24 University of Puerto Rico Business Law Journal Vol. 7
apply to foreign conduct (i.e. when it should apply “extraterritorially”), the
FTAIA “did not quite achieve that result,”
“introduced confusion into a regime
that, before its enactment, was a modestly successful common-law scheme,”
“has failed at its essential purpose,”
and “keeps getting
worse and worse.”
In summary, the FTAIA is not well liked. This article sets out
to determine why the Act has been dysfunctional since its enactment and, to
propose a solution.
The FTAIA governs the extraterritorial application of the Sherman Act to
anticompetitive conduct occurring in foreign commerce.
Prior to the FTAIA’s
enactment in 1982, courts applied a two part effects test, developed by Judge
Learned Hand in United States v.Aluminum Co. of America (hereinafter, Alcoa),
determine whether U.S. law applied extraterritorially. Under the Alcoa effects
foreign conduct that: (1) was intended to affect U.S. commerce; and (2) did
in fact affect U.S. commerce and was subject to U.S. law.
subjective, partially objective, standard represented the dominant common law
approach before 1982.
With the FTAIA, Congress sought to clarify the common law
slightly different two-pronged test limiting extraterritorial application of U.S.
law to conduct that (1)“has a direct, substantial, and reasonably foreseeable effect
. . . on [U.S. domestic commerce],” which (2) gives rise to a domestic injury.
Makan Delrahim, Drawing the Boundaries of the Sherman Act: Recent Developments in the Application of the
Antitrust Laws to Foreign Conduct, 61 N.Y.U. ANN. SURV. AM. L. 415, 420 (2005).
Max Huffman, A Retrospective on Twenty -Five Years of the Foreign Trade Antitrust Improvements Act , 44
HOUS. L. REV. 285, 286 (2007).
United States v. Nippon Paper Indus. Co., Ltd., 109 F.3d 1, 4 (1st Cir. 1997).
Huffman, supra note 3, at 286.
Robert D. Sowell, New Decisions Highlight Old Misgivings: A Reassessment of the Foreign Trade Antitrust
Improvements Act Following Minn-Chem, 66 FLA. L. REV. 511, 523 n. 84 (2014) (c iting Joseph P. Bauer,
The Foreign Trade Antitrust Improvements Act: Do We Really Want to Return to American Banana?, 65 ME. L.
REV. 3, 4 (2012)).
15 U.S.C. § 6a(1)(A) (cover ing, specifically, “trade or commerce (other than import trade or
import commerce) with foreign nations”).
United States v. Aluminum Co. of America, 148 F.2d 416 (2d Cir. 1945).
See Part II. As discussed below, there were several alternative effects tests applied before the
FTAIA. However, I often refer to a unified “common law effects test” for simplicity, because all of
the tests shared fundamental characteristics distinguishing them from the FTAIA.
Alcoa, 148 F.2d at 443-44.
H.R. REP. NO. 97-686, at 2 (1982).
15 U.S.C. § 6a(1)(A).