Seventh Circuit Takes Broad View Of FTAIA

Overview

In a much-awaited decision, the Seventh Circuit has taken a broad view of the ability of U.S. courts to hear antitrust cases concerning alleged foreign cartel activity that plaintiffs contend has effects in the U.S. The Court's ruling reviving a cartel case in the potash industry is likely to make it easier for future litigants to sue foreign defendants in U.S. courts for alleged cartel activity occurring overseas.

The decision also can be expected to have implications on criminal cartel investigations launched by the Department of Justice. By expressly adopting the Department's interpretation of what constitutes commerce having "direct" effects on the U.S., the decision will further bolster the Department's cartel enforcement activities, which have focused increasingly in recent years on foreign-based cartel activity that the Department contends has had effects in the U.S.

The Foreign Trade Antitrust Improvements Act ("FTAIA")

To appreciate the import of the Seventh Circuit's decision, it is necessary to have a basic understanding of the FTAIA. Congress enacted the statute 30 years ago to delineate the applicability of the Sherman Act, the basic U.S. antitrust statute, to foreign commerce and to provide a layer of protection against Sherman Act claims implicating foreign activities. The FTAIA provides that 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, 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; and

(2) such effect gives rise to a claim under the provisions of [the Sherman Act].1

Courts have wrestled with the precise parameters of the FTAIA ever since it was enacted. The statute begins by stating a broad rule that the Sherman Act "shall not apply" to conduct involving foreign trade or commerce. But, it then restores applicability to such commerce if it satisfies the listed exceptions. It was on the scope of the exceptions that the Seventh Circuit focused its attention.

The Potash

Litigation

The Potash litigation began in 2008 when plaintiffs brought a series of class action antitrust lawsuits alleging a global conspiracy to raise the price of potash, a mineral used primarily in agricultural fertilizer.2 The cases were consolidated in federal court in Chicago as In re Potash Antitrust Litigation. According to the complaint, the foreign-based defendants produced 71 percent of the global supply of potash through mining operations located in the three countries housing the bulk of the global potash reserves (Canada, Russia, and Belarus).3...