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Extraterritorial Criminal Jurisdiction under the Antitrust Laws

16 Pages Posted: 20 Feb 2013 Last revised: 28 Feb 2013

Herbert J. Hovenkamp

Univ. of Pennsylvania Law and Wharton Business

Date Written: February 27, 2013

Abstract

The Ninth Circuit may soon consider whether challenges to antitrust activity that occurs abroad must invariably be addressed under the rule of reason, which will make criminal prosecution difficult or impossible.

When antitrust cases involve foreign conduct, the courts customarily appraise its substantive antitrust significance only after deciding whether the Sherman Act reaches the activity. Nevertheless, "jurisdictional" and "substantive" inquiries are not wholly independent. Both reflect two sound propositions: that Congress did not intend American antitrust law to rule the entire commercial world and that Congress knew that domestic economic circumstances often differ from those abroad where mechanical application of domestic antitrust decisions would make little economic, political, or social sense.

The purpose of the distinction between the per se rule and rule of reason is to identify and distinguish situations where anticompetitive effects can be assessed at relatively low administrative costs from those that require more complete analysis. The Ninth Circuit has spoken of a "jurisdictional" rule of reason. However, merging considerations of comity, foreign interests, and domestic effects from extraterritorial conduct into questions about market definition and competitive impact unnecessarily complicates a set of queries that are already sufficiently complex and are in fact quite different from one another.

One rationale for expansive reach when foreign anticompetitive activity causes domestic injury is that the sovereign representing purchasers typically has a greater interest than the sovereign representing sellers. A cartel in one country fixing the price of goods for export transfers wealth away from the territory containing the buyers and toward the territory containing the sellers. Sovereigns, including the United States, have typically been less concerned with condemning restraints on export trade where all the buyers are foreign than with restraints on imports. This aspect of United States policy is reflected in the Foreign Trade Antitrust Improvements Act (FTAIA) as well as the Restatement (Third) of the Foreign Relations Law of the United States. At the same time, however, the "effects" query takes on additional relevance in cases involving extraterritorial conduct, because legislative jurisdiction under the Commerce Clause or statutory reach under the Sherman Act or FTAIA require some harmful effect in the United States. Thus, for example, a naked cartel abroad can be made subject to a criminal indictment and per se treatment. However, the government must show a sufficient effect justifying invocation of United States law. Nevertheless, requiring this effect is quite different from requiring full rule of reason treatment for naked cartel activity.

Keywords: antitrust, cartels, international, criminal law, foreign relations, comity, per se

Suggested Citation

Hovenkamp, Herbert J., Extraterritorial Criminal Jurisdiction under the Antitrust Laws (February 27, 2013). U Iowa Legal Studies Research Paper No. 13-14. Available at SSRN: https://ssrn.com/abstract=2220911 or http://dx.doi.org/10.2139/ssrn.2220911

Herbert J. Hovenkamp (Contact Author)

Univ. of Pennsylvania Law and Wharton Business ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
319-512-9579 (Phone)

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