US courts clarify stance on Foreign Anti-Competitive Conduct

Whilst the Sherman Act is designed to protect the competitiveness of the US market only, the recent case Biocad v. F. Hoffman-La-Roche Ltd. proves that in fact, foreign manufacturers are not out of reach.

The case involved the Foreign Trade Antitrust Improvement Act (FTAIA), which outlines exceptions to the jurisdictional limitations of the Sherman Act. This means that defendants can be held liable for conduct which involves import or export trade or commerce. The underlying principle of the Sherman Act is to prevent anticompetitive practice, and this remains to be of fundamental importance when the Foreign Trade Antitrust Improvement Act is considered.

FTAIA makes clear the international jurisdictional reach of the Sherman Act. In particular, the Act outlines that the Sherman Act does not apply to conduct involving trade or commerce with foreign nations, except where the conduct has a ‘direct, substantial, and reasonably foreseeable effect’ on:

  • Commerce or trade not with foreign nations
  • Import commerce or import trade with foreign nations

or

  • Export commerce or trade with foreign nations, where a person is engaged in such
  • Commerce or trade in the United States

The Supreme Court in the past has sought to clarify the exceptions and the legislative intent. The Court explained that FTAIA seeks to make clear to American exporters and firms conducting business abroad, that the Sherman Act does not prevent them entering into anticompetitive practices abroad, so long as there is no negative effect on the US market.

In the Biocad case, heard in a New York Federal court on September 30 2017, the Court further clarified how the FTAIA would be applied. Biocad, the Russian pharma manufacturer, sued Hoffman La Roche for engaging in anticompetitive practices. The conduct in question allegedly prevented Biocad from entering the US oncological pharma market. The Court found that the FTAIA barred Biocad’s claims. The Court outlined that not only did Biocad not have standing, but that the FTAIA applied only to conduct which would have an immediate effect on the US market – not a future or potential effect.

It is clear that foreign activities will continue to have a potential effect on US markets, and should be considered under antitrust law. However, the recent Biocad case assists in setting out clear boundaries as to when the FTAIA will apply.

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