United States: U.S. Supreme Court Limits the Reach of U.S. Antitrust Laws, but Permits U.S. Discovery for Use in Foreign Tribunals

The U.S. Supreme Court recently issued two opinions with important implications for the proper role of U.S. courts in international antitrust disputes.

• F. Hoffman-LaRoche Ltd. v. Empagran, S.A. limits the role of U.S. courts in addressing international antitrust disputes that result in separate injuries, some of which occur in U.S. commerce and some of which occur "entirely outside U.S. commerce."
• Intel Corp. v. Advanced Micro Devices, Inc. potentially expands the role of U.S. courts in foreign antitrust disputes by permitting the courts to order discovery on behalf of parties, including non-litigants, with an interest in the outcome of a foreign antitrust proceeding even though the foreign tribunal does not permit comparable discovery in its jurisdiction.

The Supreme Court held that there is no U.S. subject matter jurisdiction over international antitrust claims where the plaintiffs’ injury flows from "independent foreign harm" or otherwise lacks a sufficient nexus with U.S. commerce. Thus, in the context of price-fixing conspiracy involving sales in multiple countries, when the sales that give rise to a plaintiff’s claim occur "entirely outside U.S. commerce," suits for injuries resulting from these sales are barred. The Court, however, left open the possibility that parties injured in commerce outside the U.S. may still be able to bring suit if they can establish that the domestic effects of the defendant’s conduct helped "to bring about [the] foreign injury."

The Court’s opinion may provide firms involved in international price-fixing conspiracies with additional incentives to seek amnesty from U.S. and foreign enforcement agencies by limiting their exposure to U.S. treble damage claims.

The Supreme Court held that U.S. courts have the authority, but are not required, to order discovery of documents on behalf of a complainant in a European Commission (EC) competition law investigation. In so holding, the Court rejected Intel’s argument that the law categorically prohibited such discovery where (1) the party requesting discovery was not a litigant in the foreign proceeding and did not have the right under the laws of the foreign jurisdiction to obtain comparable materials located abroad, and (2) the foreign tribunal and enforcement agency that initiated the antitrust investigation and was a party to the proceeding (i.e., the European Commission) did not request or compel the production of the requested documents. The Court did not order discovery at this time, but simply remanded the case to the district court for further consideration, and suggested that there may well be circumstances in which district courts should decline to exercise this discretionary authority.

While the decision, on its face, potentially has broad implications for the use of U.S. discovery processes to obtain information for use in foreign antitrust proceedings, the actual impact of the decision will be determined by the lower courts, as they apply the principles and guidance set forth in Intel to specific discovery requests.

Prior to the Supreme Court’s decision in Empagran, there was a split of authority among the courts of appeals on whether a provision within the Foreign Trade Antitrust Improvement Act of 1982 (FTAIA) required the plaintiff’s injury to be tied to an anticompetitive effect on U.S. commerce. The controversy over this provision arose in cases involving international price-fixing conspiracies that had effects both on U.S. commerce and on commerce that takes place entirely outside the U.S. The debate between the lower courts centered on whether foreign plaintiffs should be able to recover for injuries that occurred entirely outside the U.S. simply because the unlawful conduct also had effects on U.S. commerce sufficient to establish jurisdiction for suits by the U.S. government and/or parties injured in the U.S. domestic or import market.

Specifically, the Fifth Circuit and most courts had determined that the language of the FTAIA, as well as the legislative intent of Congress, compelled the conclusion that "the ‘effect’ providing the jurisdictional nexus must also be the basis for the injury alleged under the antitrust laws." The D.C. Circuit and Second Circuit, however, had disagreed with this approach. Instead, these courts adopted a literal interpretation of certain language in the FTAIA and held that foreign plaintiffs could bring antitrust suits simply by demonstrating that the defendants’ unlawful conduct caused the requisite "direct, substantial and reasonably foreseeable" effect on U.S. commerce sufficient to give rise to "a" claim by any private plaintiff or the U.S. government (as opposed to "the" foreign plaintiff’s claim).

In Empagran, the Supreme Court rejected the approaches adopted by the D.C. Circuit and Second Circuit, and instead held that foreign plaintiffs cannot bring claims in U.S. courts unless their own injury is tied to the anticompetitive effect of the unlawful conduct on U.S. commerce. The Court held that when "the adverse foreign effect is independent of any adverse domestic effect," there is no jurisdiction under the FTAIA for claims by the plaintiffs that rest "solely on the independent foreign harm." Thus, in the context of a price-fixing conspiracy, when the relevant transactions occur "entirely outside U.S. commerce," there is no subject matter jurisdiction over claims for injury resulting from these transactions.

According to the Court, this interpretation is consistent with the FTAIA’s ambiguous language, its legislative history, and principles of international comity. In the FTAIA, "Congress sought to release domestic (and foreign) anticompetitive conduct from Sherman Act constraints when that conduct causes foreign harm." The Court emphasized, however, that its holding assumed that "anticompetitive conduct here independently caused foreign injury; that is, the conduct’s domestic effects did not help to bring about that foreign injury." Consequently, the Court left open whether parties injured in commerce outside the U.S. may still be able to bring suit if they can establish some connection or link between their foreign injury and the domestic anticompetitive effects.

In Intel, the Supreme Court interpreted the meaning of 28 U.S.C. § 1728(a), a federal law that permits U.S. courts to order parties within their jurisdiction to produce documents or give testimony "for use in a proceeding in a foreign or international tribunal" upon the request of "any interested person." The Ninth Circuit had held that a district court could consider a request from AMD, Intel’s competitor, to obtain discovery from Intel for use in an antitrust investigation and proceeding before the European Commission. The Supreme Court affirmed the Ninth Circuit, holding that U.S. courts have the authority, but are not required, under 28 U.S.C. § 1728(a) to order discovery of documents on behalf of a U.S. complainant in a European Commission (EC) investigation.

The Supreme Court did not address whether the district court should order Intel to produce the requested documents. It provided, however, the following factors to guide the district court’s resolution of this issue on remand:

• First, the district court may consider the foreign tribunal’s need for assistance. Since foreign and international tribunals can exercise jurisdiction over parties to the foreign proceeding to compel the production of evidence, the need for assistance from U.S. courts to compel discovery "is not as apparent" when the person from whom discovery is sought, such as Intel, is a participant in the foreign proceeding. Ordinarily, such assistance might only be required when the evidence is sought from a non-participant that might be outside the foreign tribunal’s jurisdictional reach.
• Second, the district court may consider the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government, court or agency to assistance from U.S. courts. (Interestingly, the EC filed an amicus curiae brief in support of Intel in the Supreme Court.)
• Third, the district court may consider whether AMD’s request was, as Intel alleged, simply an attempt to circumvent foreign limits on discovery or other policies of a foreign country or the U.S.
• Finally, the district court may consider whether the request is unduly burdensome, and condition relief upon the reciprocal exchange of information.

The Supreme Court’s decision leaves several significant issues to be resolved by the lower courts, including:

1. When, if ever, will it be appropriate to order discovery from a party to a foreign proceeding if the foreign tribunal has not requested the information and does not permit comparable discovery within its jurisdiction?
2. What is the proper scope for such a discovery request? Will reciprocal discovery be required?
3. Will third parties with information relevant to a European Commission merger or non-merger investigation be compelled to produce relevant information at the request of parties to such proceedings? What limitations, if any, will be imposed on such requests?

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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