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Supreme court defines limits on foreign lawsuits brought in US courts

WASHINGTON, DC - 06/18/04 - The Supreme Court has ruled that foreign buyers cannot sue an international business in US courts over price fixing unless they can demonstrate that the company's actions in the US directly harmed them, reports the Washington File.

In an 8-0 ruling issued earlier this week, the court overturned part of an appeals court ruling that was opposed by multinational corporations, the Bush Administration and antitrust agencies in Canada, the European Union, and Japan as amounting to "an unreasonable extraterritorial reach for US antitrust law."

The case, a private lawsuit brought by five companies in Australia, Ecuador, Panama, and Ukraine against multinational vitamin manufacturers and distributors, does not end here, however.

With the clarification by the Supreme Court, the five foreign companies, mostly large farms that bought the vitamins for adding to cattle feed, could still pursue their claims in US courts.

The five companies' private lawsuit followed the US Justice Department settlement in an international price-fixing scheme by a cartel of vitamin manufacturers that resulted in US criminal fines amounting to $500 million plus heavy civil penalties imposed by European governments.

At issue is an amendment to US Sherman Act antitrust law called the Foreign Trade Antitrust Improvements Act of 1982 (FTAIA).

It sought to limit the scope of US antitrust law outside the US except for behavior that has a "direct, substantial and reasonably foreseeable effect" on domestic US commerce.

The overturned appeals court decision had found that that exception applied in this case. Even assuming that foreign higher prices were independent of higher domestic US prices in this case, the appeals court ruling said, the FTAIA's underlying goal of deterring price fixing made the lack of connection inconsequential.

In effect, the appeals court decision said that, in a global economy, price fixing by a multinational corporation in one country can harm people in other countries.

But Justice Stephen Breyer, writing an opinion for fellow Supreme Court justices, argued that the FTAIA exception does not apply when the antitrust claim depends solely on harm done outside the US.

"The 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," Breyer wrote.

"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," he wrote.

Breyer also wrote, however, that the five companies could still attempt to argue in a US court that the foreign injury to them was not in fact independent of anti-competitive behavior in the US.

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