F. Hoffmann-La Roche Ltd. v. Empagran S. A.

542 U.S. 155, 124 S. Ct. 2359, 159 L. Ed. 2d 226, 17 Fla. L. Weekly Fed. S 374, 2004 U.S. LEXIS 4174, 72 U.S.L.W. 4501
Supreme Court of the United States·Decided June 14, 2004·No. 03-724·Published·Cited by 209 cases

Opinions

[158]*158Justice Breyer

delivered the opinion of the Court.

The Foreign Trade Antitrust Improvements Act of 1982 (FTAIA) excludes from the Sherman Act’s reach much anti-competitive conduct that causes only foreign injury. It does so by setting forth a general rule stating that the Sherman Act “shall not apply to conduct involving trade or commerce ... with foreign nations'.” 96 Stat. 1246,15 U. S. C. § 6a. It then creates exceptions to the general rule, applicable where (roughly speaking) that conduct significantly harms imports, domestic commerce, or American exporters.

We here focus upon anticompetitive price-fixing activity that is in significant part foreign, that causes some domestic antitrust injury, and that independently causes separate foreign injury. We ask two questions about the price-fixing conduct and the foreign injury that it causes. First, does that conduct fall within the FTAIA’s general rule excluding the Sherman Act’s application? That is to say, does the price-fixing activity constitute “conduct involving trade or commerce . . . with foreign nations”? We conclude that it does.

[159]*159Second, we ask whether the conduct nonetheless falls within a domestic-injury exception to the general rule, an exception that applies (and makes the Sherman Act nonetheless applicable) where the conduct (1) has a “direct, substantial, and reasonably foreseeable effect” on domestic commerce, and (2) “such effect gives rise to a [Sherman Act] claim.” §§6a(1)(A), (2). We conclude that the exception does not apply where the plaintiff’s claim rests solely on the independent foreign harm.

To clarify: The issue before us concerns (1) significant foreign anticompetitive conduct with (2) an adverse domestic effect and (3) an independent foreign effect giving rise to the claim. In more concrete terms, this case involves vitamin sellers around the world that agreed to fix prices, leading to higher vitamin prices in the United States and independently leading to higher vitamin prices in other countries such as Ecuador. We conclude that, in this scenario, a purchaser in the United States could bring a Sherman Act claim under the FTAIA based on domestic injury, but a purchaser in Ecuador could not bring a Sherman Act claim based on foreign harm.

I

The plaintiffs in this case originally filed a class-action suit on behalf of foreign and domestic purchasers of vitamins under, inter alia, §1 of the Sherman Act, 26 Stat. 209, as amended, 15 U. S. C. § 1, and §§4 and 16 of the Clayton Act, 38 Stat. 731, 737, as amended, 15 U. S. C. §§ 15, 26. Their complaint alleged that petitioners, foreign and domestic vitamin manufacturers and distributors, had engaged in a price-fixing conspiracy, raising the price of vitamin products to customers in the United States and to customers in foreign countries.

As relevant here, petitioners moved to dismiss the suit as to the foreign purchasers (the respondents here), five foreign vitamin distributors located in Ukraine, Australia, Ecuador, and Panama, each of which bought vitamins from peti[160]*160tioners for delivery outside the United States. No. Civ. 001686TFH, 2001 WL 761360, *4 (D. D. C., June 7, 2001) (describing the relevant transactions as “wholly foreign”). Respondents have never asserted that they purchased any vitamins in the United States or in transactions in United States commerce, and the question presented assumes that the relevant “transactions occurred] entirely outside U. S. commerce,” Pet. for Cert. (i). The District Court dismissed their claims. 2001 WL 761360, at *4. It applied the FTAIA and found none of the exceptions applicable. Id., at *3-*4. Thereafter, the domestic purchasers transferred their claims to another pending suit and did not take part in the subsequent appeal. 315 F. 3d 338, 343 (CADC 2003).

A divided panel of the Court of Appeals reversed. 315 F. 3d 338. The panel concluded that the FTAIA’s general exclusionary rule applied to the case, but that its domestic-injury exception also applied. It basically read the plaintiffs’ complaint to allege that the vitamin manufacturers’ price-fixing conspiracy (1) had “a direct, substantial, and reasonably foreseeable effect” on ordinary domestic trade or commerce, i. e., the conspiracy brought about higher domestic vitamin prices, and (2) “such effect” gave “rise to a [Sherman Act] claim,” i. e., an injured domestic customer could have brought a Sherman Act suit, 15 U. S. C. §§ 6a(1), (2). Those allegations, the court held, are sufficient to meet the exception’s requirements. 315 F. 3d, at 341.

The court assumed that the foreign effect, i. e., higher prices in Ukraine, Panama, Australia, and Ecuador, was independent of the domestic effect, i. e., higher domestic prices. Ibid. But it concluded that, in light of the FTAIA’s text, legislative history, and the policy goal of deterring harmful price-fixing activity, this lack of connection does not matter. Ibid. The District of Columbia Circuit denied rehearing en bane by a 4-to-3 vote. App. to Pet. for Cert. 44a.

We granted certiorari to resolve a split among the Courts of Appeals about the exception’s application. Compare Den [161]*161Norske Stats Oljeselskap As v. HeereMac Vof, 241 F. 3d 420, 427 (CA5 2001) (exception does not apply where foreign injury independent of domestic harm), with Kruman v. Christie’s Int’l PLC, 284 F. 3d 384, 400 (CA2 2002) (exception does apply even where foreign injury independent); 315 F. 3d, at 341 (similar).

II

The FTAIA seeks to make clear to American exporters (and to firms doing business abroad) that the Sherman Act does not prevent them from entering into business arrangements (say, joint-selling arrangements), however anticompet-itive, as long as those arrangements adversely affect only foreign markets. See H. R. Rep. No. 97-686, pp. 1-3, 9-10 (1982) (hereinafter House Report). It does so by removing from the Sherman Act’s reach, (1) export activities and (2) other commercial activities taking place abroad, unless those activities adversely affect domestic commerce, imports to the United States, or exporting activities of one engaged in such activities within the United States.

The FTAIA says:

“Sections 1 to 7 of this title [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 [i. e., domestic trade or commerce], 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 [i. e., on an American export competitor]; and

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F. Hoffmann-La Roche Ltd. v. Empagran S. A., 542 U.S. 155, 124 S. Ct. 2359, 159 L. Ed. 2d 226, 17 Fla. L. Weekly Fed. S 374, 2004 U.S. LEXIS 4174, 72 U.S.L.W. 4501 (2004).

542 U.S. 155 (F. Hoffmann-La Roche Ltd. v. Empagran S. A.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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