[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]
-----------------------------------------------------------------------
DEPARTMENT OF JUSTICE
Antitrust Division
Request for Comments on Draft Antitrust Enforcement Guidelines
for International Operations
agency: Department of Justice.
action: Notice.
-----------------------------------------------------------------------
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will be withdrawn when these draft Guidelines are adopted in final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 Portions of the 1988 guidelines will also be superseded by the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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\10\15 U.S.C. Secs. 13-13b, 21a (1988).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\11\15 U.S.C. Sec. 45 (1988 & Supp. 1993).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\25\15 U.S.C. Sec. 4013(a) (1988).
---------------------------------------------------------------------------
Congress intended that these standards ``encompass the full range of
the antitrust laws,'' as defined in the ETC Act.\26\
---------------------------------------------------------------------------
\26\H.R. Rep. No. 924, 97th Cong., 2d Sess. 26 (1982). See 15
U.S.C. Sec. 4021(6).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\28\15 U.S.C. Sec. 4016(b)(5) (1988).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\31\Sec. 15 U.S.C. Sec. 11 (1988).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\3\4See 19 U.S.C. 1673 et seq. (1988 & Supp. 1993).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
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
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
\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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
\62\113 S.Ct. 2891, 2910.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\69\28 U.S.C. Sec. 1605(a)(1-6) (1988).
---------------------------------------------------------------------------
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).
---------------------------------------------------------------------------
``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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.'')
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\80\See Linseman v. World Hockey Ass'n, 439 F. Supp. 1315, 1325
(D. Conn. 1977).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\81\See Section 3.34 infra.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\96\See 16 CFR 802.50-52 (1994).
\97\See 16 CFR 802.50(a) (1994).
\98\See 16 CFR 802.50 (1994).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\99\See 16 CFR 802.51 (1994).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\100\See 16 CFR 802.52 (1994).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\101\Not every country has compulsory prenotification, and the
events triggering duties to notify vary from country to country.
---------------------------------------------------------------------------
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