Law Antitrust - Instructor: Dwight Drake Foreign Trade Antitrust Improvement Act of 1982 (FTAIA) General Rule: Sherman 1-7 not apply to “conduct involving trade or commerce (other than import trade or import commerce) with foreign nations. Exception: Two prongs: 1. Conduct has “direct, substantial, reasonable foreseeable effect”on non- foreign trade or commerce, import trade or commerce, or export commerce of a person engaged in such commerce in U.S., and 2. Such “effect” gives rise to claim under Sherman 1 – 7.

Law Antitrust - Instructor: Dwight Drake Empagran S.A. v. F Hoffman-LaRoche,LTD (D.C. Cir 2003) Basic Facts: Ds, manufactures of vitamins, conspired to fix vitamin prices around the world. Ps were foreign purchasers of vitamins. Ps claim was based on theory that FTAIA exclusion not apply. Two arguments: General FTAIA rule not apply because limited to exports – not here. Even if apply, the domestic effects exception apply because both prongs of test satisfied. D.C. Circuit Holding: Where anticompetitive conduct has requisite effect on US, foreigners who are injured solely by conduct’s effect on foreign commerce (independent of US injury) may sue under US antitrust. - Legislative history supports broader reading. - Broader reading creates greater deterrence against global conspiracies. - Foreign Ps direct victims so have standing. Query: What position did DOJ and FTC take? Why?

Law Antitrust - Instructor: Dwight Drake Empagran S.A. v. F Hoffman-LaRoche,LTD (Sup. Ct 2004) Cite: 124 S.Ct.2359 Holding: Vacated D.C. Cir. holding. General FTAIA rule not limited to exports. Second prong of domestic “effects” exception not satisfied if foreign injury independent of domestic injury. Remanded for independence determination. - FTAIA purpose to exempt activities from antitrust laws to extent only impact foreign markets. - Court construes ambiguities against unreasonable interference with sovereign authority of other nations. Not reasonable to apply US law to foreign parties who are injured in foreign lands. Undermine laws of other lands. - Intent and legislative history not support broader reading. Policy arguments support narrower interpretation.

Law Antitrust - Instructor: Dwight Drake United States v. Aluminum Co. of America (“Alcoa”) (1945) Tough issues on market definition: - Alcoa produced ingot and sheet produced from ingot, and sold ingot to others that produced sheet in competition with Alcoa. - If in-house captive ingot production excluded, ingot market share 60%. If included, 90%. Court included because Alcoa controlled how ingot used. - Should secondary ingot refabricated from junk be factored into market share? Court said no because Alcoa could impact recycling flows. - Should off-shore ingot be factored in. Court held only portion that excluded tariffs and other barriers. Bottom Line: Justice Hand analytically determined Alcoa had 90% market share of ingot and showed monopoly power. Two step analytical process: 1. Define relevant market 2. Evaluate power within relevant market.

Law Antitrust - Instructor: Dwight Drake United States v. Aluminum Co. of America (“Alcoa”) (1945) More from Hand: 1.Size itself isn’t unlawful if monopoly thrust on a party. “The successful competitor must not be turned on when he wins”. 2.Alcoa used its size to build and strengthen monopoly. 3.Section 2 requires both power to monopolize and “intent”, but no “monopolist monopolizes unconscious of what he is doing”. 4.Unlawful practice of using power to raise ingot prices while squeezing sheet prices not part of unlawful monopoly reasoning. Separate offense.

Law Antitrust - Instructor: Dwight Drake United States v. Aluminum Co. of America (“Alcoa”) (1945) Why did district court not bust up Alcoa? -Strong aluminum industry vital to national security. -Strength requires size and economies of scale. -Government had sold its aluminum facilities to Reynolds and Kaiser so there were new competitors. -Dividing vertically integrated company may do more harm than good – inefficiencies, management, less research, etc. - Court ended Alcoa’s control of its Canadian sub. This, with government sales, did the job of creating competitive market.