Recent Decisions Shed Light On FTAIA

First published in Antitrust News & Notes, October 2011

The Foreign Trade Antitrust Improvements Act (FTAIA), enacted in 1982, was meant to provide clarification on the applicability of the Sherman Act to foreign commerce. The FTAIA was also supposed to protect American exporters from being unfairly subjected to trade restrictions not faced by their international competitors. Whether the FTAIA has been successful in protecting American exporters is debatable, but as for providing clarity on the application of the Sherman Act to foreign commerce, few would argue that the statute comes close. In fact, the U.S. Court of Appeals for the Third Circuit has gone so far as to describe the law as using "rather convoluted language" and being "inelegantly phrased."1 As such, companies must rely on the courts to provide the clarity so desperately needed in interpreting and understanding how the FTAIA may reach their foreign conduct. Two recent decisions in the Third and Seventh Circuits help delineate the scope and applicability of the FTAIA.

The FTAIA provides that the Sherman Act: 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; and (2) such effect gives rise to a claim under [the Sherman Act].2

However inelegantly phrased, courts have recognized that the FTAIA provides two important exceptions to the general rule that the Sherman Act does not apply to foreign commerce. The FTAIA makes the Sherman Act applicable (1) to foreign anticompetitive conduct involving U.S. import trade or import commerce, or the "import commerce exception," and (2) foreign anticompetitive conduct that has a direct, substantial, and reasonably foreseeable effect on U.S. domestic or import trade or commerce, or the "direct effects exception."

Since Congress passed the FTAIA in 1982, there has been uncertainty as to whether it was intended to create a jurisdictional bar to be applied by courts at the outset of a matter or a substantive merits limitation. Courts have also endeavored to clarify the meaning and applicability of the import commerce and direct effects exceptions. The Third Circuit in Animal Science Products, Inc. v. China Minemtal Corp.,3 and the Seventh Circuit, in Minn-Chem...