Striking the Balance: The Views of International Competition Agencies on the Extraterritorial Application of US Antitrust Law

Foreign competition authorities have long been concerned about the application of US antitrust law—in particular civil claims for treble damages—to conduct occurring outside the United States. Over the years, courts and Congress have adopted different tests for determining when US antitrust law applies to foreign conduct. Questions regarding the most recent of these tests—the Foreign Trade Antitrust Improvements Act ("FTAIA")—are now before the Second, Seventh, and Ninth Circuits.

In Motorola Mobility LLC v. AU Optronics Corporation, the Korean Fair Trade Commission ("KFTC"), the Japanese Ministry of Economy, Trade and Industry ("METI") and the Belgian Competition Authority ("BCA") recently filed amicus curiae briefs urging the Seventh Circuit to dismiss claims related to foreign sales of liquid crystal display ("LCD") panels. To preserve the delicate balance between antitrust enforcement and international comity inherent in the FTAIA, the Seventh Circuit will need to weigh carefully the views of these foreign agencies against the Department of Justice's interest in prosecuting foreign cartels that harm US consumers.

The FTAIA and Changing Views on the Extraterritorial Application of US Antitrust Law

Courts have been trying to strike this balance for nearly a century. In 1919, the Supreme Court held in American Banana Co. v. United Fruit that "the general and almost universal rule is that the character of an act as lawful or unlawful must be determined wholly by the law of the country where the act is done."1 Nearly 30 years later, in United States v. Alcoa, the Second Circuit, acting as the court of last resort, rejected the strict territorial approach of American Banana. The Alcoa court adopted an "effects test" that allowed for the extraterritorial application of the Sherman Act where the plaintiff could show a direct and intended effect on US commerce.2

In 1982, Congress passed the FTAIA in an effort to address these issues. The FTAIA "excludes from the Sherman Act's reach much anti-competitive conduct that causes only foreign injury."3 It does so by "removing ... (1) export activities and (2) other commercial activities taking place abroad" from the ambit of the Sherman Act "unless those activities adversely affect domestic commerce, imports to the United States, or exporting activities of one engaged in such activities in the United States."4

The FTAIA states that the Sherman Act does not apply to conduct involving foreign trade or...