------------------------------------------------------------------------

3.133  Jurisdiction in Cases Involving Foreign Export Commerce
    Two categories of ``export cases'' fall within the FTAIA's 
jurisdictional test.
    First, the Agencies may in appropriate cases take enforcement 
action against anticompetitive conduct, wherever occurring, that 
restrains U.S. exports, if (1) the conduct has a direct, substantial, 
and reasonably foreseeable effect on exports of goods or services from 
the United States, and (2) the U.S. courts can obtain jurisdiction over 
the foreign persons or corporations engaged in such conduct.\54\ As 
Section 3.2 below explains more fully, if the conduct is unlawful under 
the importing country's antitrust laws as well, the Agencies are also 
prepared to work with that country's authorities if they are better 
situated to remedy the conduct, and if they are prepared to take action 
against such conduct pursuant to their antitrust laws that will address 
the U.S. concerns.
---------------------------------------------------------------------------

    \54\See U.S. Department of Justice Press Release dated April 3, 
1992 (announcing enforcement policy that would permit the Department 
to challenge foreign business conduct that harms American exports 
when the conduct would have violated U.S. antitrust laws if it 
occurred in the United States).
---------------------------------------------------------------------------

    Second, the Agencies may in appropriate cases take enforcement 
action against conduct by U.S. exporters that has a direct, 
substantial, and reasonably foreseeable effect on trade or commerce 
within the United States, or on import trade or commerce. This can 
arise in two principal ways. First, if demand in the United States were 
inelastic or if sellers not involved in the agreement are unable to 
increase sales readily, an agreement among U.S. firms regarding the 
level of their exports that had a substantial share of the relevant 
market could reduce supply and raise prices in the United States.\55\ 
Second, conduct ostensibly export-related could affect the price of 
products sold or resold in the United States. This kind of effect could 
occur if, for example, U.S. firms fixed the price of an input used to 
manufacture a product overseas for ultimate resale in the United 
States.
---------------------------------------------------------------------------

    \55\One would need to show more than indirect price effects 
resulting from legitimate export efforts to support an antitrust 
challenge. See ETC Guidelines, note 29, supra, 50 Fed.Reg. at 1791.
---------------------------------------------------------------------------

Illustrative Example F

    Situation: Companies, P, Q, R, and S, organized under the laws 
of country Alpha, all manufacture and distribute construction 
equipment. Much of that equipment is protected by patents in the 
various countries where it is sold, including Alpha. The companies 
all belong to a private trade association, which develops industry 
standards that are often (although not always) adopted by Alpha's 
regulatory authorities. Feeling threatened by competition from the 
United States, the companies agree at a trade association meeting 
(1) to refuse to adopt any U.S. company technology as an industry 
standard, and (2) to boycott any distributor of construction 
equipment that stocks competing U.S. products. The U.S. companies 
have taken all necessary steps to protect their intellectual 
property under the law of Alpha.
    Discussion: In this example, the collective activity impedes 
U.S. companies in two ways: Their technology is boycotted (even if 
U.S. companies are willing to license their intellectual property) 
and they are foreclosed from access to existing distributors who 
cannot afford to lose the accounts of their major domestic 
companies. The jurisdictional question is whether these actions 
create a direct, substantial, and reasonably foreseeable effect on 
the exports of U.S. companies. The mere fact that only the market of 
Alpha appears to be foreclosed is not enough to defeat such an 
effect. Only if exclusion from Alpha as a quantitative measure were 
so de minimis in terms of actual volume of trade that there would 
not be a substantial effect on U.S. export commerce would 
jurisdiction be lacking. Given that this example involves 
construction equipment, a generally highly priced capital good, the 
exclusion from Alpha would probably satisfy the substantiality 
requirement for FTAIA jurisdiction, even if U.S. exports to Alpha 
would be expected to amount to only a few machines. This arrangement 
appears to have been created with particular reference to 
competition from the United States, which indicates that the effects 
on U.S. exports are both direct and foreseeable.
3.14  Jurisdiction When U.S. Government Finances or Purchases
    The Agencies may, in appropriate cases, take enforcement action 
when the U.S. Government is a purchaser, or substantially funds the 
purchase, of goods or services for consumption or use abroad. Cases in 
which the effect of anticompetitive conduct with respect to the sale of 
these goods or services falls primarily on U.S. taxpayers may qualify 
for redress under the federal antitrust laws.\56\ As a general matter, 
the Agencies consider there to be a sufficient effect on U.S. commerce 
to support the assertion of jurisdiction if, as a result of its payment 
or financing, the U.S. Government bears more than half the cost of the 
transaction. For purposes of this determination, the Agencies apply the 
standards used in certifying export conduct under the ETC Act of 1982, 
15 U.S.C. Secs. 4011-21 (1982).\57\
---------------------------------------------------------------------------

    \56\Cf. United States v. Concentrated Phosphate Export Ass'n, 
393 U.S. 199, 208 (1968) (``[A]lthough the fertilizer shipments were 
consigned to Korea although in most cases Korea formally let the 
contracts, American participation was the overwhelmingly dominant 
feature. The burden of noncompetitive pricing fell, not on any 
foreign purchaser, but on the American taxpayer. The United States 
was, in essence, furnishing fertilizer to Korea ***. The foreign 
elements in the transaction were, by comparison insignificant.''); 
United States v. Standard Tallow Corp., 1988-1 Trade Cas. (CCH) 
67,913 (S.D.N.Y. 1988) (consent decree) (barring suppliers from 
fixing prices or rigging bids for the sale of tallow financed in 
whole or in part through grants or loans by the U.S. Government); 
United States v. Anthracite Export Ass'n, 1970 Trade Cas. (CCH) 
73,348 (M.D. Pa. 1970) (consent decree) (barring price-fixing, bid-
rigging, and market allocation in Army foreign aid program).
    \57\See ETC Guidelines, note 29 supra, 50 Fed. Reg. 1799-1800. 
The requisite U.S. Government involvement could include the actual 
purchase of goods by the U.S. Government for shipment abroad, a U.S. 
Government grant to a foreign government that is specifically 
earmarked for the transaction, or a U.S. Government loan 
specifically earmarked for the transaction that is made on such 
generous terms that it amounts to a grant. U.S. Government interests 
would not be considered to be sufficiently implicated with respect 
to a transaction that is funded by an international agency, or a 
transaction in which the foreign government received non-earmarked 
funds from the United States as part of a general government-to-
government aid program.
---------------------------------------------------------------------------

Illustrative Example G

    Situation: A combination of U.S. firms and local firms in 
country Beta create a U.S.-based joint venture for the purpose of 
building a major pollution control facility for Beta's Environmental 
Control Agency (``BECA''). The venture has received preferential 
funding from the U.S. Government, which has the effect of making the 
present value of expected future repayment of the principal and 
interest on the loan less than half its face value. Once the venture 
has begun work, it appears that its members secretly agreed to 
inflate the price quoted to BECA, in order to secure more funding.
    Discussion: The fact that the U.S. Government bears more than 
half the financial risk of the transaction is sufficient for 
jurisdiction. With jurisdiction established, the Agencies would 
proceed to investigate whether the apparent bid-rigging actually 
occurred.\58\
---------------------------------------------------------------------------

    \58\Such conduct might also violate the False Claims Act, 31 
U.S.C. Secs. 3729-3733 (1988 & Supp. 1993).
---------------------------------------------------------------------------

Illustrative Example H

    Situation: The United States has many military bases and other 
facilities located in other countries. These facilities procure 
substantial goods and services from suppliers in the host country. 
In country X, it comes to the attention of the local U.S. military 
base commander that bids to supply certain construction services 
have been rigged.
    Discussion: Sales made by a foreign party to the U.S. 
Government, including to a U.S. facility located in a foreign 
country, are within U.S. antitrust jurisdiction when they fall 
within the rule of Section 3.13 above. Bid-rigging of sales to the 
U.S. Government represents the kind of conduct that can lead to an 
antitrust action. Indeed, in the United States this type of behavior 
is normally prosecuted by the Department as a criminal offense. In 
practice, the Department has whenever possible worked closely with 
the host country antitrust authorities to explore remedies under 
local law. This has been successful in a number of instances.\59\
---------------------------------------------------------------------------

    \59\If, however, local law does not provide adequate remedies, 
or the local authorities are not prepared to take action, the 
Department will weigh the comity factors, discussed in Section 3.2 
infra, and take such action as is appropriate.
---------------------------------------------------------------------------

3.2  COMITY
    In enforcing the antitrust laws, the Agencies consider 
international comity. Comity itself reflects the broad concept of 
respect among co-equal sovereign nations and plays a role in 
determining ``the recognition which one nation allows within its 
territory to the legislative, executive or judicial acts of another 
nation.''\60\ Thus, in determining whether to assert jurisdiction to 
investigate or bring an action, or to seek particular remedies in a 
given case, each Agency takes into account whether significant 
interests of any foreign sovereign would be affected.\61\
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    \60\Hilton v. Guyot, 159 U.S. 113, 164 (1895).
    \61\The Agencies have agreed to consider the legitimate 
interests of other nations in accordance with the recommendations of 
the OECD and various bilateral agreements, see Section 2.9 supra.
---------------------------------------------------------------------------

    In performing a comity analysis, the Agencies take into account all 
relevant factors. Among others, these may include: (1) the relative 
significance to the alleged violation of conduct within the United 
States, as compared to conduct abroad; (2) the nationality of the 
persons involved in or affected by the conduct; (3) the presence or 
absence of a purpose to affect U.S. consumers, markets, or exporters; 
(4) the relative significance and foreseeability of the effects of the 
conduct on the United States as compared to the effects abroad; (5) the 
existence of reasonable expectations that would be furthered or 
defeated by the action; (6) the degree of conflict with foreign law or 
articulated foreign economic policies; (7) the effect on foreign 
enforcement; and (8) the effectiveness of foreign enforcement.
    The relative weight that each factor should be given depends on the 
facts and circumstances of each case. With respect to the factor 
concerning foreign law, the Supreme Court made clear in Hartford 
Fire\62\ that no conflict exists for purposes of an international 
comity analysis in the courts if the person subject to regulation by 
two states can comply with the laws of both. Bearing this in mind, the 
Agencies first ask what laws or policies of the arguably interested 
foreign jurisdictions are implicated by the conduct in question. There 
may be no actual conflict between the antitrust enforcement interests 
of the United States and the laws or policies of a foreign sovereign. 
This is increasingly true as more countries adopt antitrust or 
competition laws that are compatible with those of the United States. 
In these cases, the anticompetitive conduct in question may also be 
prohibited under the pertinent foreign laws, and thus the only possible 
conflict would relate to enforcement practices or remedy. If the laws 
or policies of a foreign nation are neutral, it is again possible for 
the parties in question to comply with the U.S. prohibition without 
violating foreign law. Of course, the Agencies take into account comity 
factors beyond whether there is a conflict with foreign law. For 
example, in deciding whether or not to challenge an alleged antitrust 
violation, the Agencies would, as part of a comity analysis, consider 
whether one country either encourages a certain course of conduct or 
wishes to leave parties free to choose among different strategies, 
while another opts to prohibit some of those strategies.
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    \62\113 S.Ct. 2891, 2910.
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    In lieu of bringing an enforcement action, or course, the Agencies 
may consult with interested foreign sovereigns through appropriate 
diplomatic channels to attempt to eliminate anticompetitive effects in 
the United States. If, however, the United States decides to prosecute 
an antitrust action, such a decision represents a determination by the 
Executive Branch that the importance of antitrust enforcement outweighs 
any relevant foreign policy concerns.\63\ The Department does not 
believe that it is the role of the courts to ``second-guess the 
executive branch's judgment as to the proper role of comity concerns 
under these circumstances.\64\ To date, no Commission cases have 
presented this issue. It is important also to note that in disputes 
between private parties, many courts are willing to undertake a comity 
analysis.\65\
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    \63\Foreign policy concerns may also lead the United States not 
to prosecute a case. See, e.g., U.S. Department of Justice Press 
Release dated Nov. 19, 1984 (announcing the termination, based on 
foreign policy concerns, of a grand jury investigation into 
passenger air travel between the United States and the United 
Kingdom).
    \64\United States v. Baker Hughes, Inc., 731 F. Supp. 3, 6 n.5 
(D.D.C.), aff'd, 908 F.2d 981 (D.C. Cir. 1990).
    \65\See, e.g., Timberlane Lumber Co. v. Bank of America, N.T., 
549 F.2d 597 (9th Cir. 1976).
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Illustrative Example I

    Situation: A group of buyers in one foreign country decide that 
they will agree on the price that they will offer to suppliers of a 
particular product that they procure from overseas. Major suppliers 
of that product are located in the United States and the agreement 
results in substantial loss of sales and capacity reductions in the 
United States.
    Discussion: From a jurisdictional point of view, the FTAIA 
standard appears to be satisfied because the effects on U.S. 
exporters presented here are direct and the percentage of supply 
accounted for by the buyers' cartel is substantial given the fact 
that the U.S. suppliers are ``major.'' The Agencies, however, would 
also take into consideration the comity aspects presented before 
deciding whether or not to proceed.
    Consistent with its consideration of comity and its obligations 
under various international agreements, the Agencies would 
ordinarily notify the antitrust authority in the cartel's home 
country. If that authority were in a better position to address the 
competitive problem, and were prepared to take effective action to 
address the adverse effects on U.S. commerce, the Agencies would 
consider working cooperatively with the foreign authority or staying 
their own remedy pending enforcement efforts by the foreign country. 
In deciding whether to proceed, the Agencies would weigh the factors 
relating to comity set forth above. Factors weighing in favor of 
bringing such an action include the substantial harm caused by the 
cartel to the United States and the fact that the foreign parties 
purposefully availed themselves of the benefits of doing business in 
and with the United States.
3.3  Effects of Foreign Government Involvement
    Foreign governments may be involved in a variety of ways in conduct 
that may have antitrust consequences. To address the implications of 
such foreign governmental involvement, Congress and the courts have 
developed four special doctrines: The doctrine of foreign sovereign 
immunity; the doctrine of foreign sovereign compulsion; the act of 
state doctrine; and the application of the Noerr-Pennington doctrine to 
immunize the lobbying of foreign governments. Although these doctrines 
are interrelated, for purposes of discussion the Guidelines discuss 
each one individually.
3.31  Foreign Sovereign Immunity
    The scope of immunity of a foreign government or its agencies and 
instrumentalities (hereinafter foreign government)\66\ from the 
jurisdiction of the U.S. courts for all causes of action, including 
antitrust, is governed by the Foreign Sovereign Immunities Act of 1976 
(``FSIA'').\67\ Subject to the treaties in place at the time of FSIA's 
enactment, a foreign government is immune from suit except where 
designated in the FSIA.\68\
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    \66\Section 1603(b) of the Foreign Sovereign Immunities Act of 
1976 defines an ``agency or instrumentality of a foreign state'' to 
be any entity ``(1) which is a separate legal person, corporate or 
otherwise; and (2) which is an organ of a foreign state or political 
subdivision thereof, or a majority of whose shares or other 
ownership interest is owned by a foreign state or political 
subdivision thereof; and (3) which is neither a citizen of a State 
of the United States as defined in Section 1332 (c) and (d) of 
[Title 28, U.S. Code], nor created under the laws of any third 
country.'' 28 U.S.C. Sec. 1603(b) (1988). It is not uncommon in 
antitrust cases to see state-owned enterprises meeting this 
definition.
    \67\28 U.S.C. Secs. 1602 et seq. (1988).
    \68\28 U.S.C. Sec. 1604 (1988 & Supp. 1993).
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    Under the FSIA, a U.S. court has jurisdiction if the foreign 
government has:
    (a) Waived its immunity explicitly or by implication,
    (b) Engaged in commercial activity,
    (c) Expropriated property in violation of international law,
    (d) Acquired rights to U.S. property,
    (e) Committed certain torts within the United States, or agreed to 
arbitration of a dispute.\69\
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    \69\28 U.S.C. Sec. 1605(a)(1-6) (1988).
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    The commercial activities exception is a frequently invoked 
exception to sovereign immunity under the FSIA. Under the FSIA, a 
foreign government is not immune in any case:

    * * * in which the action is based upon a commercial activity 
carried on in the United States by the foreign state; or upon an act 
performed in the United States in connection with a commercial 
activity of the foreign state elsewhere; or upon an act outside the 
territory of the United States in connection with a commercial 
activity of the foreign state elsewhere and that act causes a direct 
effect in the United States.\70\

    \70\28 U.S.C. Sec. 1605(a)(2) (1988).
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    ``Commercial activity of the foreign state'' is not defined in the 
FSIA, but is to be determined by the ``nature of the course of conduct 
or particular transaction or act, rather than by reference to its 
purpose.''\71\ In attempting to differentiate commercial from sovereign 
activity, courts have considered whether the conduct being challenged 
is customarily performed for profit\72\ and whether the conduct is of a 
type that only a sovereign government can perform.\73\ As a practical 
matter, most activities of foreign government-owned corporations 
operating in the commercial marketplace will be subject to U.S. 
antitrust laws to the same extent as the activities of foreign 
privately-owned firms.
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    \71\28 U.S.C. Sec. 1603(d) (1988).
    \72\See e.g., Republic of Argentina v. Weltover, Inc., 112 S. 
Ct. 2160 (1992); Schoenberg v. Exportadora de Sal, S.A. de C.V., 930 
F.2d 777 (9th Cir. 1991); Rush-Presbyterian--St. Luke's Medical Ctr. 
v. Hellenic Republic, 877 F.2d 574, 578, n.4 (7th Cir.), cert. 
denied, 493 U.S. 937 (1989).
    \73\See e.g., Saudia Arabia v. Nelson, 113 S. Ct. 1471 (1993); 
de Sanchez v. Banco Central de Nicaragua, 770 F.2d 1385 (5th Cir 
1985); Letelier v. Republic of Chile, 748 F.2d 790, 797-98 (2d Cir 
1984), cert. denied, 471 U.S. 1125 (1985); International Ass'n of 
Machinists & Aerospace Workers v. Organization of Petroleum 
Exporting Countries, 477 F. Supp. 553 (C.D. Cal. 1979), aff'd on 
other grounds, 649 F.2d 1354 (9th Cir. 1981), cert. denied, 454 U.S. 
1163 (1982).
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    The commercial activity also must have a substantial nexus with the 
United States before a foreign government is subject to suit. The FSIA 
sets out three different standards for meeting this requirement. First, 
the challenged conduct by the foreign government may occur in the 
United States.\74\ Alternatively, the challenged commercial activity 
may entail an act performed in the United States in connection with a 
commercial activity of the foreign government elsewhere.\75\ Or, 
finally, the challenged commercial activity of a foreign government 
outside of the United States may produce a direct effect within the 
United States, i.e., there is an effect which follows ``as an immediate 
consequence of the defendant's * * * activity.''\76\
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    \74\28 U.S.C. Sec. 1603(e) (1988).
    \75\See H.R. Rep No. 1487, 94th Cong., 2d Sess. 18-19 (1976), 
Reprinted in 1976 U.S.C.C.A.N. 6604, 6617-18 (providing as an 
example the wrongful termination in the United States of an employee 
of a foreign state employed in connection with commercial activity 
in a third country.) But see Filus v. LOT Polish Airlines, 907 F.2d 
1328, 1333 (2d Cir. 1990)(holding as too attenuated the failure to 
warn of a defective product sold outside of the United States in 
connection with an accident outside the United States.)
    \76\Republic of Argentina, 112 S. Ct. at 2168. This test is 
similar to proximate cause formulations adopted by other courts. See 
Martin v. Republic of South Africa, 836 F.2d 91, 95 (2d Cir. 1987) 
(a direct effect is one with no intervening element which flows in a 
straight line without deviation or interruption), quoting Upton v. 
Empire of Iran, 459 F. Supp. 264, 266 (D.D.C. 1978) aff'd mem., 607 
F.2d 494 (D.C. Cir. 1979).
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3.32  Foreign Sovereign Compulsion
    Although U.S. antitrust jurisdiction extends to conduct and parties 
in foreign countries whose actions have the required effects on U.S. 
commerce, as discussed above, those parties may find themselves subject 
to conflicting requirements from the other country (or countries) where 
they are located.\77\ Under Hartford Fire, if it is possible for the 
party to comply both with the foreign law and the U.S. antitrust laws, 
the existence of the foreign law does not provide any excuse for 
actions that do not comply with U.S. law. However, sometimes a direct 
conflict arises when the facts demonstrate that the foreign sovereign 
has compelled the very conduct that the U.S. antitrust law prohibits.
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    \77\Conduct by private entities not required by law is entirely 
outside of the protections afforded by this defense. See Continental 
Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 706 (1962); 
United States v. Watchmakers of Switzerland Info. Ctr., Inc., 1963 
Trade Cas. (CCH)  70,600 at 77,456--57 (S.D.N.Y. 1962) (``[T]he 
fact that the Swiss Government may, as a practical matter, approve 
the effects of this private activity cannot convert what is 
essentially a vulnerable private conspiracy into an unassailable 
system resulting from a foreign government mandate.'')
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    In these circumstances, at least one court has recognized a defense 
under the U.S. antitrust laws, and the Agencies will also recognize 
it.\78\ There are two rationales underlying the defense of foreign 
sovereign compulsion. First, Congress enacted the U.S. antitrust laws 
against the background of well recognized principles of international 
law and comity among nations, pursuant to which U.S. authorities give 
due deference to the acts of foreign governments acting within their 
own spheres of authority. A defense for actions taken under the 
circumstances spelled out below serves to accommodate two equal 
sovereigns. Second, important considerations of fairness to the 
defendant require some mechanism that provides a predictable rule of 
decision for those seeking to conform their behavior to all pertinent 
laws.
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    \78\Interamerican Refining Corp. v. Texaco Maracaibo, Inc., 307 
F. Supp. 1291 (D. Del. 1970) (defendant, having been ordered by the 
government of Venezuela not to sell oil to a particular refiner out 
of favor with the current political regime, held not subject to 
antitrust liability under the Sherman Act for an illegal group 
boycott). The defense of foreign sovereign compulsion is 
distinguished from the federalism-based state action doctrine. The 
state action doctrine applies not just to the actions of states and 
their subdivisions, but also to private anticompetitive conduct that 
is both undertaken pursuant to clearly articulated state policies, 
and is actively supervised by the state. See FTC v. Ticor Title 
Insurance Co., 112 S. Ct. 2169 (1992); California Retail Liquor 
Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 105 (1980); 
Parker v. Brown, 317 U.S. 341 (1943).
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    Because of the limited scope of the defense, the Agencies will 
refrain from enforcement actions on the ground of foreign sovereign 
compulsion only when certain criteria are satisfied. First the foreign 
government must have compelled the anticompetitive conduct in 
circumstances in which refusal to comply with the foreign government's 
command would give rise to the imposition of penal or other severe 
sanctions. As a general matter, the Agencies regard the foreign 
government's formal representation that refusal to comply with its 
commend would have such a result as being sufficient to establish that 
the conduct in question has been compelled, as long as the 
representation contains sufficient detail to enable them to see 
precisely how the compulsion would be accomplished under the local 
law.\79\ Foreign government measures short of compulsion do not suffice 
for this defense, although they can be relevant in a comity analysis.
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    \79\For example, the Agencies may not regard as dispositive a 
statement that is ambiguous or that on its face appears to be 
internally inconsistent. The Agencies may inquire into the 
circumstances underlying the statement and they may also request 
further information if the source of the power to compel is unclear.
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    Second, although there can be no strict territorial test for this 
defense, the defense normally applies only when the foreign government 
compels conduct which can be accomplished entirely within its own 
territory. If the compelled conduct occurs in the United States, the 
Agencies will not recognize the defense.\80\ For example, no defense 
arises when a foreign government requires the U.S. subsidiaries of 
several firms to organize a cartel in the United States to fix the 
price at which products would be sold in the United States, or when it 
requires its firms to fix mandatory resale prices for their U.S. 
distributors to use in the United States.
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    \80\See Linseman v. World Hockey Ass'n, 439 F. Supp. 1315, 1325 
(D. Conn. 1977).
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    Third, with reference to the discussion of foreign sovereign 
immunity in Section 3.31 above, the order must come from the foreign 
government acting in its governmental capacity. The defense does not 
arise from conduct that would fall within the FSIA commercial activity 
exception.

Illustrative Example J

    Situation: Greatly increased quantities of commodity X have 
flooded into the world market over the last two or three years, 
including substantial amounts indirectly coming into the United 
States. Because they are unsure whether they would prevail in an 
antidumping and countervailing duty case, U.S. industry participants 
have refrained from filing trade law petitions. The officials of 
three foreign countries meet with foreign firms and urge them to 
``rationalize'' production by cooperatively cutting back. The 
foreign firms agree among themselves to limit production, but there 
are governmental penalties contemplated for a failure to do so.
    Discussion: In the facts stated here, the Agencies would not 
find that sovereign compulsion precluded prosecution of this 
agreement, assuming for the purpose of this example that the 
overseas production cutbacks have the necessary effects in the U.S. 
market to support jurisdiction. Other doctrines, such as the foreign 
analog to the domestic Noerr-Pennington doctrine,\81\ may also be 
relevant in these circumstances.
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    \81\See Section 3.34 infra.
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3.33  Acts of State
    As it presently stands, the act of state doctrine is a judge-made 
rule of federal common law.\82\ It is a doctrine of judicial abstention 
based on considerations of international comity and separation of 
powers, and applies only if the specific conduct complained of is a 
public act of the foreign sovereign within its territorial jurisdiction 
on matters pertaining to its governmental sovereignty. The act of state 
doctrine arises when the validity of the acts of a foreign government 
constitutes an unavoidable aspect of a case.\83\ In such cases, courts 
have refused to adjudicate claims or issues that would require the 
court to judge the legality (as a matter of U.S. law or international 
law) of the sovereign act of a foreign state.\84\ Although in some 
cases the sovereign act in question may also compel private behavior, 
other situations may arise in which the act imposes no such 
obligation.\85\ While the act of state doctrine does not compel 
dismissal as a matter of course, abstention is appropriate in a case 
where the court must ``declare invalid, and thus ineffective as a rule 
of decision in the U.S. courts,* * * the official act of a foreign 
sovereign.''\86\
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    \82\Banco Nacional de Cuba V. Sabbatino, 376 U.S. 398, 421-22 
n.21 (1964) (noting that other countries do not adhere in any 
formulaic way to an act of state doctrine).
    \83\W.S. Kirkpatrick & Co. v. Environmental Tectonics Corp., 493 
U.S. 400 (1990).
    \84\International Ass'n of Machinists and Aerospace Workers V. 
Organization of Petroleum Exporting Countries, 649 F.2d 1354, 1358 
(9th Cir. 1981).
    \85\See Timberlane, 459 F.2d at 606-08.
    \86\Kirkpatrick, 493 U.S. at 405, quoting Ricaud v. American 
Metal Co., U.S. 246 U.S. 304, 310 (1918).
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    When a restraint on competition arises directly from the act of a 
foreign sovereign, such as the grant of a license, award of a contract, 
expropriation of property, or the like, the Agencies may refrain from 
bringing an enforcement action based on the act of state doctrine. For 
example, the Agencies will not challenge foreign acts of state if the 
facts and circumstances indicate that: (1) the specific conduct 
complained of is a public act of the sovereign, (2) the act was taken 
within the territorial jurisdiction of the sovereign, and (3) the 
matter is governmental, rather than commercial.
3.34  Petitioning of Sovereigns
    Under the Noerr-Pennington doctrine, a genuine effort to obtain or 
influence action by governmental entities in the United States is 
immune from application of the Sherman Act, even if the intent or 
effect of that effort is to restrain or monopolize trade.\87\ Whatever 
the basis asserted for Noerr-Pennington immunity (either as an 
application of the First Amendment or as a limit on the statutory reach 
of the Sherman Act, or both), the Agencies will apply it in the same 
manner to the petitioning of foreign governments and the U.S. 
Government.
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    \87\See Eastern Railroad Presidents Conference v. Noerr Motor 
Freight, Inc., 365 U.S. 127 (1961); United Mine Workers of America 
v. Pennington, 381 U.S. 657 (1965); California Motor Transport Co. 
v. Trucking Unlimited, 404 U.S. 508 (1972) (extending protection to 
petitioning before ``all departments of Government,'' including the 
courts); Professional Real Estate Investors, Inc. v. Columbia 
Pictures Indus., 113 S. Ct. 1920 (1993). However, this immunity has 
never applied to ``sham'' activities, in which petitioning 
``ostensibly directed toward influencing governmental action, is a 
mere sham to cover *  *  * an attempt to interfere directly with the 
business relationships of a competitor.'' Professional Real Estate 
Investors 113 S. Ct. at 1926, quoting Noerr, 365 U.S. at 144. See 
also USS-Posco Indus. v Contra Costa Cty. Bldg. Constr. Council, 
AFL-CIO, 31 F.3d 800 (9th Cir., 1994).
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Illustrative Example K

    Situation: In the course of preparing an antidumping case, which 
requires the U.S. industry to demonstrate that it has been injured 
through the effects of the dumped imports, producers representing 
75% of U.S. output exchange the information required for the 
adjudication. All the information is exchanged indirectly through 
third parties and in an aggregated form that makes the identify of 
any particular producer's information impossible to discern.
    Discussion: Information exchanged by competitors within the 
context of an antidumping proceeding implicates the Noerr-Pennington 
petitioning immunity. To the extent that these exchanges are 
reasonably necessary in order for them to prepare their joint 
petition, which is permitted under the trade laws, Noerr is 
available to protect against antitrust liability that would 
otherwise arise. On these facts the parties are likely to be 
immunized by Noerr if they have taken the necessary measures to 
ensure that the provision of sensitive information called for by the 
Commerce Department and the ITC cannot be used for anticompetitive 
purposes. In such a situation, the information exchange is 
incidental to genuine petitioning and is not subject to the 
antitrust laws.
    Conversely, were the parties directly to exchange extensive 
information relating to their costs, the prices each has charged for 
the product, pricing trends, and profitability, including 
information about specific transactions that went beyond the scope 
of those facts required for the adjudication, such conduct would go 
beyond the contemplated protection of Noerr immunity.
3.4  Antitrust Enforcement and International Trade Regulation
    There has always been a close relationship between the 
international application of the antitrust laws and the policies and 
rules governing the international trade of the United States. 
Restrictions such as tariffs or quotas on the free flow of goods affect 
market definition, consumer choice, and supply options for U.S. 
producers. In certain instances, the U.S. trade laws set forth specific 
procedures for settling disputes under those laws, which can involve 
price and quantity agreements by the foreign firms involved. When those 
procedures are followed, an implied antitrust immunity results.\88\ 
However, agreements among competitors that do not comply with the law, 
or go beyond the measures authorized by the law, do not enjoy antitrust 
immunity. In the absence of legal authority, the fact, without more, 
that U.S. or foreign government officials were involved in or 
encouraged measures that would otherwise violate the antitrust laws 
does not immunize such arrangements.\89\
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    \88\See e.g., Letter from Charles F. Rule, Acting Assistant 
Attorney General, Antitrust Division, Department of Justice, to Mr. 
Makoto Kuroda, Vice-Minister for International Affairs, Japanese 
Ministry of International Trade and Industry, July 30, 1986 
(concluding that a suspension agreement did not violate U.S. 
antitrust laws on the basis of factual representations that the 
agreement applied only to products under investigation, that it did 
not require pricing above levels needed to eliminate sales below 
foreign market value, and that assigning weighted-average foreign 
market values to exporters who were not respondents in the 
investigation was necessary to achieve the purpose of the 
antidumping law).
    \89\Cf. United States v. Socony-Vacuum Oil Co., 310 U.S. 150,226 
(1940) (``Through employees of the government may have known of 
those programs and winked at them or tacitly approved them, no 
immunity would have thereby been obtained. For Congress had 
specified the precise manner and method of securing immunity [in the 
National Industrial Recovery Act]. None other would suffice * * 
*.''); see also Otter Tail Power Co. v. United States, 410 U.S. 366, 
378-79 (1973).
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    If a particular voluntary export restraint does not qualify for 
express or implied immunity from the antitrust laws, then the legality 
of the arrangement would depend upon the existence of the ordinary 
elements of an antitrust offense, such as whether or not a prohibited 
agreement exists or whether defenses such as foreign sovereign 
compulsion can be invoked.

Illustrative Example L

    Situation: Six U.S. producers of product Q have initiated an 
antidumping action alleging that imports of Q from country Sigma at 
less than fair value are causing material injury to the U.S. Q 
industry. The ITC has made a preliminary decision that there is a 
reasonable indication that the U.S. industry is suffering material 
injury from Q imported from Sigma. The Department of Commerce has 
preliminarily concluded that the foreign market value of Q imported 
into the U.S. by Sigma's Q producers exceeds the price at which they 
are selling Q in this country by margins of 10 to 40 percent. 
Sigma's Q producers jointly initiate discussions with the Department 
of Commerce that lead to suspension of the investigation in 
accordance with Section 734 of the Tariff Act of 1930, 19 U.S.C. 
Sec. 1673c. The suspension agreement provides that each of Sigma's Q 
producers will sell product Q in the United States at no less than 
its individual foreign market value, as determined periodically by 
the Department of Commerce in accordance with the Tariff Act. Before 
determining to suspend the investigation, the Department of Commerce 
provides copies of the proposed agreement to the U.S. Q producers, 
who jointly advise the Department that they do not object to the 
suspension of the investigation on the terms proposed. The 
Department also determines that suspension of the investigation was 
in the public interest. As a result of the suspension agreement, 
prices in the United States of Q imported from Sigma rise by an 
average of 25 percent from the prices that prevailed before the 
antidumping action was initiated.
    Discussion: While an unsupervised agreement among foreign firms 
to raise their U.S. sales prices ordinarily would violate the 
Sherman Act, the suspension agreement outlined above qualifies for 
an implied immunity from the antitrust laws. As demonstrated here, 
the parties has engaged only in conduct contemplated by the Tariff 
Act and none of the participants have engaged in conduct beyond what 
is necessary to implement that statutory scheme.

Illustrative Example M

    Situation: The Export Association is a Webb-Pomerene association 
that has filed the appropriate certificates and reports with the 
Commission. The Association exports a commodity to markets around 
the world, and fixes the price at which all of its members sell the 
commodity in the foreign markets. Nearly 80% of all U.S. producers 
of the commodity belong to the Association, and on a world-wide 
level, the Association's members account for approximately 40% of 
annual sales.
    Discussion: The Webb-Pomerene Act addresses only the question of 
antitrust liability under U.S. law. Although the U.S. antitrust laws 
confer an immunity on such associations, the Act does not purport to 
confer immunity under the law of any foreign country, nor does the 
Act compel the members of a Webb-Pomerene association to act in any 
particular way. Thus, a foreign government retains the ability to 
initiate proceedings if such an association allegedly violates that 
country's competition law.

4. Personal Jurisdiction and Procedural Rules

4.1  Personal Jurisdiction
    The Agencies will bring suit only if they conclude that personal 
jurisdiction exists under the due process clause of the U.S. 
Constitution.\90\ Section 12 of the Clayton Act, 15 U.S.C. Sec. 22, 
provides that any suit under the antitrust laws against a corporation 
may be brought in the judicial district where it is an inhabitant, 
where it may be found, or where it transacts business. The concept of 
transacting business is interpreted pragmatically by the Agencies. 
Thus, a company may transact business in a particular district directly 
through an agent, or through a related corporation that is actually the 
``alter ego'' of the foreign party.\91\ In all cases, the assertion of 
personal jurisdiction must satisfy constitutional requirements of 
minimum contacts with the United States, such that the proceeding 
comports with ``fair play and substantial justice.''\92\
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    \90\International Shoe Co. v. Washington, 326 U.S. 310 (1945).
    \91\See, e.g., Letter from Donald S. Clark, Secretary of the 
Federal Trade Commission, to Caswell O. Hobbs, Esq., Morgan, Lewis & 
Bockius, Jan. 17, 1990 (Re: Petition to Quash Subpoena Nippon Sheet 
Glass, et al., File No. 891-0088, at page 3) (``The Commission * * * 
may exercise jurisdiction over and serve process on, a foreign 
entity that has a related company in the United States acting as its 
agent or alter ego.''); see also Fed. R. Civ. P. 4.
    \92\International Shoe, 326 U.S. 310, 320. Once personal 
jurisdiction under the Constitution is established, service or 
process must be authorized by a particular statute or rule. The 
Clayton Act, which permits the service of process beyond the 
boundaries of the forum state, is the federal statute that 
authorizes service wherever the corporate defendant transacts 
business. Go-Video, Inc. v. Akai Elec. Co., Ltd., 885 F.2d 1406, 
1414 (9th Cir. 1989). Under such a statute, the question is whether 
the party has sufficient contacts with the United States, not any 
particular state. Id. (citations omitted).
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4.2  Investigatory Practice Relating to Foreign Nations
    In conducting investigations that require documents that are 
located outside the United States, or contacts with persons located 
outside the United States, the Agencies first consider requests for 
voluntary cooperation when practical and consistent with enforcement 
objectives. When compulsory measures are needed, they seek whenever 
possible to work with foreign government involved. U.S. law also 
provides authority in some circumstances for the use of compulsory 
measures directed to parties over whom the courts have personal 
jurisdiction, which the Agencies may use when other efforts to obtain 
information have been exhausted or would be unavailing.\93\
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    \93\For example, 28 U.S.C. Sec. 1783(a) (1988) authorizes a U.S. 
court to order the issuance of a subpoena ``requiring the appearance 
as a witness before it, or before a person or body designated by it, 
of a national or resident of the United States who is in a foreign 
country, or requiring the production of a specified document or 
other thing by him,'' under circumstances spelled out in the 
statute.
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    Conflicts can arise, however, where foreign statutes purport to 
prevent persons from disclosing documents or information for us in U.S. 
proceedings. However, the mere existence of such statutes does not 
excuse noncompliance with a request for information from one of the 
Agencies.\94\ To enable the Agencies to obtain evidence located abroad 
more effectively, as noted in Section 2.91 above. Congress recently has 
enacted legislation authorizing the Agencies to negotiate bilateral 
agreements between antitrust enforcement agencies to facilitate the 
exchange or documents and evidence in civil and criminal 
investigations.\95\
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    \94\See Societe Internationale pour Participations Industrielles 
et Commerciales, S.A. v. Rogers, 357 U.S. 197 (1958).
    \95\S. 2297 and H.R. 4781, International Antitrust Enforcement 
Assistance Act of 1994 (103d Cong., 2d Sess.) (1994).
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4.22  Hart-Scott-Rodino: Special Foreign Commerce Rules
    As noted above in Section 2.4, qualifying mergers and acquisitions, 
defined both in terms of size of party and size of transaction, must be 
reported to the Agencies, along with certain information about the 
parties and the transaction, prior to their consummation, pursuant to 
the HSR Amendments to the Clayton Act, 15 U.S.C. Sec. 18a.
    In some instances, the HSR implementing regulations exempt 
otherwise reportable foreign transactions.\96\ First, some acquisitions 
by U.S. persons are exempt. Acquisitions of foreign assets by a U.S. 
person are exempt when (i) no sales in or into the United States are 
attributable to those assets, or (ii) some sales in or into the United 
States are attributable to those assets, but the acquiring person would 
not hold assets of the acquired person to which $25 million or more of 
such sales in the acquired person's most recent fiscal year were 
attributable.\97\ Acquisitions by a U.S. person of voting securities of 
a foreign issuer are exempt unless the issuer holds assets in the 
United States having an aggregate book value of $15 million or more, or 
made aggregate sales in or into the United States of $25 million or 
more in its most recent fiscal year.\98\
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    \96\See 16 CFR 802.50-52 (1994).
     \97\See 16 CFR 802.50(a) (1994).
    \98\See 16 CFR 802.50 (1994).
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    Second, some acquisition by foreign persons are exempt. An 
exemption exists for acquisitions by foreign persons if (i) the 
acquisition is of voting securities of a foreign issuer and would not 
confer control of a U.S. issuer having annual net sales or total assets 
of $25 million or more, or of any issuer with assets located in the 
United States having a book value of $15 million or more; or (ii) the 
acquired person is also a foreign person and the aggregate annual net 
sales of the merging firms in or into the United States is less than 
$110 million and their aggregate total assets in the United States are 
less than $110 million.\99\ In addition, an acquisition by a foreign 
person of assets located outside the United States is exempt. 
Acquisitions by foreign persons of U.S. issuers or assets are not 
exempt.
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    \99\See 16 CFR 802.51 (1994).
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    Finally, acquisitions are exempt if the ultimate parent entity of 
either the acquiring or the acquired person is controlled by a foreign 
state, and the acquisition is of assets located within that foreign 
state, or of voting securities of an issuer organized under its 
laws.\100\ The HSR rules are necessarily technical, and should be 
consulted rather than relying on the summary description herein.
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    \100\See 16 CFR 802.52 (1994).
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Illustrative Example N

    Situation: A and B manufacture a consumer product for which 
there are no readily available substitutes in ten different 
countries around the world, including the United States, Canada, 
Mexico, Spain, Australia, and others. When they decide to merge, it 
becomes necessary for them to file premerger notifications in many 
of these countries, and to subject themselves to the merger law of 
all ten.\101\
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    \101\Not every country has compulsory prenotification, and the 
events triggering duties to notify vary from country to country.
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    Discussion: Under the OECD 1986 Recommendation, OECD countries 
notify one another when a proceeding such as a merger review is 
underway that might affect the interests of other countries. Within 
the strict limits of national confidentiality laws, agencies attempt 
to cooperate with one another in processing these reviews. This 
might extend to exchanges of publicly available information, 
agreements to let the other agencies know when a decision to 
institute a proceeding is taken, and to consult for purposes of 
international comity with respect to proposed remedial measures and 
investigatory methods. The parties can facilitate faster resolution 
of these cases if they are willing voluntarily to waive 
confidentiality protections and to cooperate with a joint 
investigation. At present neither U.S. law nor foreign laws permit 
effective coordination of a single international investigation in 
the absence of such waivers.

[FR Doc. 94-25765 Filed 10-18-94; 8:45 am]
BILLING CODE 4410-01-M