Posts Tagged Effects doctrine

The Foreign Trade Antitrust Improvements Act (“FTAIA”): How does one decide jurisdiction in competition cases.

Whether the US’ Foreign Trade Antitrust Improvements Act (“FTAIA”) is jurisdictional or rather establishes a substantial condition on the merits under the US Sherman Act (its main anti-trust law) has been extensively debated and arguments for or against now also rely on the seminal Morrison litigation (emphasising the need to draw a careful line between true jurisdictional limitations and other types of rules).

The FTAIA provides in short that the Sherman Act (the main source of US anti-trust or ‘competition’ law) shall not apply to conduct involving trade or commerce (other than import trade or import commerce) with foreign nations unless – (1) such conduct has a direct, substantial, and reasonably foreseeable effect – (A) on trade or commerce which is not trade or commerce with foreign nations, or on import trade or import commerce with foreign nations; or (B) on export trade or export commerce with foreign nations, of a person engaged in such trade or commerce in the United States; and (2) such effect gives rise to a claim under the Sherman Act.

In Lotes v Foxconn, Scheindlin USDJ for the US District Court of New York rejected jurisdiction and found FTAIA to be of a jurisdictional nature. Plaintiff and defendant are Chinese corporations, competing in the USB connector market. Neither of them sell or manufacture the connector in the United States, however Lotes, plaintiff, argues that the management by defendant of its patents effectively forecloses Lotes from gaining a foothold in inter alia the US market. Judge Scheindlin found there to be a disconnect between the relevant foreign market (in competition terms) in which the defendant is alleged to create a monopoly (the Chinese market in USB 3.0 connectors), and the US market supposedly affected by the attempted monpolisation.

At the level of competition authorities, the issue of jurisdiction is sometimes managed using comity considerations in inter-State agreements [such as the US -EU agreements: see here and here]. These agreements employ some form of an effects and comity doctrine. Of course where enforcement of competition law is sought through private action, these agreements do not apply, leaving courts to having to apply their standard jurisdictional (or are they – see above) rules. This is no different in the EU, albeit that jurisdiction there is much easier determined, typically on the basis of corporate domicile. What (competition) law applies, is regulated through an EU equivalent, in the Rome II Regulation, of the US’ minimum contacts doctrine.

Geert.

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