Supreme Court Vitamin Antitrust Ruling Throws Foreign Claims Out

Foreign firms injured in commerce occurring "significantly" in foreign markets will not be able to pursue antitrust claims in the U.S., the Supreme Court ruled June 14.

The high court unanimously voted to vacate a federal appeals court decision allowing a group of foreign bulk vitamin purchasers to sue suppliers in a vitamin price-fixing case.

Empagran SA and four other firms sought claims against large vitamin distributors based on overly high prices they paid during the 1990s as the result of an alleged international cartel of suppliers.

Various Justice Department and class-action suits against F. Hoffman-La Roche and other major manufacturers named in the suit have been settled.

Empagran et al.'s claims were dismissed by a Washington, D.C. federal judge in 2001 on jurisdictional grounds, but reinstated by the appeals court in January 2003 (¹ 'The Tan Sheet' Jan 27, 2003, In Brief).

La Roche, Aventis, BASF and other defendants petitioned the Supreme Court for review and argued their case in April (² (Also see "Supreme Court Takes Up Vitamin Antitrust Case Appeal" - Pink Sheet, 22 Dec, 2003.) p. 13 and ³ (Also see "Supreme Court Ponders U.S. Reach In Vitamin Antitrust Case Oral Arguments" - Pink Sheet, 3 May, 2004.), p. 15).

The court's ruling holds that respondents Empagran et al.'s claims did not qualify for exceptions outlined in the Foreign Trade Antitrust Improvements Act of 1982 (FTAIA), which "excludes from the Sherman Act's reach much anticompetitive conduct that causes only foreign injury," Justice Stephen Breyer wrote in the court's opinion.

Under FTAIA, only foreign claims where the conduct in question has a "direct, substantial and reasonably foreseeable effect" on U.S. commerce that "gives rise to a [Sherman Act] claim" are allowed.

The court rejected respondents' linguistic argument that the conduct need only give rise to "a claim," not necessarily the particular claim for which damages are sought. The court found this argument at odds with the intent of the law.

Breyer cautioned that applying U.S. law to foreign conduct that causes independent foreign damage "creates a serious risk of interference with a foreign nation's ability independently to regulate its own commercial affairs."

"Even where nations agree about primary conduct, say price-fixing, they disagree dramatically about appropriate remedies," such as treble damages used in the U.S., Breyer added.

The opinion cited briefs filed by the governments of Germany, Canada and Japan in support of petitioners LaRoche et al., all of which showed particular concern that treble damages would interfere with their ability to regulate their own markets.

Taking into account both comity with other nations' legal systems and case history, the court determined that "Congress would not have intended the FTAIA's exception to bring independently caused foreign injury within the Sherman Act's reach."

The court did not address respondents' alternative argument, which defined the bulk vitamin market as global and interdependent.

Empagran claimed the foreign injury was not independent but that "the anticompetitive conduct's domestic effects were linked to that foreign harm."

The foreign firms had argued that the bulk vitamin market is global, and that without the higher prices in the U.S. - caused by the cartel's actions - the price-fixing could not have been maintained, and the firms "would not have suffered their foreign injury," the court notes.

Because the appellate court did not address that argument, the Supreme Court did not either, Breyer wrote.

"Respondents remain free to ask the Court of Appeals to consider the claim. The Court of Appeals may determine whether respondents properly preserved the argument, and, if so, it may consider it and decide the related claim."

BASF issued a statement that it is "pleased" with the Supreme Court decision, adding the firm "remains confident that the company will continue to prevail in such proceedings."