Notes from the antitrust subconscious: how attempts to suppress common law precedent replaced by the foreign trade antitrust improvements act have only brought the act closer to its roots
| Autor | Anthony Kakoyannis |
| Cargo | J.D. Candidate 2016, University of Florida Levin College of Law |
| Páginas | 22-54 |
NOTES FROM THE ANTITRUST SUBCONSCIOUS: HOW ATTEMPTS
TO SUPPRESS COMMON LAW PRECEDENT REPLACED BY THE
FOREIGN TRADE ANTITRUST IMPROVEMENTS ACT HAVE ONLY
BROUGHT THE ACT CLOSER TO ITS ROOTS
ANTHONY KAKOYANNIS*
ABSTRACT
In 1982, Congress enacted the Foreign Trade Antitrust Improvements Act
(FTAIA) to serve as a standard for determining when U.S. antitrust law should
extend to foreign conduct. The FTAIA was designed to clarify the common law of
antitrust extraterritoriality but has instead paralyzed the law’s application. For
years after its enactment, courts simply avoided the FTAIA. Into the late 1990s,
many were still applying the common law test. More recent decisions have begun
to construe the FTAIA’s language, but their attempts have created more
confusion than clarity. This Note argues that the dysfunction is a product of poor
drafting and the resulting assumption that the FTAIA dispensed with the
subjective elements of the common law test that preceded it. Understanding the
FTAIA as a purely objective standard has proved unworkable. The evidence for
this position comes from a close reading of FTAIA decisions, which shows that
courts are implicitly relying on the subjective common law test in their analyses,
even while asserting that the FTAIA test is objective. Rather than debate which
circuit’s interpretation of the FTAIA is better, courts should broaden their
understanding of the Act to incorporate its common law roots.
I. Introduction ......................................................................................................................... 232
II. Brief Background on Antitrust Statutes ....................................................................... 25
III. The Common Law of Antitrust Extraterritoriality Before the FTAIA ............... 26
A. The Predominant Common Law Approach Is Known as the Alcoa Effects
Test .................................................................................................................................... 26
IV. Congress Passes the FTAIA, Creating a New Test .................................................. 28
A. An Overview of How Each Part of the FTAIA Functions .................................. 30
1. The FTAIA Is a Substantive Limitation ......................................................................... 30
2. Overview of the FTAIA’s First Prong ............................................................................. 31
3. Overview of the FTAIA’s Second Prong ........................................................................ 32
* J.D. Candidate 2016, University of Florida Levin College of Law .
No. 1 Notes from the Antitrust Subconscious 23
B. Background of Congressional Intent ........................................................................ 33
V. How The Act And The First Prong Have Been Awkwardly Applied Since The
FTAIA Replaced The Common Law Test .................................................................... 34
A. Courts Avoid Applying the FTAIA or Holding Under the First Prong ......... 35
B. Early FTAIA Cases Ignored the Act Altogether .................................................... 35
C. Recent Cases Apply the FTAIA ................................................................................. 38
VI. Division of Federal Circuits Between Different Definitions of the Word
“Direct” in the First Prong ................................................................................................ 40
A. The Seventh Circuit's Definition of “Direct”.......................................................... 41
B. The Ninth Circuit's Definition of “Direct” .............................................................. 45
C. The Second Circuit's Adoption the Seventh Circuit’s Definition ................... 50
VII. The Legislative History and the Federal Agencies’ Position ................................ 50
VIII. Conclusion ........................................................................................................................ 53
I. INTRODUCTION
Nineteen Eighty-Two was a year that seemed to want a break with the past.
Michael Jackson released Thriller and Time Magazine gave its Person-of-the-Year
Award to the computer. Possibly swept up in the tide, Congress also attempted
to mark a transition from the past to the future in the realm of antitrust law, and
enacted the Foreign Trade Antitrust Improvements Act (hereinafter “FTAIA” or
“the Act”).
1
Unlike other promising innovations of 1982, however, the FTAIA has
contemporary courts and litigants yearning for the past. Although meant to
clarify the common law standard used to decide when U.S. antitrust law should
1
The Foreign Trade Antitrust Improvement Act, 15 U.S.C. § 6a (2000). The FTAIA amended the
Sherman Act an d the Federal Trade Commission Act, see 15 U.S.C. § 45(a)(3) (2014), by using
However, for simplicity, I refer to it as though it is a stand-alone statute.
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,”
2
“introduced confusion into a regime
that, before its enactment, was a modestly successful common-law scheme,”
3
“is
inelegantly phrased,”
4
“has failed at its essential purpose,”
5
and “keeps getting
worse and worse.”
6
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.
7
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),
8
to
determine whether U.S. law applied extraterritorially. Under the Alcoa effects
test,
9
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.
10
This partially
subjective, partially objective, standard represented the dominant common law
approach before 1982.
With the FTAIA, Congress sought to clarify the common law
11
using a
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.
12
Few
2
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).
3
Max Huffman, A Retrospective on Twenty -Five Years of the Foreign Trade Antitrust Improvements Act , 44
HOUS. L. REV. 285, 286 (2007).
4
United States v. Nippon Paper Indus. Co., Ltd., 109 F.3d 1, 4 (1st Cir. 1997).
5
Huffman, supra note 3, at 286.
6
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)).
7
15 U.S.C. § 6a(1)(A) (cover ing, specifically, “trade or commerce (other than import trade or
import commerce) with foreign nations”).
8
United States v. Aluminum Co. of America, 148 F.2d 416 (2d Cir. 1945).
9
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.
10
Alcoa, 148 F.2d at 443-44.
11
H.R. REP. NO. 97-686, at 2 (1982).
12
15 U.S.C. § 6a(1)(A).
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