Author: Jarod Bona
Just because your company isn’t based in the United States doesn’t mean it can ignore US antitrust law. In this interconnected world, there is a good chance that if you produce something, the United States is a market that matters to your company.
For that reason, I offer five points below that attorneys and business leaders for non-U.S. companies should understand about US antitrust law.
But maybe you aren’t from a foreign company? Does that mean you can click away? No. Keep reading. Most of the insights below matter to anyone within the web of US antitrust law.
This original version of this article is cross-posted in both English and French at Thibault Schrepel’s outstanding competition blog Le Concurrentialiste.
1. Two federal and many state agencies enforce antitrust laws in the United States
The United States government has two separate antitrust agencies—the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ). The FTC is an independent federal agency controlled by several Commissioners, while the Antitrust Division of the DOJ is part of the Executive Branch, under the President.
Both of them enforce federal antitrust laws (among other laws). Their jurisdictions technically overlaps, but they tend to have informal agreements between each other for one or the other to handle certain industries or subjects. If you are part of a major industry, your antitrust lawyer may be able to tell you whether the DOJ or FTC is likely to oversee competition issues in your field.
The Antitrust Division of the DOJ is the only one of the two to enforce the criminal antitrust laws, so if you are entangled in a cartel investigation, you will likely hear from them. By the way, if you want to learn about antitrust cartels, read my friend Bob Connolly’s excellent blog Cartel Capers.
Both the DOJ and FTC review mergers and acquisitions (including joint ventures), once again informally divided by subject. If you have a significant transaction in the United States, make sure you determine whether you must prepare a Hart-Scott-Rodino Act filing with the US antitrust agencies. And, in the meantime, read this article about how to avoid ten minefields in your HSR filing to the antitrust agencies. And this article about private equity companies, small transactions, and HSR rules.
Besides the federal antitrust laws, the Attorney Generals of the many states can enforce their own state antitrust laws. Many of these laws pattern or mimic the federal antitrust laws, but some of them have important differences, like the Cartwright Act in California.
This federal/state distinction is particularly an issue when it comes to resale price maintenance agreements.
You should also know that the position of State Attorney General is often a stepping-stone to running for Governor. And you will often see politically ambitious attorney generals leading (or more accurately following) antitrust pursuits once a federal antitrust agency has announced an antitrust investigation. So if you are ensnared in a federal investigation, be ready for some state antitrust activity as well. If this is your situation, read our article about what I call an antitrust blizzard.
3. The Federal Courts ultimately decide antitrust cases
The federal antitrust agencies play a significant role in US antitrust enforcement. But compared to the EU and other international jurisdictions, the courts in the US are much more important. In most jurisdictions, the antitrust agency is the center of the antitrust and competition universe. But in the United States, the federal court decides everything.
If a US antitrust agency wants to pursue a claim, it must ultimately either file a claim in court or have its claim upheld in court, perhaps after administrative proceedings in the case of the FTC. The latter may not necessarily differ from other jurisdictions, but if you come from Europe or elsewhere, it might surprise you how relatively little the courts defer to the antitrust agencies.
Sure, there is some deference and if an appellate court is reviewing an FTC administrative ruling, they will formally defer on the facts to a certain extent. But the courts are independent and they make the decisions. And the federal judges—with lifetime appointments—have no trouble concluding that a federal antitrust agency (or any other agency, for that matter) is wrong.
That is not to say that the agencies don’t matter—an investigation is expensive and time-consuming. But when you receive that tap on the shoulder from your friendly investigator, you need not necessarily concede everything and beg for mercy. If you are right on the facts and the law, you might consider taking your chance in court. But call an antitrust attorney first.
3. Sometimes it’s okay to have a monopoly
If you are accustomed to antitrust and competition law in Europe, for example, you probably consider that having “dominance,”—the EC term for monopoly—entails special duties. And that word—“duty”—is important. It represents a different perspective on antitrust than prevails in the United States.
I’ll try to explain. In the United States, a monopolist, or dominant company, cannot engage in certain conduct that a non-monopolist might take without consequence. That is, there are certain types of claims under Section 2 of the Sherman Act that aren’t available unless the defendant has monopoly power. But in the United States, we don’t think of this as a positive “duty” of a monopolist, as if it must give something up because of its great riches.
Instead, we recognize that, under accepted economic theory, absent monopoly power, certain conduct simply doesn’t cause anticompetitive harm. It is not that monopolists have extra responsibilities, it is that an entity—no matter what its market position—does not harm competition by certain conduct unless it has monopoly power. And without harm to competition, antitrust enforcement has no place.
In Europe and elsewhere, there is a moral component to this “duty” of a dominant company not to take certain action that doesn’t exist in the United States.
I don’t know the exact reason for this distinction, but I suspect it stems from two factors: (1) economics has served as a foundation for antitrust and competition law for a longer period in the US than in Europe; and (2) the United States is more libertarian and free market than Europe.
Of course, in the United States, there seems to be a resurgence of anti-monopoly sentiment brewing, so I wouldn’t be surprised to see the United States move the direction of Europe when it comes to monopolization enforcement.
4. It might surprise you that you are subject to the US antitrust laws
The Foreign Trade Antitrust Improvements Act (FTAIA) limits the extraterritorial scope of US antitrust law by excluding conduct involving non-import trade or commerce with foreign nations. Well, that doesn’t sound so bad, right?
It doesn’t until you keep reading and see that there is a “domestic injury” exception that could swallow the limit. If the foreign anticompetitive conduct has a “direct, substantial, and reasonably foreseeable effect” on US commerce and this effect gives rise to plaintiff’s claim, the FTAIA limits don’t apply. If you want to learn more about how the FTAIA works, I recommend that you read the many articles on the topic at Robert Connolly’s Cartel Capers Blog.
The exact interpretation and scope of this exception is currently in dispute among the federal appellate courts. Indeed, we’ve recently litigated it ourselves in one of our cases in which we are defending an antitrust class action. But the bottom line is that more conduct than you probably realized is subject to US antitrust jurisdiction. So be careful and get advice. Don’t just assume that the US courts and agencies don’t have jurisdiction.
5. Much of US antitrust law is enforced through private antitrust lawsuits
Most jurisdictions do not have near the private antitrust litigation that exists in the United States. This is a surprise for many foreign companies that are accustomed to agency-centric antitrust models.
In the US, an agency investigation often leads to dozens of private antitrust lawsuits against the targets filed throughout the country. One antitrust agency investigation can spawn a multi-front war for the company in several jurisdictions. Class-action antitrust litigation is big business in the United States. You can read about the requirements for class-certification in an antitrust class action here.
At the same time, companies commonly sue each other over antitrust violations. Indeed, companies often wage business competition through antitrust (and intellectual property) lawsuits.
It might also surprise you how the litigation works. Discovery is wide-ranging and extensive. You will have to produce a lot of documents; and you will see a lot of the other side’s documents. This is often a shock to non-US companies that litigate.
While it is reflexive to fear the unknown and unfamiliar, if you are trying to gain a foothold in a US market, but another company or group of companies is keeping you from competing, you should consider whether you have an antitrust claim. You just might.
If anything involving antitrust comes up, please feel free to contact us to discuss whether we can help you. We litigate as plaintiffs and defendants, handle antitrust issues for mergers and acquisitions, and offer antitrust counseling.