En Banc Seventh Circuit Further Opens U.S. Courts To Foreign Cartel Activities That Affect Domestic Commerce

In an important decision interpreting the Foreign Trade Antitrust Improvements Act (FTAIA), Judge Diane Wood, writing for the Seventh Circuit en banc, clarified the reach of U.S. antitrust laws over foreign conduct. The ruling breathed new life into a previously dismissed purchaser class action lawsuit against mostly foreign potash producers. Minn-Chem v. Agrium, No. 10-1712, 2012 U.S. App. LEXIS 13131 (7th Cir. Jun. 27, 2012).

In 2008, U.S. purchasers of potash, a mineral used in agricultural fertilizers, sued seven producers, all but one of whom are headquartered outside the United States. The complaint alleged that the defendants had engaged in a global cartel that included manipulating output and capacity and engaging in joint ventures that were designed to police the cartel, with the effect of increasing prices for potash up to 600%. All of the relevant activity occurred outside the United States.

The defendants immediately raised the argument that the complaint did not meet the requirement of FTAIA. The district court denied a motion to dismiss in 2009, but certified an immediate appeal to the Seventh Circuit. A Seventh Circuit panel concluded in September 2011 that FTAIA precluded the complaint, but the court subsequently decided to review the issue en banc.

The en banc decision contains several important holdings. First, Judge Wood concluded in light of recent Supreme Court decisions, particularly Morrison v. National Australia Bank Ltd., 130 S.Ct. 2869 (2010), that the Seventh Circuit's previous decision in United Phosphorous v. Angus Chemical, 322 F. 3rd 942 (7th Cir. 2003) (en banc) should be overruled, and that "the FTAIA sets forth an element of an antitrust claim, not a jurisdictional limit on the power of federal courts." Minn-Chem, 2012 U.S. App. LEXIS 13131 at *16.

Second, the court then continued to clarify the reach of the statute, passed in 1982. The court addressed two questions: first, how to define pure import commerce that is not subject to the special limiting rules established by FTAIA, and second, what it takes to show that foreign conduct has a "direct, substantial and reasonably foreseeable" effect on domestic commerce. Id. at *19. With respect to the first question, the court suggested that it distills into whether import trade has been substantially and intentionally affected by an anti-competitive arrangement that would violate the U.S. antitrust laws. Parsing the language of the second question, the court...