A central challenge of modern antitrust law is determining the extent to which U.S. antitrust law applies to actors in foreign countries. (1) Although foreign violations of U.S. antitrust law seem beyond the proper sphere of U.S. courts' subject matter jurisdiction, (2) anticompetitive behavior in foreign countries affects consumers in the U.S., (3) suggesting that the U.S. has an interest in adjudicating these issues. Last Term, in Roche v. Empagran, (4) the Supreme Court held that where antitrust violations cause similar but independent harms to domestic and international purchasers, those international purchasers cannot bring suit in U.S. courts. (5) However, the Court's assumption that the harms were independent was fallacious and thus the Court failed to establish a workable standard for determining when U.S. courts have jurisdiction over foreign antitrust violations. (6)
Roche arose out of a class action filed on behalf of both domestic and foreign vitamin purchasers against vitamin manufacturers alleging a price-fixing conspiracy designed to raise prices for vitamins both domestically and abroad. (7) The manufacturers moved to dismiss the complaint of the foreign purchasers (8) because their vitamin purchases occurred outside the United States and thus were not part of U.S. commerce and did not fall under the ambit of U.S. antitrust law. (9) The district court agreed and dismissed the foreign claims. (10) The district court applied the Foreign Trade Antitrust Improvement Act of 1982, (11) which exempts commerce with foreign nations from U.S. antitrust jurisdiction when such actions do not injure domestic interests. (12) The court then found that none of the exceptions to the FTAIA applied and thus concluded that it lacked jurisdiction over the foreign purchasers' claims. (13) The domestic purchasers then separated their claims, leaving only the foreign purchasers to appeal. (14)
The Court of Appeals for the District of Columbia reversed. (15) The appeals court agreed with the district court that the FTAIA applied, but held that these activities affected domestic commerce, thereby bringing these activities under an exception to the FTAIA. (16) The appeals court went through a two-step analysis, first determining that the conspiracy did in fact lead to higher domestic vitamin prices and then concluding that these higher prices gave rise to an antitrust claim because a domestic consumer could bring a suit under the Sherman Act for these higher prices. (17) The court concluded that the existence of the domestic claim satisfied the requirements of the FTAIA exception, (18) despite assuming that the effect on foreign vitamin prices was independent of the effect on domestic vitamin prices. (19) Then the court, reading the FTAIA broadly, held that the lack of a connection in the harmful effects did not matter because the FTAIA's goal was to deter price-fixing. (20) The dissent argued that for the FTAIA to apply the requisite harm must occur in the United States before U.S. antitrust law can be applied to foreign actors; the dissent would thus have affirmed the district court. (21) An en banc rehearing was denied. (22)
The Supreme Court reversed, vacating the opinion and remanding for further proceedings. (23) Writing for the Court, (24) Justice Breyer began by explaining that the FTAIA excludes all non-import activity involving foreign commerce from the ambit of U.S. antitrust laws but brings some of that conduct back under U.S. jurisdiction if it has a "direct, substantial, and reasonably foreseeable effect" on American commerce and has a harmful effect as defined by antitrust law. (25) As a preliminary matter, the Court established that the FTAIA was meant to apply not only to export activity but also to wholly foreign commerce that might affect the U.S. (26) This meant that the FTAIA's limitations on Sherman Act subject matter jurisdiction also apply to purely foreign commerce.
The Court then proceeded to the heart of the issue: whether the exception to the FTAIA's general exclusion applied in this case. …