An Overseas Sea Change For U.S. Antitrust Laws? New Developments In The Interpretation Of The Foreign Trade Antitrust Improvements Act

Did it just get easier for plaintiffs to apply U.S. antitrust laws to foreign conduct? Quite possibly, yes. In a recent, thorough opinion, the Third Circuit lowered the bar for plaintiffs seeking recovery for anticompetitive behavior that occurs overseas but affects U.S. commerce. In Animal Science Products, Inc. v. China Minmetals Corp., et al.,1 the court overturned its previous rulings (and at the same time set itself apart from other circuits) interpreting the Foreign Trade Antitrust Improvements Act ("FTAIA"),2 the statute that governs the extraterritorial application of U.S. antitrust laws; the panel rejected the prevailing view that the FTAIA enhances the burden borne by plaintiffs to establish federal court jurisdiction in cases involving overseas conduct, and held that the statute instead merely adds an element to an antitrust cause of action, one that defendants must rebut to prevail on a motion to dismiss. Under the Third Circuit's new law, defendants will find it more difficult to win early dismissal, and avoid expensive discovery, in antitrust cases involving foreign conduct affecting U.S. commerce. Moreover, there is now a circuit split that invites Supreme Court attention. Given the increase, and increasing significance, of global trade, this is an invitation the Court should accept.

Overview of the Issues

The FTAIA was enacted to put well-defined limits on the application of U.S. antitrust laws to conduct that occurs overseas; under the Act, U.S. antitrust laws do not reach conduct involving trade or commerce with foreign nations unless it has a "direct, substantial, and reasonably foreseeable effect" on U.S. commerce (including, e.g., imports and exports). Previously, the Third Circuit, in line with decisions in other circuits, treated this U.S. effects requirement as a jurisdictional limitation on the ability of U.S. courts to hear plaintiffs' antitrust claims based on foreign conduct; unless plaintiffs offer evidence of U.S. impact, usually at the outset of the case, they are vulnerable to dismissal from U.S. federal court for lack of subject-matter jurisdiction. In Animal Science, the Third Circuit rejected that jurisdictional interpretation in favor of one that treats the U.S. effects requirement as a substantive element of an antitrust claim; while plaintiffs must plead and eventually prove U.S. commercial effects, they need not do so to establish U.S. federal court jurisdiction. The difference, while seemingly subtle, may have profound effects on plaintiffs' ability to sue and recover from companies engaged in conduct that occurs overseas but affects U.S. commercial activity, because the standards for a motion to dismiss on jurisdictional grounds differ in important ways from those governing a motion to dismiss for failure to state a claim or for summary judgment. If other circuits follow suit, or the Supreme Court forces them to, plaintiffs even outside the Third Circuit will have a far easier time reaching anticompetitive foreign conduct that harms them through its impact on U.S. markets.

The FTAIA and Its Troubles

The FTAIA was enacted in 1982 to address confusion about the extraterritorial reach of U.S. antitrust laws. Prior to its enactment, the extent to which foreign conduct fell within the purview of U.S. antitrust laws was governed by a two-part test developed at common law. Anticompetitive...