Foreign companies are more exposed to US antitrust law
following a recent appellate court decision that overturned
precedent. More extraterritorial class action civil suits and
higher fines are expected.
The ruling is of particular concern for foreign companies
that sell products or materials to companies that export to the
US. They were previously shielded from US antitrust enforcement
because they were not considered to have a direct impact on US
consumers. The Court of Appeals for the Seventh Circuit has now
The court reached an en banc decision in favour of
the collective plaintiffs in
Minn-Chem v Agrium on June 27. The judgment relied
on a less restrictive interpretation of the Foreign Trade
Antitrust Improvements Act (FTAIA), a statute used by
defendants to have cases dismissed since it was passed in 1982.
Now the FTAIA can serve plaintiffs as well.
The FTAIA defines the extraterritoriality of US antitrust
laws as limited to import commerce with a direct, substantial
and reasonably foreseeable effect on domestic or export
commerce. The ability of US plaintiffs to file claims against
foreign companies relies on interpretation of the word
Niall Lynch, an antitrust and competition partner with
Latham & Watkins, told IFLR that circuit courts
have traditionally used a more restrictive definition of direct
effect, as one that flows as an immediate consequence of the
defendants activity, thereby limiting the type of foreign
activities subject to US antitrust laws.
Direct effect can pass through intermediaries if there is a
reasonably proximate causal nexus, according to Judge Diane
[The decision] makes it easier for antitrust
plaintiffs to sue foreign companies in US courts in class
actions, Jeremy Evan, an antitrust litigation partner
with Paul Hastings said. That presumably will be a
concern [for foreign companies] because you dont have
anywhere else in the world with the same type of private
antitrust regime as the US.
I think many global companies are concerned about US
class action practice and the amount of damages that a company
can be forced to pay in civil law suits [because] that type of
mechanism doesnt exist in other jurisdictions,
Department of Justice
Minn-Chem v Agrium also makes foreign companies
more vulnerable to criminal probes by the US Department of
Justice (DoJ) and Federal Trade Commission, and the
courts interpretation largely mirrors a DoJ
amicus brief submitted to the court.
With its amicus brief, the DoJ is trying to shape the
development of the law to go after more foreign anticompetitive
activity and criminally prosecute more foreign conduct under
the US antitrust laws, Lynch said.
Evans believes the decision will strengthen the DoJs
hand in reaching larger plea agreements with foreign antitrust
There just arent that many criminal antitrust
trials, Evans said. I think the impact is going to
be felt more when the DoJ is negotiating plea deals with
companies and there is a fight over the volume of
The Seventh Circuits decision referenced an earlier
decision by the Third Circuit, Animal
Science Products v China Minmetals, which
also found that the FTAIA was a required part of a claim rather
than a jurisdictional limitation.
Other courts, most notably the Ninth Circuit in United
States v LSL Biotechs, have used a more narrow definition
of direct and considered the FTAIA a jurisdictional
As a result of the Seventh Circuit decision, Lynch said
plaintiffs may have the opportunity to conduct full discovery
on the merits in these cases if FTAIA is considered part of the
claim, which can be very costly for defendants.
The Agrium case might request the US Supreme Court to decide
whether the claims are allowed and resolve differences at the