Recent developments in the application of federal antitrust laws indicate that foreign companies may be held liable for civil and criminal violations based on activity occurring entirely overseas. Such activity is actionable in the United States even where the conduct is wholly lawful in the country of origin.
In the recent case of United States v. Nippon Paper Industries Co., Ltd., 1997 WL 109199 (1st Cir. 1997), the United States Court of Appeals refused to dismiss a federal criminal indictment against a Japanese manufacturer of facsimile paper, Nippon Paper Industries, Co., Ltd. ("NPI"). The indictment alleged that NPI had participated in a conspiracy to fix the price of thermal fax paper for the North American market in violation of the Sherman Act, a federal antitrust statute. NPI sought dismissal on the ground that its alleged conduct occurred entirely in Japan, and therefore was not subject to the jurisdiction of United States courts.
The First Circuit rejected NPI's argument, however, and held that foreign activities that violate the Sherman Act may be the subject of civil and criminal liability in the United States so long as the conduct was intended to have, and did in fact have, substantial effects in this country.
The Court relied heavily on a recent opinion of the United States Supreme Court. In that case, Hartford Fire Ins. Co. v. California, 509 U.S. 764, 125 L.Ed 2d 612 (1993), a group of British reinsurance companies stood accused of violating the Sherman Act through a conspiracy to limit the availability of certain types of insurance coverage in the United States.
As in the Nippon Paper Industries case, all of the alleged unlawful conduct occurred outside of the United States. The reinsurers therefore asserted that the United States courts should decline to exercise jurisdiction under the principle of international comity.
The Supreme Court rejected this argument and stated:
"[I]t is well established by now that the Sherman Act applies to foreign conduct that was meant to produce and did in fact produce some substantial effect in the United States." 125 L.Ed. 2d at 638.
Moreover, while the Court acknowledged that application of United States antitrust laws to the British reinsurers could lead to "significant conflict with English law and policy," the principle of comity was ineffective where adherence to foreign law did not compel violation of American law. Id. at 640-641.
The recent settlement of a major class-action lawsuit further demonstrates the dangers of incurring antitrust liability for wholly foreign activities. See In re Amino Acid Lysine Antitrust Litigation, 1996 WL 164434 (N.D.Ill. 1996). In that case, two Japanese companies agreed to pay more than $20 million to settle charges that they conspired with Archer-Daniels-Midland Co. to fix the price of synthetic lysine, a food additive used in the agricultural industry. The most damaging evidence appeared to be videotapes of company executives discussing illegal sales targets to limit supply during meetings held in various Asian and European cities.
These cases demonstrate the need for all foreign companies to comply with United States antitrust and unfair competition laws while planning their strategies for marketing products in this country.