Empagran SA, et al v. F Hoffman-Laroche, et al, No. 01-7115 (D.C. Cir. 2003)

Annotate this Case

The court issued a subsequent related opinion or order on November 2, 2004.
The court issued a subsequent related opinion or order on June 28, 2005.

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 9, 2002 Decided January 17, 2003

No. 01-7115

Empagran S.A., et al.,

Appellants

v.

F. Hoffman-LaRoche, Ltd., et al.,

Appellees

Appeal from the United States District Court

for the District of Columbia

(No. 00cv01686)

Paul T. Gallagher argued the cause for appellants. With

him on the briefs was Michael D. Hausfeld. Ann C. Yahner

entered an appearance.

Charles S. Duggan argued the cause for appellees. With

him on the brief were Arthur F. Golden, Bruce L. Montgom-

ery, Stephen Fishbein, Tyrone C. Fahner, Andrew S. Maro-

vitz, John M. Majoras, Lawrence Byrne, Michael L. Denger,

D. Stuart Meiklejohn, Laurence T. Sorkin, Roy L. Regozin,

Paul P. Eyre, Marcia E. Marsteller, Donald I. Baker, W.

Todd Miller, Alice G. Glass, Peter E. Halle, Thomas J. Lang,

James R. Weiss, Elizabeth W. Fleming, Craig M. Walker,

Fred W. Reinke, Thomas M. Mueller, Michael O. Ware,

Aileen Meyer, Sutton Keany, Bryan Dunlap, Martin Freder-

ic Evans, Karen N. Walker, Moses Silverman, Kevin R.

Sullivan, and Jeffrey S. Bucholtz. Thomas S. Martin, Kate

Usdrowski, Matthew Solum, Carl W. Riehl and John S.

Kiernan entered appearances.

Before: Edwards, Henderson, and Rogers, Circuit Judges.

Opinion for the Court filed by Circuit Judge Edwards.

Dissenting opinion filed by Circuit Judge Henderson.

Edwards, Circuit Judge: The action in this case was filed

under section 1 of the Sherman Act, 15 U.S.C. s 1, sections 4

and 16 of the Clayton Act, 15 U.S.C. s 15 and 26, the

antitrust laws of foreign nations, and international law, on

behalf of all foreign purchasers of certain vitamins, vitamin

premixes, and bulk vitamin products and precursors, against

a number of corporations, both foreign and domestic, who

distribute and sell these vitamin products around the world.

Appellants contend that appellees engaged in an over-arching

worldwide conspiracy to raise, stabilize, and maintain the

prices of vitamins; that this cartel operated on a global basis

and affected virtually every market where appellees operated

worldwide; and that appellees' unlawful price-fixing conduct

had adverse effects in the United States and in other nations

that caused injury to appellants in connection with their

foreign purchases of vitamin products. Appellees moved to

dismiss the action in the District Court, asserting that the

court lacked subject matter jurisdiction under the federal

antitrust laws, because the injuries plaintiffs sought to re-

dress were allegedly sustained in transactions that lack any

direct connection to United States commerce. The District

Court granted the motion to dismiss and appellants now

appeal.

This appeal requires us to interpret the Foreign Trade

Antitrust Improvements Act ("FTAIA"), 15 U.S.C. s 6a, to

determine the jurisdictional reach of the federal antitrust

laws. FTAIA, which amended the Sherman Act, provides that

the Sherman Act "shall not apply to conduct" involving trade

or commerce with foreign nations unless "such conduct has a

direct, substantial, and reasonably foreseeable effect" on

trade or commerce in the United States, and "such effect

gives rise to a claim" under the provisions of the Sherman

Act. Section 6a(1) of FTAIA makes it clear that our federal

antitrust laws regulate foreign conduct only where that con-

duct has the proscribed "effects" on domestic or foreign

United States commerce. And s 6a(2) of FTAIA provides

that the antitrust laws are inapplicable unless the effect of

extraterritorial conduct on United States commerce "gives

rise to a claim" under the Sherman Act. The District Court

held that, under FTAIA, a plaintiff must establish that the

injuries it seeks to remedy actually arose from the anticom-

petitive effects of the defendants' conduct on United States

commerce. In other words, it is not enough for a plaintiff to

show that other persons were injured by such United States

effects; the United States effects themselves must give rise

to plaintiff's claim. This restrictive view of FTAIA's jurisdic-

tional reach finds support in the Fifth Circuit. See Den

Norske Stats Oljeselskap As v. Heeremac Vof, 241 F.3d 420

(5th Cir. 2001).

Appellants contend that the District Court misconstrued

FTAIA. According to appellants, FTAIA applies to "con-

duct" that has a "direct, substantial, and reasonably foresee-

able effect" on United States commerce, if - not merely to the

extent that - the requisite United States effects are found.

Thus, according to appellants, Congress did not limit jurisdic-

tion to "the same claim" as that on which the jurisdictional

effects are based. Rather, Congress provided only that "a"

claim cognizable under the Sherman Act must exist. Once a

jurisdictional nexus exists, FTAIA does not limit the types of

plaintiffs who may seek relief. Thus, according to appellants,

it does not matter that the transactions in which they pur-

chased vitamins took place outside of United States com-

merce. This less restrictive view of FTAIA's jurisdictional

reach finds support in the Second Circuit. See Kruman v.

Christie's Int'l PLC, 284 F.3d 384 (2d Cir. 2002).

In the alternative, appellants claim that their complaint

states a viable cause of action even under the District Court's

restrictive view of FTAIA. Appellants contend that appellees

caused injury to purchasers outside of the United States as a

result of the anticompetitive effects of price changes and

supply shifts in United States commerce. Not only was

United States commerce directly affected by the worldwide

conspiracy, appellants say, but the cartel raised prices around

the world in order to keep prices in equilibrium with United

States prices in order to avoid a system of arbitrage. Thus,

according to appellants, the "fixed" United States prices acted

as a benchmark for the world's vitamin prices in other

markets. On this view of the alleged facts, appellants claim

that the foreign plaintiffs were injured as a direct result of

the increases in United States prices even though they

bought vitamins abroad. The District Court did not address

this alternative theory of jurisdiction. Neither the Second

Circuit nor the Fifth Circuit embrace this view of FTAIA's

jurisdictional reach, nor do we. In light of our disposition in

favor of appellant on other grounds, we find it unnecessary to

address this "alternative" theory of subject matter jurisdic-

tion.

We can find no "plain meaning" in s 6a(2) of FTAIA. Nor

do we find any easy resolution of this case by reference to the

decisions of the Second and Fifth Circuits. The majority

opinion in Den Norske Stats Oljeselskap As v. Heeremac Vof

seems to us to endorse a view of FTAIA that is overly rigid,

in light of the words of the statute and relevant portions of

the legislative history. And, as we explain below, the opinion

in Kruman v. Christie's International PLC seems to reach

too far in its view of subject matter jurisdiction. Our view of

the statute falls somewhere between the views of the Fifth

and Second Circuits, albeit somewhat closer to the latter than

the former.

We hold that where the anticompetitive conduct has the

requisite harm on United States commerce, FTAIA permits

suits by foreign plaintiffs who are injured solely by that

conduct's effect on foreign commerce. The anticompetitive

conduct itself must violate the Sherman Act and the conduct's

harmful effect on United States commerce must give rise to

"a claim" by someone, even if not the foreign plaintiff who is

before the court. Although the language of s 6a(2) does not

plainly resolve this case, we believe that our holding regard-

ing the jurisdictional reach of FTAIA is faithful to the

language of the statute. We reach this conclusion not only by

virtue of our literal reading of the statute, but also in light of

the statute's legislative history and underlying policies of

deterrence emanating from the Supreme Court's decision in

Pfizer, Inc. v. Government of India, (1978).

Because the foreign plaintiffs here have alleged that the

United States effects of appellees' cartel give rise to antitrust

claims by parties injured in the United States from transac-

tions occurring in the United States, we hold that subject

matter jurisdiction is proper. We also find that appellants

have standing to sue under the antitrust laws. We therefore

reverse the District Court's decision, vacate the judgment

against appellants, and remand the case for further proceed-

ings consistent with this opinion.

I. Background

Section 1 of the Sherman Act makes unlawful "[e]very

contract, combination ... or conspiracy, in restraint of trade

or commerce among the several States, or with foreign

nations...." 15 U.S.C. s 1. Section 4 of the Clayton Act

confers a cause of action on "any person who shall be injured

in his business or property by reason of anything forbidden in

the antitrust laws," and provides for treble damages. Id.

s 15(a). Section 16 of the Clayton Act entitles "[a]ny person,

firm, corporation or association ... to sue for and have

injunctive relief ... against threatened loss or damage by a

violation of the antitrust laws...." Id. s 26. In 1982,

Congress enacted FTAIA, which amended the Sherman Act

to make the Sherman Act inapplicable to non-import foreign

commerce unless the conduct has a "direct, substantial, and

reasonably foreseeable effect" on domestic commerce, and

"such effect gives rise to a claim under" the Sherman Act.

Id. s 6a. The text of FTAIA provides, in full:

Sections 1 to 7 of this title shall not apply to

conduct involving trade or commerce (other than

import trade or import commerce) with foreign na-

tions 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

provisions of sections 1 to 7 of this title, other than

this section.

If sections 1 to 7 of this title apply to such conduct

only because of the operation of paragraph (1)(B),

then sections 1 to 7 of this title shall apply to such

conduct only for injury to export business in the

United States.

Id.

Appellees ("vitamin companies") are manufacturers and

distributors of vitamins and vitamin products. Appellants

("foreign purchasers" or "foreign plaintiffs") are foreign cor-

porations domiciled in various foreign countries, who pur-

chased vitamins abroad from the vitamin companies or their

alleged co-conspirators from January 1, 1988 to February

1999, for delivery outside the United States. The plaintiffs in

this case originally filed a class action suit on behalf of foreign

and domestic purchasers of vitamins, alleging "a massive and

long-running conspiracy" among the vitamin companies and

their co-conspirators "with the purpose and effect of fixing

prices, allocating market share, and committing other unlaw-

ful practices designed to inflate the prices of various vitamins

... sold to the Plaintiffs and other purchasers both within

and outside the United States." Amend. Compl. at p 1, Joint

Appendix ("J.A.") 15-16. The plaintiffs sought injunctive

relief and damages under s 1 of the Sherman Act; ss 4 and

16 of the Clayton Act; the antitrust laws of relevant foreign

nations; and international law. Id. at p 7, J.A. 19.

The vitamin companies moved to dismiss the suit as to the

foreign plaintiffs pursuant to Fed. R. Civ. P. 12(b)(1) for lack

of subject matter jurisdiction under the federal antitrust laws,

and for lack of standing under the federal antitrust laws.

They also urged the District Court to decline to exercise

supplemental jurisdiction over the foreign law claims, and to

dismiss the international law claims for failure to state a claim

upon which relief may be granted. The District Court held

that it lacked subject matter jurisdiction under FTAIA over

the foreign plaintiffs' claims. See Empagran S.A. v. F.

Hoffman-La Roche, Ltd., 2001 WL 761360, at 2-4 (D.D.C.

June 7, 2001). The "critical question in this case," the

District Court stated, "is whether allegations of a global price

fixing conspiracy that affects commerce both in the United

States and in other countries gives persons injured abroad in

transactions otherwise unconnected with the United States a

remedy under our antitrust laws." Id. at 2. The District

Court held that, because the conspiracy's effect on U.S.

commerce did not cause the foreign purchasers' injury, the

court did not have jurisdiction over the foreign purchasers'

claims. See id. at 2-4.

Because the District Court dismissed the foreign purchas-

er's federal claims for lack of subject matter jurisdiction, it

found that it did not need to reach the issue of standing with

respect to the foreign plaintiffs. See id. at 5. The District

Court declined to exercise supplemental jurisdiction over the

foreign purchasers' foreign law claims, because "these foreign

law claims raise novel and complex issues of foreign law, the

court has already dismissed all federal claims brought by the

foreign plaintiffs for lack of subject matter jurisdiction," and

because of "comity and efficiency reasons." Id. at 8. Finally,

the District Court dismissed the foreign purchasers' claims

under customary international law for failure to state a claim,

because the court could not find the existence of a customary

international law proscribing the conduct alleged. See id. at

9. The foreign purchasers filed an interlocutory appeal.

At the time of its decision, the District Court deferred

ruling on the defendants' motion to dismiss the domestic

plaintiffs' federal antitrust claims, and directed the domestic

plaintiffs to supplement their complaint to provide more

detailed factual allegations. Id. at 4, 6. At the suggestion of

the District Court, for practicality, see id. at 7 n.5, the

domestic plaintiffs in the case subsequently entered into a

court-approved stipulation that transferred their claims to

another action pending before the District Court, Procter &

Gamble Co. v. BASF AG, No. 99-3046 (M.D.L. No. 1285),

which involved similar claims against substantially the same

defendants. The parties thereby agreed that the domestic

plaintiffs had no pending claims in the instant case. On

September 10, 2001, the District Court granted the defen-

dants' motion for an order directing entry of final judgment,

and on April 26, 2002, the District Court entered final judg-

ment for the defendants in the instant case. The foreign

plaintiffs' appeal is therefore no longer interlocutory.

II. Analysis

A. Subject Matter Jurisdiction

This court reviews de novo the District Court's dismissal of

a complaint for lack of subject matter jurisdiction. Nat'l

Taxpayers Union, Inc. v. United States, 68 F.3d 1428, 1432

(D.C. Cir. 1995). A complaint may be dismissed for lack of

subject matter jurisdiction only if " 'it appears beyond doubt

that the plaintiff can prove no set of facts in support of his

claim which would entitle him to relief.' " Sinclair v. Klein-

dienst, 711 F.2d 291, 293 (D.C. Cir. 1983) (quoting Conley v.

Gibson, , 45-46 (1957)). In our review, this court

assumes the truth of the allegations made and construes them

favorably to the pleader. Scheuer v. Rhodes, ,

236 (1974).

In this case, the foreign purchasers, who bought vitamins

exclusively outside the United States, allege that the vitamin

companies conspired to fix vitamin prices around the world,

and that the foreign purchasers paid inflated prices for

vitamins abroad as a result of the global conspiracy. FTAIA

makes the Sherman Act inapplicable to conduct in foreign

commerce unless the conduct has "a direct, substantial, and

reasonably foreseeable effect" on domestic commerce and

"such effect gives rise to a claim under" the Sherman Act.

See 15 U.S.C. s 6a(1).

As an initial matter, the parties appear to dispute the scope

of the "conduct" that should be considered for our FTAIA

analysis. Essentially, appellants argue that the relevant con-

duct is the "massive international cartel, exercising global

market power." Appellants' Br. 19. Appellees argue that

the relevant conduct is solely the market transactions be-

tween them and the foreign plaintiffs overseas. Appellees'

Br. 20-21. Both the Second and Fifth Circuits have adopted

appellants' approach, and appellants' approach is correct.

See Kruman, 284 F.3d at 398; Den Norske, 241 F.3d at 426.

Indeed, the Kruman court rejected a narrow definition of

"conduct" as "[t]he precise acts that caused injury," and

instead adopted a broader definition of "conduct" as "acts

that are illegal under the Sherman Act," that is, the interna-

tional price-fixing conspiracy. Kruman, 284 F.3d at 398.

The complaint in this case alleges an international price-fixing

conspiracy among the vitamin companies, and appellees "do

not contest that the vitamin cartel produced substantial ef-

fects in the United States" for the purpose of this appeal.

Oral Argument Transcript, at 30-31. In light of this conces-

sion by appellees, it is unnecessary for us to explore further

the precise parameters of the definition of "conduct," since

there is no real dispute that the vitamin companies' conduct

had "a direct, substantial, and reasonably foreseeable effect"

on U.S. commerce. We therefore accept that the "direct,

substantial, and reasonably foreseeable effect" requirement

under s 6a(1) of FTAIA is met. Additionally, in light of

appellees' concession that the vitamin cartel produced sub-

stantial effects on U.S. commerce, it is unnecessary for us to

address appellees' argument that regulating foreign business

transactions would exceed the powers granted to Congress

under the Commerce Clause. See Appellees' Br. 16-17.

The precise issue presented in this appeal is whether the

"gives rise to a claim" requirement under s 6a(2) of FTAIA

authorizes subject matter jurisdiction where the defendant's

conduct affects both domestic and foreign commerce, but the

plaintiff's claim arises only from the conduct's foreign effect.

In other words, the question is whether FTAIA precludes

actions under the Sherman Act unless a plaintiff shows that

the injuries it seeks to remedy arise from the anticompetitive

effects of the defendant's conduct on U.S. commerce; or,

alternatively, is it enough for a plaintiff to show that the

anticompetitive effects of the defendant's conduct on U.S.

commerce give rise to an antitrust claim under the Sherman

Act by someone, even if not the plaintiff who is before the

court.

The Supreme Court first addressed the foreign reach of the

Sherman Act in American Banana Co. v. United Fruit Co.,

(1909) (Holmes, J.), which held that the Sherman

Act did not apply to conduct occurring outside the United

States. Eighteen years later, the Court moderated this

approach, and held that the Sherman Act authorized jurisdic-

tion over foreign defendants, as long as some of the defen-

dants' conduct occurred within the United States and the

conduct affected domestic commerce. See United States v.

Sisal Sales Corp., , 275-76 (1927).

In 1945, in an important opinion by Judge Learned Hand,

the Second Circuit held that a federal court has jurisdiction

over foreign conduct as long as the conduct was intended to,

and actually did, affect U.S. commerce. See United States v.

Aluminum Co. of Am., 148 F.2d 416, 443-44 (2d Cir. 1945)

("Alcoa"). Judge Hand said that a "state may impose liabili-

ties, even upon persons not within its allegiance, for conduct

outside its borders that has consequences within its borders

which the state reprehends." Id. at 443. Under Alcoa,

jurisdiction depends upon whether the conduct had an effect

on domestic commerce, not where the conduct took place.

"[C]onduct which has no consequences within the United

States" does not come within the reach of U.S. antitrust laws.

Id. Alcoa's "effects test" is now well accepted. See, e.g.,

Laker Airways Ltd. v. Sabena, Belgian World Airlines, 731 F.2d 909, 922 (D.C. Cir. 1984) ("It has long been settled law

that a country can regulate conduct occurring outside its

territory which causes harmful results within its territory.");

see also IA Philip E. Areeda & Herbert Hovenkamp, Anti-

trust Law p 270, at 336 (2d ed. 2000) ("The central point, now

well established, is that conduct, whether at home or abroad,

can be reached by our antitrust laws when it affects competi-

tion within the United States or export competition from the

United States."). The Supreme Court expressly embraced

the "effects test" in Hartford Fire Insurance Co. v. Califor-

nia, (1993), stating that "it 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." Id. at 796 (citing Matsushita

Elec. Indus. Co. v. Zenith Radio Corp., , 582 n.6

(1986); Alcoa, 148 F.2d at 444).

In 1982, Congress enacted FTAIA, to "encourage the busi-

ness community to engage in efficiency producing joint con-

duct in the export of American goods and services." H.R.

Rep. No. 97-686, at 2 (1982). As the Supreme Court has

noted, "FTAIA was intended to exempt from the Sherman

Act export transactions that did not injure the United States

economy." Hartford Fire Ins., 509 U.S. at 796-97 n.23 (cita-

tions omitted). FTAIA was also passed to enact a "single,

objective test - the 'direct, substantial, and reasonably fore-

seeable effect' test" that "will serve as a simple and straight-

forward clarification of existing American law...." H.R.

Rep. No. 97-686, at 2. FTAIA thus endorsed Alcoa's "effects

test." See id. at 5 ("Since Judge Learned Hand's opinion in

[Alcoa], it has been relatively clear that it is the situs of the

effects as opposed to the conduct, that determines whether

United States antitrust law applies.").

Since the enactment of FTAIA, the D.C. Circuit has had

one occasion to apply the statute. In Caribbean Broadcast-

ing System, Ltd. v. Cable & Wireless PLC, 148 F.3d 1080,

1086-87 (D.C. Cir. 1998), the court considered whether

FTAIA authorizes subject matter jurisdiction over a Caribbe-

an radio station's claim that a competing Caribbean radio

station violated the Sherman Act by falsely telling U.S.

advertisers that its own radio signal reached the entire

Eastern Caribbean so that the advertisers would believe that

it alone could fulfill their advertising needs. The precise

question was whether the complaint by a foreign plaintiff

against a foreign defendant adequately alleged that the lat-

ter's anticompetitive conduct had a "direct, substantial, and

reasonably foreseeable effect" on U.S. commerce, as required

by FTAIA's first prong. This court found that the anticom-

petitive conduct of the defendant radio station harmed the

U.S. advertisers who had to pay higher prices because of it.

We stated: "In this context it appears that antitrust injury to

[the plaintiff] is ultimately a harm to U.S. purchasers of radio

advertising. By keeping [the plaintiff] out of the market, [the

defendant] denied such purchasers the benefit of competi-

tion." Id. Thus, we held that FTAIA authorized subject

matter jurisdiction in that case.

The decision in Caribbean did not expressly address

FTAIA's second prong - requiring that the effects of the

anticompetitive conduct on U.S. commerce "give[ ] rise to a

claim under" the antitrust laws - which is at issue in the

instant appeal. However, in the course of addressing the

first prong's "direct, substantial, and reasonably foreseeable

effect" requirement, the Caribbean decision noted that the

foreign radio station's "antitrust injury ... is ultimately a

harm to U.S. purchasers of radio advertising." Id. This

conclusion followed from the facts of that case, in which the

foreign company's injury and the U.S. purchasers' injury

were two sides of the same coin: the defendant radio station's

false representations to its U.S. advertisers had the effect of

misleading the U.S. advertisers, and causing them to buy

advertising from the false advertiser at inflated prices; these

purchases based on false information were what shut the

plaintiff radio station out of the advertising market. Thus, it

is possible to read Caribbean to have assumed, on the facts of

that case, that the effect of the conduct on U.S. commerce

gave rise to the plaintiff's claim. If so, Caribbean simply did

not address the question at issue in the instant case, where

the effect of the vitamin companies' conduct on U.S. com-

merce does not give rise to the plaintiffs' claim for redress.

There is another equally plausible way to read the Caribbe-

an decision. Although the foreign plaintiff's loss of opportu-

nity to sell advertising and the higher prices paid by U.S.

advertisers were clearly interrelated, the higher prices paid

by U.S. advertisers did not cause or give rise to the foreign

plaintiff's loss of opportunity to sell advertising. One then

could not say that the U.S. effect "gave rise to" the plaintiff's

claim. It is thus possible that Caribbean impliedly interpret-

ed the "gives rise to a claim" prong of FTAIA to be satisfied

even where the U.S. effect does not "give rise to" the foreign

plaintiff's claim.

We need not determine which of these two readings of

FTAIA's second prong is implied by Caribbean. Both inter-

pretations appear plausible. Compare, e.g., Den Norske, 241 F.3d at 430 ("[T]he effect on United States commerce in

[Caribbean] ... gave rise to the injury suffered by the

plaintiff, a competing radio station - that is, exclusion of the

plaintiff from the market for United States advertising dol-

lars."), with id., 241 F.3d at 436-37 (Higginbotham J, dissent-

ing) ("[Caribbean] did not require that the injury to American

advertisers 'give[ ] rise to' the plaintiff's cause of action; its

determination that the injury gave rise to 'a' claim was

sufficient."). In any event, because Caribbean only addressed

FTAIA's "direct, substantial, and reasonably foreseeable ef-

fect" prong, we hesitate to derive a firm interpretation of the

"gives rise to a claim" prong from that case. The law of the

circuit thus leaves unanswered the question whether FTAIA

requires that the plaintiff's claim arise from the U.S. effect of

the anticompetitive conduct. This is an issue of first impres-

sion in this circuit.

1. Circuit Split

As noted above, the Second and Fifth Circuits have split on

this very question of statutory interpretation. The District

Court in the instant case followed the Fifth Circuit's Den

Norske decision, which held that the federal antitrust laws do

not apply to claims in which the plaintiff's injury does not

arise from the conspiracy's anticompetitive domestic effect.

Den Norske, 241 F.3d at 427. That is, even if a conspiracy

results in higher prices in the United States, that domestic

effect must "give rise to" the plaintiff's injury. By contrast,

the Second Circuit in Kruman held that FTAIA allows suit

by a plaintiff whose injury does not arise from the conduct's

harm to domestic commerce, as long as that conduct's "do-

mestic effect violate[d] the substantive provisions of the Sher-

man Act." Kruman, 284 F.3d at 400. As in the instant case,

the "direct, substantial, and reasonably foreseeable effect"

prong of s 6a(1) was satisfied in those two cases, and the

question at issue was whether the "gives rise to a claim"

prong of s 6a(2) was satisfied where the U.S. effect of the

conduct did not give rise to the plaintiff's claim.

In the Fifth Circuit's Den Norske case, a Norwegian oil

corporation conducting business exclusively in the North Sea

brought an antitrust conspiracy claim against providers of

heavy-lift barge services, alleging that the defendants' con-

duct inflated the plaintiff's operating costs in the North Sea

and also inflated oil prices in the U.S. market. The majority

opinion in Den Norske interpreted the "gives rise to a claim"

prong as demanding that the domestic effect give rise to the

plaintiff's claim, not merely to someone's claim. Den Norske,

241 F.3d at 427. Because the plaintiff's injury arose solely

from the foreign effect, and not from the domestic effect of

the defendant's conduct, the Fifth Circuit found subject mat-

ter jurisdiction lacking.

Judge Patrick Higginbotham dissented, writing that he was

"not persuaded that when illegal conduct produces these

domestic effects, that Congress intended to close the door to

a foreign company injured by the same illegal conduct." Id.

at 431 (Higginbotham J., dissenting). Judge Higginbotham

found that the literal text of the words "gives rise to a claim"

supported jurisdiction: "The word 'a' has a simple and uni-

versally understood meaning. It is the indefinite article....

If the drafters of FTAIA had wished to say 'the claim' instead

of 'a claim,' they certainly would have." Id. at 432. In light

of the purpose of FTAIA "to exempt exporting from antitrust

scrutiny, not to limit the liability of participants in transna-

tional conspiracies that affect United States commerce,"

Judge Higginbotham worried that the majority's "interpreta-

tion of the FTAIA transforms a safe harbor for American

exporters into a boon for foreign cartels that restrain com-

merce in the United States." Id. at 433, 434. Judge

Higginbotham emphasized the deterrence rationale animating

the Sherman and Clayton Acts, and feared that global con-

spiracies that affect U.S. commerce could be inadequately

deterred in the absence of suits by foreign plaintiffs:

Conspirators facing antitrust liability only to plain-

tiffs injured by their conspiracy's effects on the

United States may not be deterred from restraining

trade in the United States. A worldwide price-fixing

scheme could sustain monopoly prices in the United

States even in the face of such liability if it could

cross-subsidize its American operations with profits

from abroad. Unless persons injured by the con-

spiracy's effects on foreign commerce could also

bring antitrust suits against the conspiracy, the con-

spiracy could remain profitable and undeterred.

Id. at 435.

In the Second Circuit's Kruman case, buyers and sellers at

foreign auctions filed suit against the two largest auction

houses, Christie's and Sotheby's, alleging that the auction

houses had conspired to fix prices in the United States and

abroad for their services as auctioneers, and had inflated

commissions. In addressing this claim, the Second Circuit

explained that FTAIA is an amendment to the Sherman Act,

rather than to the Clayton Act, and, as such, focuses only on

the prohibition of a defendant's anticompetitive conduct, rath-

er than on what injury a plaintiff must suffer to bring suit.

Thus, the court reasoned, the argument that FTAIA limits

liability to injury arising out of the conduct's domestic effect

conflates the Clayton Act, to which a plaintiff's injury is

relevant, and the Sherman Act, to which only a defendant's

conduct is relevant. See Kruman, 284 F.3d at 397-99. The

court then interpreted the "gives rise to a claim" language as

requiring only "that the domestic effect violate the substan-

tive provisions of the Sherman Act," rather than "that the

domestic effect give rise to an injury that would serve as the

basis for a Clayton Act action." Id. at 400. The Second

Circuit read Congress' use of the indefinite article in "gives

rise to a claim" to mean that "[t]he 'effect' on domestic

commerce need not be the basis for a plaintiff's injury, it only

must violate the substantive provisions of the Sherman Act."

Id.

The Second Circuit also relied on policy considerations in

interpreting FTAIA. In line with its view that FTAIA

governs what conduct by a defendant is regulated by the

Sherman Act, rather than which plaintiffs can bring suit, the

court reasoned that

when anticompetitive conduct is directed at both

foreign and domestic markets, the success of an

anticompetitive scheme in foreign markets may en-

hance the effectiveness of an anticompetitive scheme

in the domestic market. When a foreign scheme

magnifies the effect of the domestic scheme, and

plaintiffs affected only by the foreign scheme have

no remedy under our laws, the perpetrator of the

scheme may have a greater incentive to pursue both

the foreign scheme and the domestic scheme rather

than the domestic scheme alone. Our markets suf-

fer when the foreign scheme is not deterred because

the domestic scheme may have a greater chance of

success when it is supplemented by the foreign

scheme.

Id. at 403. Thus, the Second Circuit found that "[o]ur

markets can benefit from the additional deterrence of conduct

affecting foreign markets." Id. (citing Pfizer, 434 U.S. at

313-15).

2. FTAIA's Language: "Effect" that "Gives Rise to a

Claim"

Appellants' and appellees' arguments regarding the mean-

ing of FTAIA's "gives rise to a claim" language largely

correspond to the reasoning adopted in the Second Circuit's

and the Fifth Circuit's opinions, respectively. On the Fifth

Circuit's restrictive view of FTAIA, the statute allows suit

only where the plaintiff is injured by the U.S. effects of the

anticompetitive conduct. Den Norske, 241 F.3d at 427. On

the Second Circuit's less restrictive view, the statute also

allows suit where the plaintiff is injured in foreign commerce

by anticompetitive conduct whose "domestic effect ... vio-

lates the Sherman Act," even if the domestic effect of the

conduct does not injure the plaintiff. Kruman, 284 F.3d at

401.

Appellants make two arguments about the language of

FTAIA that we reject. First, echoing the Second Circuit,

appellants argue that the Fifth Circuit's restrictive interpre-

tation of "gives rise to a claim" renders superfluous the

concluding provision of FTAIA, which states that, if the

Sherman Act applies only because the conduct affects "export

commerce or export commerce with foreign nations, of a

person engaged in such trade or commerce in the United

States," 15 U.S.C. s 6a(1)(B), then it applies "to such conduct

only for injury to export business in the United States," id.

s 6a. See Appellants' Br. 22-23; Kruman, 284 F.3d at 396;

Den Norske, 241 F.3d at 432 n.5 (Higginbotham, J., dissent-

ing). In other words, if subsections 1 and 2 of FTAIA

already provide that the Sherman Act applies only where the

U.S. effect gives rise to the plaintiff's injury, why would

Congress need to add the final proviso that, regarding injury

to export commerce, the Sherman Act only applies to injury

to U.S. export commerce?

We think that there is a reading of the final proviso of

FTAIA that would not render it superfluous, even if one were

to adopt the Fifth Circuit's and the District Court's restrictive

interpretation of "gives rise to a claim." The final proviso

could be intended to clarify that, although subsection 1(B)

speaks of a "person engaged in" export commerce, the Sher-

man Act does not extend to all injury sustained by such a

person as a result of the defendant's anticompetitive conduct,

but, rather, only to injury to his export business sustained

within the United States. In other words, the proviso pre-

cludes an exporter from suing for injury to some aspect of his

export business suffered outside the United States. See IA

Areeda & Hovenkamp, supra, p 262, at 360 (explaining that

the final proviso "is designed to make clear that a foreign

firm operating an export business in the United States contin-

ues to be protected by the antitrust laws with respect to that

business but not with respect to its operations outside the

United States"). This limitation would not render the final

proviso superfluous under an interpretation of subsection 2

requiring that the plaintiff be injured by the conduct's domes-

tic effect to be able to sue.

Second, appellants place significance on the fact that, in

providing that the Sherman Act shall not apply to foreign

commerce "unless ... such conduct" has a U.S. effect that

"gives rise to a claim," Congress chose the word "unless"

rather than the phrase "except to the extent that." Appel-

lants contend that "unless" enables the conduct itself to be

actionable so long as the U.S. effect is present, whereas

"except to the extent that" would make the Sherman Act

apply only to the extent that the conduct that causes the U.S.

effect also gives rise to the plaintiffs' claim. See Appellants'

Br. 17-19. This is overreading. Like the District Court, we

are unconvinced that "unless" and "to the extent that" would

have such different meanings in this statute.

At bottom, however, we agree with appellants that s 6a(2)

supports subject matter jurisdiction in this case. Although

both the Second Circuit and the Fifth Circuit found the "gives

rise to a claim" language of s 6a(2) to be plain in opposite

ways, we find that the language does not clearly resolve the

question whether "a claim" means the plaintiff's claim. The

Fifth Circuit's view that "a claim" plainly refers to the

plaintiff's claim must depart from the literal language - "gives

rise to a claim" - and substitute the words "gives rise to the

plaintiff's claim" in order to reach the plain meaning to

which the court subscribes. The Second Circuit construes

broadly Congress' use of the indefinite article in "a claim,"

such that "a claim" really means "civil action ... by the

federal government to enforce or prevent a substantive viola-

tion of the Sherman Act pursuant to 15 U.S.C. s 4"; hence,

the words "gives rise to a claim" mean that the conduct's

domestic effect "only must violate the substantive provisions

of the Sherman Act." Kruman, 284 F.3d at 399-400. We

think that this interpretation of the words "a claim" gives

short shrift to s 6a(2)'s explicit requirement that the domes-

tic effect "give[ ] rise to a claim" - in other words, the

language is far from clear as to whether that requirement can

be satisfied merely by a violation of the Sherman Act, rather

than by antitrust injury to the plaintiffs or others who could

bring a claim under the provisions of the Clayton Act that

create a cause of action for Sherman Act violations.

Our view of the statute falls somewhere between the views

of the Fifth and Second Circuits, albeit somewhat closer to

the latter than the former. We hold that, where the anticom-

petitive conduct has the requisite effect on United States

commerce, FTAIA permits suits by foreign plaintiffs who are

injured solely by that conduct's effect on foreign commerce.

The anticompetitive conduct itself must violate the Sherman

Act and the conduct's harmful effect on United States com-

merce must give rise to "a claim" by someone, even if not the

foreign plaintiff who is before the court. Thus, the conduct's

domestic effect must do more than give rise to a government

action for violation of the Sherman Act, but it need not

necessarily give rise to the particular plaintiff's (private)

claim. This interpretation has the appeal of literalism. Cf.

Den Norske, 241 F.3d at 432 (Higginbotham, J., dissenting)

("The word 'a' has a simple and universally understood mean-

ing.... If the drafters of FTAIA had wished to say 'the

claim' instead of 'a claim,' they certainly would have.").

Although the language of s 6a(2) does not plainly resolve

this case, we believe that our holding regarding the jurisdic-

tional reach of FTAIA is a faithful to the language of the

statute. We reach this conclusion not only by virtue of our

literal reading of the statute, but also in light of the statute's

legislative history and underlying policies of deterrence,

which we address in parts A.4. and A.5., infra. We first

consider the Second Circuit's structural argument in support

of its less restrictive view of s 6a(2).

3. FTAIA's Structure

Appellants adopt the Second Circuit's structural argu-

ment - namely that, because FTAIA amended the Sherman

Act rather than the Clayton Act, FTAIA only speaks to the

question what conduct is prohibited, not which plaintiffs can

sue. See Appellants' Reply Br. 6-7; Kruman, 284 F.3d at

397-400. Because FTAIA is an amendment to the Sherman

Act, this structural argument deems Congress in FTAIA to

have addressed only the Sherman Act's prohibition of anti-

competitive conduct, putting out of view the Clayton Act's

conferral of a cause of action on those injured by Sherman

Act violations. Appellants argue: "Since the focus of the

FTAIA is on the defendants' conduct, which is regulated by

the Sherman Act, it is this conduct alone that violates the

Sherman Act. To require that the injury of domestic pur-

chasers be the basis for the injury suffered by Plaintiffs ...

improperly imports a concept applicable to Section 4 of the

Clayton Act." Appellants' Reply Br. 6-7.

This argument is plausible but ultimately unconvincing.

The Clayton Act, which gives plaintiffs a cause of action

under the Sherman Act, was in effect at the time that FTAIA

was enacted, and FTAIA speaks explicitly of "giv[ing] rise to

a claim under" the Sherman Act. The concept of a claim

arising under the Sherman Act is clearly one that is present

in the Clayton Act's conferral of a cause of action on those

injured by Sherman Act violations. It is thus equally plausi-

ble to think that Congress referred to both prohibited conduct

and plaintiffs' injury, importing concepts from both the Sher-

man and Clayton Acts, in making the nexus of "conduct,"

"effect," and "claim" the key to FTAIA. The view that

FTAIA must be taken to refer only to defendants' conduct

tends to ignore the fact that FTAIA does refer on its face to

the conduct's effect giving rise to a claim, which arguably

refers to a plaintiff's injury. Congress may well have import-

ed a concept from the Clayton Act in amending the Sherman

Act, notwithstanding appellants' and the Second Circuit's

assumption of categorical precision on Congress' part.

The Second Circuit's heavy reliance on this argument led to

its rather expansive holding to the effect that: "Rather than

require that the domestic effect give rise to an injury that

would serve as the basis for a Clayton Act action, subsection 2

of the FTAIA only requires that the domestic effect violate

the substantive provisions of the Sherman Act." Kruman,

284 F.3d at 400. According to the Second Circuit, "a violation

of the Sherman Act is not predicated on the existence of an

injury to a plaintiff. In fact, the only civil action that can be

brought directly under the Sherman Act is one by the federal

government to enforce or prevent a substantive violation of

the Sherman Act pursuant to 15 U.S.C. s 4." Id. at 399.

The Second Circuit thereby held that violation of the Sher-

man Act is sufficient to meet the "gives rise to a claim"

requirement of subsection 2. In the Second Circuit's view,

the words "a claim" in FTAIA mean an action by the govern-

ment, not a private claim. The Second Circuit justified this

view in a footnote, with three arguments: that the definition

of the words "a claim" does not exclude this meaning, id. at

400 (citing Black's Law Dictionary 240 (7th ed. 1999)); that

FTAIA's specific reference to "a claim under the provisions of

sections 1 to 7 of this title" means a claim brought directly

pursuant to the Sherman Act, id.; and that Congress has not

exclusively used the word "claim" to refer to a private action

for damages, id. (citing the Federal Trade Commission Act,

15 U.S.C. s 45(a)(3), which gives the FTC "the power to

enforce the substantive provisions of the FTCA regardless of

whether a plaintiff has suffered injury").

While we acknowledge that the words "a claim" do not

necessarily exclude a government action, the usual meaning

of "a claim" is a private action. Thus, unlike the Second

Circuit, we do not think that violation of the Sherman Act is

necessarily the same thing as "giv[ing] rise to a claim" under

it. Furthermore, the concept of "giv[ing] rise to a claim" may

well be a concept from the Clayton Act, which creates a

private cause of action for Sherman Act violations. As noted

above, we believe that, in order to satisfy FTAIA, a plaintiff

must show that the anticompetitive conduct violates the Sher-

man Act and that the conduct's U.S. effect gives rise to

someone's claim under it. As the Second Circuit itself noted,

"[t]he existence of a Sherman Act violation does not depend

on whether anyone has actually suffered an injury. Conduct

may violate the Sherman Act but not be actionable under

section 4 of the Clayton Act because it did not cause injury."

Kruman, 284 F.3d at 397 (citing Indian Grocery, Inc. v.

Super Valu Stores, Inc., 864 F.2d 1409, 1419 (7th Cir. 1989)).

"The 'mere presence' of a per se violation under Sherman Act

s 1 'does not by itself bestow on any plaintiff a private right

of action for damages,' which is a 'gift of section 4 of the

Clayton Act.' " II Areeda & Hovenkamp, supra, s 337c, at

313 (quoting Indian Grocery, 864 F.2d at 1419). And "while

actual injury is required to seek treble damages under section

4 of the Clayton Act, 15 U.S.C. s 15, a plaintiff may bring an

antitrust action seeking prospective injunctive relief under

section 16 of the Clayton Act for conduct violating the Sher-

man Act without suffering an actual injury." Kruman, 284 F.3d at 397 (citing 15 U.S.C. s 26; McLain v. Real Estate

Bd. of New Orleans, Inc., , 243 (1980); Zenith

Radio Corp. v. Hazeltine Research, Inc., , 130

(1969)). But the Sherman Act may be enforced by the

government even when no private plaintiff claims actual or

threatened injury. See 15 U.S.C. s 4 ("The several district

courts of the United States are invested with jurisdiction to

prevent and restrain violations of sections 1 to 7 of this title;

and it shall be the duty of the several United States attorneys

... to institute proceedings in equity to prevent and restrain

such violations.").

We hold that the words "a claim" in subsection 2 of FTAIA

refer to a private action, not merely a government action to

enforce the Sherman Act. In other words, "giv[ing] rise to a

claim" means giving rise to someone's private claim for

damages or equitable relief. To satisfy this requirement, the

plaintiff must allege that some private person or entity has

suffered actual or threatened injury as a result of the U.S.

effect of the defendant's violation of the Sherman Act. In the

instant case, the conspiracy's U.S. effects did allegedly injure

and did give rise to the claim of some private entities -

namely the domestic plaintiffs who filed suit along with the

foreign plaintiffs against the vitamin companies.

4. Legislative History

Both appellants and appellees argue that FTAIA's legisla-

tive history supports their respective readings of the statute.

Parts of the report from the House Committee that drafted

FTAIA suggest that plaintiffs injured by the U.S. effects of

the anticompetitive conduct may sue, which of course is

consistent with the restrictive view of FTAIA's jurisdictional

reach. However, there is much in the legislative history to

suggest that foreign plaintiffs injured solely by the foreign

effects of the anticompetitive conduct may sue, so long as the

conduct also harms U.S. commerce. This legislative history

supports the less restrictive view of FTAIA's jurisdictional

reach, consistent with the position advanced by appellants

and endorsed by the Second Circuit. What is most notewor-

thy is that the presence of legislative history that is consis-

tent with the restrictive view does not (when read in context)

denigrate or exclude the less restrictive view, whereas the

less restrictive view includes within it the view that plaintiffs

harmed by the U.S. effects can sue. This leads us to con-

clude that the legislative history as a whole supports the less

restrictive interpretation of FTAIA that would allow plaintiffs

injured by the conduct's foreign effects to bring suit even

where the conduct's U.S. effects do not give rise to the

plaintiff's claim.

Appellees argue that the following passage from the House

Report demonstrates that Congress intended for the Sher-

man Act to apply only in cases where the plaintiff's injury

arose from anticompetitive effect on U.S. commerce:

The Committee did not believe that the bill reported

by the Subcommittee was intended to confer juris-

diction on injured foreign persons when that injury

arose from conduct with no anticompetitive effects in

the domestic marketplace. Consistent with this con-

clusion, the full Committee added language ... to

require that the "effect" providing the jurisdictional

nexus must also be the basis for the injury alleged

under the antitrust laws. This does not, however,

mean that the impact of the illegal conduct must be

experienced by the injured party within the United

States.... [I]t is sufficient that the conduct provid-

ing the basis of the claim has had the requisite

impact on the domestic or import commerce of the

United States....

H.R. Rep. No. 97-686, at 11-12. This passage states that the

U.S. " 'effect' providing the jurisdictional nexus must also be

the basis for the injury alleged under the antitrust laws,"

which is consistent with appellees' restrictive view that the

plaintiffs' injury must arise from the conduct's U.S. effect.

However, the sentences that immediately follow make clear

that "it is sufficient that the conduct providing the basis of

the claim has had the requisite impact on" U.S. commerce,

which supports appellants' broader view of the statute's

"gives rise to a claim" requirement. Indeed, the "[t]his does

not, however, mean that the impact of the illegal conduct

must be experienced by the injured party within the United

States" language, which follows immediately after the discus-

sion of the restrictive view, strongly suggests that Congress

did not intend to exclude the less restrictive basis for subject

matter jurisdiction under FTAIA.

Under the heading "Imports and Purely Foreign Transac-

tions," the House Report states:

A transaction between two foreign firms, even if

American-owned, should not, merely by virtue of the

American ownership, come within the reach of our

antitrust laws.... [T]here should be no American

antitrust jurisdiction absent a direct, substantial and

reasonably foreseeable effect on domestic commerce

or a domestic competitor.... It is thus clear that

wholly foreign transactions as well as export trans-

actions are covered by the [FTAIA], but that import

transactions are not.

Id. at 9-10. This passage also suggests that the restrictive

view of the statute does not exclude the less restrictive

interpretation. On the one hand, the antitrust laws do not

extend to "wholly foreign transactions," such as a transaction

between two foreign firms. On the other hand, when the

passage is read as a whole, this restriction seems to be

contemplated only where there is no "direct, substantial and

reasonably foreseeable effect on domestic commerce." This

implies that where there is such an effect, jurisdiction over

foreign transactions is proper. This surely does not support

appellees' view of the statute.

Parts of FTAIA's legislative history plainly support the

broader view of the statute. For example, the House Report

states that

the domestic "effect" that may serve as the predi-

cate for antitrust jurisdiction ... must be of the

type that the antitrust laws prohibit.... For exam-

ple, a plaintiff would not be able to establish United

States antitrust jurisdiction merely by proving a

beneficial effect within the United States, such as

increased profitability of some other company or

increased domestic employment, when the plaintiff's

damage claim is based on an extraterritorial effect

on him of a different kind.

H.R. Rep. No. 97-686, at 11. The focus here seems to be on

whether the conduct's domestic effect violates the antitrust

laws, rather than on whether the conduct's domestic effect

gives rise to the plaintiff's claim. This passage suggests that

the plaintiff need only allege that the defendant's conduct

actually had an effect on the domestic market and that such

effect violated the antitrust laws. But more tellingly, in the

course of explaining that a plaintiff whose "damage claim is

based on an extraterritorial effect" cannot establish jurisdic-

tion where the conduct has a "beneficial effect within the

United States," the passage implicitly assumes that a plaintiff

whose claim is based on a foreign effect can establish jurisdic-

tion where the conduct has a harmful effect within the United

States. This example addresses the situation in which the

same conduct has both domestic and foreign effects, and

clearly assumes that the plaintiff's claim does not arise from

the conduct's U.S. effect. It specifies that the hypothetical

beneficial U.S. effect could be "increased profitability of some

other company or increased domestic employment," which

obviously could not give rise to a claim under the antitrust

laws. But significantly, this example does not assume that

the fact that the claim arises from something other than the

U.S. effect precludes subject matter jurisdiction. Rather, it

is clearly the fact of the U.S. effect being beneficial - and

therefore the absence of harmful effect under the "effect"

prong - that would render jurisdiction improper. This pas-

sage thus suggests that the plaintiff can invoke jurisdiction

where the anticompetitive conduct's U.S. effect does not give

rise to the plaintiff's claim, as long as the conduct has a

harmful, not beneficial, effect on U.S. commerce.

In another passage, the House Report states:

Any major activities of an international cartel would

likely have the requisite impact on United States

commerce to trigger United States subject matter

jurisdiction. For example, if a domestic export car-

tel were so strong as to have a "spillover" effect on

commerce within this country - by creating a world-

wide shortage or artificially inflated world-wide price

that had the effect of raising domestic prices - the

cartel's conduct would fall within the reach of our

antitrust laws. Such an impact would, at least over

time, meet the test of a direct, substantial and

reasonably foreseeable effect on domestic commerce.

H.R. Rep. No. 97-686, at 13. This suggests that Congress

intended for subject matter jurisdiction to exist over the

conduct of an international cartel that had an effect on

domestic commerce, even if the plaintiff's claim does not arise

from that domestic effect. Again, the focus for subject

matter jurisdiction purposes here is on whether the defen-

dant's conduct has "the requisite impact on United States

commerce," rather than whether the plaintiff in particular

was injured by that impact. This passage's example of a

domestic export cartel, which presumably directs its anticom-

petitive conduct to foreign markets, but whose conduct also

has a " 'spillover' effect on commerce within this country"

exemplifies this point, because such a cartel's conduct would

give rise to claims by foreign and domestic plaintiffs. In

understanding the conduct of such a cartel to be likely to "fall

within the reach of our antitrust laws," nothing in this pas-

sage restricts that reach to suits only by the domestic plain-

tiffs injured by the conduct's spillover effects. Admittedly,

nothing in this passage explicitly allows suits by plaintiffs

injured abroad by a "world-wide shortage or artificially inflat-

ed world-wide price" rather than by the domestic spillover

effects. But we think that given the clear concern here with

the conduct that creates the world-wide shortage or price

inflation that in turn creates domestic spillover effects, it

would be counter-intuitive and arbitrary to read Congress to

intend to limit jurisdiction to only the subset of claims

brought by plaintiffs injured by the spillover effects of the

conduct at issue. Since the same conduct injures both for-

eign plaintiffs and domestic plaintiffs, and it is clearly the

conduct that Congress aims to reach with our antitrust laws,

it is reasonable to read Congress as envisioning suits by any

plaintiffs who would enable our antitrust laws to reach and

deter that conduct.

The House Report makes this point explicit:

The intent of the Sherman and FTC Act amend-

ments in H.R. 5235 is to exempt from the antitrust

laws conduct that does not have the requisite domes-

tic effects. This test, however, does not exclude all

persons injured abroad from recovering under the

antitrust laws of the United States. A course of

conduct in the United States - e.g., price fixing not

limited to the export market - would affect all

purchasers of the target products or services, wheth-

er the purchaser is foreign or domestic. The con-

duct has requisite effects within the United States,

even if some purchasers take title abroad or suffer

economic injury abroad. Cf., e.g., Pfizer Inc., et al.

v. Government of India, et al., (1978).

Foreign purchasers should enjoy the protection of

our antitrust laws in the domestic marketplace, just

as our citizens do.

Id. at 10. Explicitly envisioning recovery for plaintiffs who

"suffer economic injury abroad," this passage seems to sup-

port appellants' less restrictive reading of the statute. But

appellees point out that this passage, which seems to allow

recovery by foreign plaintiffs injured abroad as long as the

conduct has the "requisite domestic effects," also expressly

states that "[f]oreign purchasers should enjoy the protection

of our antitrust laws in the domestic marketplace" (emphasis

added). This sentence suggests that foreign plaintiffs can sue

under the antitrust laws for injury suffered in the domestic

market. Arguably, this statement lends some support to

appellees' restrictive view of the statute, but not much.

In sum, there is much in the legislative history that sup-

ports the less restrictive view of FTAIA's jurisdictional reach.

There are isolated statements that are consistent with the

restrictive view, but they are never offered to denigrate or

exclude the less restrictive view of the statute. This is

telling, we think, for if Congress intended to reject the less

restrictive view of FTAIA's jurisdictional reach, there was

absolutely no reason to discuss this possible basis for subject

matter jurisdiction along with the restrictive view. We there-

fore conclude that the less restrictive view of jurisdiction is

consistent with a literal interpretation of s 6a(2), and this

interpretation is perfectly consistent with the legislative histo-

ry.

5. Deterrence

The Supreme Court's decision in Pfizer, Inc. v. Govern-

ment of India, (1978), which was issued before

Congress enacted FTAIA, is cited approvingly in the legisla-

tive history to FTAIA. See H.R. Rep. No. 97-686, at 10.

Pfizer therefore may offer some clues as to Congress' intent

in enacting FTAIA.

In Pfizer, the Supreme Court articulated policy reasons for

holding that a foreign plaintiff was entitled to sue for treble

damages under the antitrust laws to the same extent as any

other plaintiff. Noting that one purpose of s 4 of the Clayton

Act is "to deter violators and deprive them of 'the fruits of

their illegality,' " the Supreme Court reasoned that denying a

foreign plaintiff injured by an antitrust violation the right to

sue "would permit a price fixer or a monopolist to escape full

liability for his illegal actions" and "would lessen the deter-

rent effect" of the antitrust laws. See Pfizer, 434 U.S. at 314-

15 (citations omitted). Moreover,

[i]f foreign plaintiffs were not permitted to seek a

remedy for their antitrust injuries, persons doing

business both in this country and abroad might be

tempted to enter into anticompetitive conspiracies

affecting American consumers in the expectation

that the illegal profits they could safely extort

abroad would offset any liability to plaintiffs at

home. If, on the other hand, potential antitrust

violators must take into account the full costs of

their conduct, American consumers are benefitted by

the maximum deterrent effect of treble damages

upon all potential violators.

Id. at 315.

On this deterrence logic, the Second Circuit in Kruman

refuted the view that suits by domestic plaintiffs injured by a

global conspiracy's domestic effects could adequately enforce

our antitrust laws. The Second Circuit noted that, when a

foreign anticompetitive scheme enhances the success of a

domestic scheme, the perpetrator would have a greater incen-

tive to pursue the global scheme, which would ultimately

harm U.S. consumers if a plaintiff harmed only by the foreign

effect of a global scheme had no U.S. remedy. See Kruman,

284 F.3d at 403 (citing Pfizer, 434 U.S. at 313-15). Judge

Patrick Higginbotham's dissent in Den Norske similarly em-

phasized that allowing foreign plaintiffs to sue would protect

U.S. consumers by deterring perpetrators from engaging in

global conspiracies that harm U.S. markets. See Den

Norske, 241 F.3d at 435 (Higginbotham, J., dissenting).

Judge Higginbotham, following Pfizer, reasoned that a global

price-fixing scheme could sustain monopoly prices in the

United States even in the face of domestic liability, since the

profits from abroad would subsidize the U.S. operations.

"Unless persons injured by the conspiracy's effects on foreign

commerce could also bring antitrust suits against the conspir-

acy, the conspiracy could remain profitable and undeterred."

Id.

We find this deterrence reasoning, drawn from Pfizer, and

amplified in Judge Higginbotham's opinion in Den Norske,

most compelling. The less restrictive interpretation of the

"gives rise to a claim" language of FTAIA, allowing suits by

foreign plaintiffs injured by the foreign effects of a global

conspiracy, serves "the United States' narrow interest in

vigorous domestic competition" better than the restrictive

interpretation disallowing such suits. Id. at 438-39. Pfizer's

concern was that denying a foreign plaintiff injured by an

antitrust violation a remedy under our antitrust laws would

permit a price fixer to escape full liability for his conduct,

which would lessen the deterrent effect of the antitrust laws.

This concern applies squarely to this case. Disallowing suits

by foreign purchasers injured by a global conspiracy because

they themselves were not injured by the conspiracy's U.S.

effects runs the risk of inadequately deterring global conspir-

acies that harm U.S. commerce. Suits only by those injured

by the U.S. effects of a conspiracy may not provide sufficient

deterrence; a conspirator could expect that illegal profits

abroad would offset his liability in the U.S., leaving the

conspirator with an incentive to engage in global conspiracy.

Allowing suits by those injured solely in foreign commerce,

where the anticompetitive conduct also harmed U.S. com-

merce, forces the conspirator to internalize the full costs of

his anticompetitive conduct.

Even assuming, arguendo, that the antitrust laws are only

intended to protect selfish national interests, suits by foreign

purchasers harmed solely by a conspiracy's foreign effects are

necessary to protect U.S. commerce from global conspiracies.

This reasoning is also supported by FTAIA's legislative histo-

ry, which notes: "As the Supreme Court pointed out in

Pfizer, ... to deny foreigners a recovery could under some

circumstances so limit the deterrent effect of United States

antitrust law that defendants would continue to violate our

laws, willingly risking the smaller amount of damages payable

only to injured domestic persons." H.R. Rep. No. 97-686, at

10.

We are persuaded that, if foreign plaintiffs could not en-

force the antitrust laws with respect to the foreign effects of

anticompetitive behavior, global conspiracy would be under-

deterred, since the perpetrator might well retain the benefits

that the conspiracy accrued abroad. There would be an

incentive to engage in global conspiracies, because, even if the

conspirator has to disgorge his U.S. profits in suits by

domestic plaintiffs, he would very possibly retain his foreign

profits, which may make up for his U.S. liability. In any

case, the profitability of the global conspiracy would depend

on the uncertainties of foreign antitrust enforcement. The

U.S. consumer would only gain, and would not lose, by

enlisting enforcement by those harmed by the foreign effects

of a global conspiracy. We think that Pfizer supports this

view and that the citation to Pfizer in the legislative history of

FTAIA suggests that Congress meant to endorse it as well.

6. Conclusion on Subject Matter Jurisdiction

On the basis of the foregoing, we conclude that the less

restrictive view of FTAIA's jurisdictional reach, allowing

subject matter jurisdiction in this case, is what Congress

meant to achieve. The District Court erred in dismissing the

foreign plaintiffs' federal antitrust claims for lack of subject

matter jurisdiction, since under the less restrictive interpreta-

tion, the foreign plaintiffs can establish that the global con-

spiracy's "direct, substantial, and reasonably foreseeable ef-

fect" on domestic commerce "gives rise to a claim" under the

antitrust laws.

B. Standing

Appellees contend that, even if subject matter jurisdiction

is proper, the case should nonetheless be dismissed because

the foreign purchasers lack standing. Because the District

Court concluded that it lacked subject matter jurisdiction

over the foreign plaintiffs' claims, it declined to address the

standing issue. Although the District Court did not rule on

the issue, it was fully presented below, as well as before this

court. Appellants ask this court to remand the case so that

the District Court may examine the issue in the first instance,

or alternatively, to find that they have standing.

While the District Court's failure to rule on the issue of

standing "might be thought to warrant a remand, so that the

district court [may] consider the matter in the first instance,

the Supreme Court has instructed the courts of appeals to

decide for themselves whether the party seeking judicial

review has standing, even if the issue was not decided be-

low...." Found. on Econ. Trends v. Lyng, 943 F.2d 79, 82

(D.C. Cir. 1991) (citing FW/PBS, Inc. v. City of Dallas, (1990)). We are thus "required to address the issue

[of standing] even if the courts below have not passed on

it...." FW/PBS, 493 U.S. at 230 (citing Jenkins v. McKeith-

en, , 421 (1969)). "[E]very federal appellate

court has a special obligation to 'satisfy itself not only of its

own jurisdiction, but also that of the lower courts in a cause

under review'...." FW/PBS, 493 U.S. at 231 (citing Bender

v. Williamsport Area Sch. Dist., , 541 (1986)

(citing Mitchell v. Maurer, , 244 (1934))).

To meet the constitutional requirements of standing under

the Clayton Act, an antitrust plaintiff must establish "injury-

in-fact or threatened injury-in-fact caused by the defendant's

alleged wrongdoing." Andrx Pharms., Inc. v. Biovail Corp.

Int'l, 256 F.3d 799, 806 (D.C. Cir. 2001) (citing Associated

Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpen-

ters, , 535 (1983)). The foreign purchasers have

constitutional standing. They allege that they suffered

injury-in-fact when they paid inflated prices for vitamins

directly to the defendants. This injury was allegedly caused

by defendants' conspiracy to fix vitamin prices around the

world. There is no dispute that the foreign plaintiffs in this

case have been injured by paying inflated prices for vitamins.

In addition, an antitrust plaintiff must establish "antitrust

injury," that is, " 'injury of the type the antitrust laws were

intended to prevent and that flows from that which makes

defendants' acts unlawful." Atlantic Richfield Co. v. USA

Petroleum Co., , 334 (1990) (quoting Brunswick

Corp. v. Pueblo Bowl-O-Mat, Inc., , 489 (1977)).

Appellees argue that the plaintiffs' injuries "are not 'injury of

the type the antitrust laws were intended to prevent,' because

those laws do not forbid the fixing of prices in the markets in

which Plaintiffs purchased vitamins, but only in U.S. com-

merce." Appellees' Br. 42 (citation omitted). We disagree.

In this case, plaintiffs allege that the defendants engaged in

a global conspiracy that had an effect on U.S. and foreign

commerce. The antitrust laws do not merely forbid price-

fixing in U.S. commerce, but rather forbid price-fixing that

harms U.S. commerce. See, e.g., Laker Airways, 731 F.2d at

922 ("It has long been settled law that a country can regulate

conduct occurring outside its territory which causes harmful

results within its territory."); Alcoa, 148 F.2d at 443-44; cf.

Pfizer, 434 U.S. at 314 ("The fact that Congress' foremost

concern in passing the antitrust laws was the protection of

Americans does not mean that it intended to deny foreigners

a remedy when they are injured by antitrust violations.").

Thus, the antitrust laws forbid the fixing of prices in foreign

markets where that conduct harms U.S. commerce. Where

defendants' global conspiracy harms U.S. commerce, the

mere fact that the foreign purchasers bought vitamins solely

in foreign markets does not mean that the foreign purchasers

lack standing to sue.

In Brunswick, the Supreme Court explained that, to estab-

lish "antitrust injury," the injury should be " 'the type of loss

that the claimed violations' " of the Sherman Act " 'would be

likely to cause.' " Brunswick, 429 U.S. at 489 (quoting Ze-

nith Radio Corp. v. Hazeltine Research, , 125

(1969)). The foreign purchasers of vitamins here were in-

jured by conduct that violated the Sherman Act - a global

price-fixing conspiracy. The foreign plaintiffs' paying of in-

flated prices in foreign commerce was loss of the type that

violation of the Sherman Act would be likely to cause. More-

over, the arguments that have already persuaded us that,

where anticompetitive conduct harms domestic commerce,

FTAIA allows foreign plaintiffs injured by anticompetitive

conduct to sue to enforce the antitrust laws similarly per-

suade us that the antitrust laws intended to prevent the harm

that the foreign plaintiffs suffered here. The foreign pur-

chasers' injury therefore must be deemed to be "of the type

that the antitrust laws were intended to prevent and that

flows from that which makes the defendant's conduct unlaw-

ful." Brunswick, 429 U.S. at 489. Appellants can therefore

establish "antitrust injury."

In addition, we must consider the following additional

Associated General Contractors factors to determine whether

appellants are "proper plaintiffs": "the directness of the

injury, whether the claim for damages is 'speculative,' the

existence of more direct victims, the potential for duplicative

recovery and the complexity of apportioning damages."

Andrx Pharms., 256 F.3d at 806 (citing Associated Gen.

Contractors, 459 U.S. at 542-45). The foreign plaintiffs alleg-

edly purchased vitamins at inflated prices directly from the

defendants, and their injury arose from defendants' alleged

conspiracy to inflate prices. The injury is direct and the

claim for damages is not speculative. Allowing the foreign

plaintiffs to sue does not risk duplicative recovery or complex

damage apportionment.

Appellees finally argue that "there is a large body of 'more

appropriate plaintiffs,' " namely the "[h]undreds of U.S. plain-

tiffs, as well as a class of domestic purchasers," who have

sued the defendants. Appellees' Br. 44. But these domestic

plaintiffs have not been harmed more directly by the foreign

effects of the conspiracy than the foreign purchasers, and

appellees do not suggest that the domestic plaintiffs can seek

to recover for the same injury that the foreign plaintiffs

suffered. The domestic plaintiffs are not more direct victims

of defendants' conduct than the foreign plaintiffs, since the

foreign plaintiffs have been injured just as directly as the

domestic plaintiffs as a result of the defendants' conduct.

Furthermore, for the reasons already explained, the foreign

plaintiffs play an important role in the deterrence of the

global conspiracy, a role that cannot be filled adequately by

the domestic plaintiffs alone. Therefore, the foreign plaintiffs

are proper plaintiffs to bring suit in this case.

We conclude that the foreign plaintiffs in this case have

standing to bring their federal antitrust claims.

C. Supplemental Jurisdiction

Appellants contend that, after the District Court dismissed

the foreign plaintiffs' federal antitrust claims for lack of

subject matter jurisdiction, it erred in declining to exercise

supplemental jurisdiction over the foreign plaintiffs' foreign

law claims pursuant to 28 U.S.C. s 1367. Appellants argue

that "the district court has original subject matter jurisdiction

over the claims of the domestic plaintiffs under the Sherman

Act, and consequently, should have exercised supplemental

jurisdiction over the claims of the foreign plaintiffs." Appel-

lants' Br. 27-28.

This court reviews the District Court's decision not to

exercise supplemental jurisdiction for abuse of discretion.

See Diven v. Amalgamated Transit Union Int'l & Local 689,

38 F.3d 598, 601 (D.C. Cir. 1994). 28 U.S.C. s 1367 provides

that, "in any civil action of which the district courts have

original jurisdiction, the district courts shall have supplemen-

tal jurisdiction over all other claims that are so related to

claims in the action within such original jurisdiction that they

form part of the same case or controversy under Article III."

28 U.S.C. s 1367. Under 28 U.S.C. s 1367, "the District

Court has supplemental jurisdiction over related claims when

it has original jurisdiction over the initial claim." Harris v.

Sec'y, U.S. Dep't of Veterans Affairs, 126 F.3d 339, 346 (D.C.

Cir. 1997). "When the District Court has dismissed claims

properly before it, it retains discretion to decide whether or

not to dismiss other claims as to which it may exercise

supplemental jurisdiction." Id. The District Court "may

decline to exercise supplemental jurisdiction over a claim" if,

for example, "the district court has dismissed all claims over

which it has original jurisdiction." 28 U.S.C. s 1367(c)(3).

But "[i]f the district court dismissed the underlying claim on

jurisdictional grounds, then it could not exercise supplemental

jurisdiction." Saksenasingh v. Sec'y of Educ., 126 F.3d 347,

351 (D.C. Cir. 1997).

When the District Court dismissed the foreign plaintiffs'

underlying federal antitrust claim on jurisdictional grounds, it

had no discretion to exercise supplemental jurisdiction at all

over the foreign plaintiffs' foreign law claims. Appellants'

assumption that the District Court's remaining jurisdiction

over the domestic plaintiffs' claims can serve as the basis of

supplemental jurisdiction over the foreign plaintiffs' foreign

law claims is implausible, and appellants cite no cases to

support this assumption. When the District Court dismissed

the foreign plaintiffs' claims on jurisdictional grounds, the

remaining original jurisdiction over the domestic plaintiffs'

claims was irrelevant to the exercise of supplemental jurisdic-

tion over the foreign plaintiffs' foreign law claims. The

dismissal of the foreign plaintiffs' federal antitrust claims on

jurisdictional grounds precluded the District Court from exer-

cising supplemental jurisdiction over any of the foreign plain-

tiffs' additional claims over which the court did not have

original jurisdiction.

We recognize that the District Court has already articulat-

ed reasons that counsel against exercising supplemental juris-

diction, such as comity, efficiency, and the novelty and com-

plexity of the issues of foreign law involved. The posture of

the case has now changed, however, because we reverse the

District Court's decision on subject matter jurisdiction and

vacate its judgment against appellants. On remand, the

District Court will have original jurisdiction over the foreign

plaintiffs' federal antitrust claims. Therefore, the District

Court must consider anew whether to exercise its discretion

to accept supplemental jurisdiction over the foreign plaintiffs'

foreign law claims. But the District Court still retains discre-

tion to decline to exercise supplemental jurisdiction over the

foreign law claims pursuant to 28 U.S.C. s 1367.

III. Conclusion

For the reasons stated above, we reverse the District

Court's decision, vacate the judgment against appellants, and

remand the case for further proceedings consistent with this

opinion.

Karen LeCraft Henderson, Circuit Judge, dissenting:

I disagree with the majority's interpretation of the Foreign

Trade Antitrust Improvements Act (FTAIA), 15 U.S.C. s 6a,

and, consequently, with its disposition of this appeal.1 The

majority decides whether a court has jurisdiction over claims

asserted by a plaintiff in one action by reference to a hypo-

thetical claim another party could, perhaps, raise in some

other proceeding. This seems a peculiar notion. The more

natural reading of the statutory language, I believe, is the

narrower one adopted by the district court below and by the

Fifth Circuit in Den Norske Stats Oljeselskap AS v. Heere-

Mac VOF, 241 F.3d 420 (5th Cir. 2001), under which the

phrase "gives rise to a claim" refers to the claim advanced by

the plaintiff in the action before the court. This reading, to

me, reflects the Congress's "unambiguously expressed intent"

under Chevron USA Inc. v. Natural Resources Defense

Council, Inc., , 842-43 (1984). It is also consis-

tent with the legislative history that the majority cites.

The Fifth Circuit's narrower construction is unambiguously

supported by the House Report's declaration that "the 'effect'

providing the jurisdictional nexus must also be the basis for

the injury alleged under the antitrust laws." H.R. Rep.

97-686, at 11-12 (emphasis added); see maj. op. at 23-24.

The plain meaning of this statement is not undercut, as the

majority contends, by the two sentences that follow; they

simply explain that, so long as "the basis of the claim has had

the requisite impact on the domestic or import commerce of

the United States,"2 the claim does not fail simply because

"the impact of the illegal conduct" is not "experienced by the

injured party within the United States." H.R. Rep. No.

97-686, at 12; see maj. op. at 24. Another excerpt the

majority quotes similarly explains that "[f]oreign purchasers

should enjoy the protection of our antitrust laws in the

domestic marketplace, just as our citizens do" so long as "the

__________

1 I nonetheless agree with the majority's determination that the

district court lacked discretion to exercise supplemental jurisdiction

once it had dismissed all of the appellants' claims under United

States law. See maj. op. at 34-36.

2 Notably, the word "claim" in the quoted language refers to the

specific claim asserted by the injured party.

conduct has the requisite effects within the United States,

even if some purchasers take title abroad or suffer economic

injury abroad." See H.R. Rep. No. 97-686, at 10 (quoted

in maj. op. at 27) (emphasis added). Taken together, these

two excerpts make clear that neither the situs of the injury

nor the nationality of the claimant is jurisdictionally disposi-

tive so long as there is a sufficient domestic impact or effect

to satisfy subsection (1) of the FTAIA. Neither excerpt

purports to eliminate the requirement in subsection (2) that

such domestic impact give rise to the claimed injury wherever

and by whomever felt. Other of the majority's citations

likewise relate to the first prong of the jurisdictional test, in

subsection (1), and so are of no assistance in construing the

second prong of the test set out in subsection (2). See maj.

op. at 24-26 (quoting H.R. Rep. No. 97-686, at 9-10, 11, 13).

Finally, the Report expressly relies, as the majority observes,

on the United States Supreme Court's decision in Pfizer v.

Government of India, (1978), but only for the

broad proposition that "[t]o deny foreigners a recovery could

under some circumstances so limit the deterrent effect of

United States antitrust law that defendants would continue to

violate our laws, willingly risking the smaller amount of

damages payable only to injured domestic persons." H.R.

Rep. No. 97-686, at 10 (quoted in maj. op. at 30) (emphasis

added). The Report does not suggest the deterrence policy

discussed in Pfizer justifies expanding jurisdiction beyond the

limits expressed in subsection (2) of the FTAIA.

Finally, I believe that our decision in Caribbean Broadcast-

ing Sys., Ltd. v. Cable & Wireless PLC, 148 F.3d 1080 (D.C.

Cir. 1998), cannot be construed to support the majority's

interpretation of the FTAIA. As a textual matter, the court

in Caribbean addressed only subsection (1) of the FTAIA,

with nary a mention of subsection (2). Even were we to

presume that the court sub silentio considered the second

prong of the jurisdictional test, the plaintiffs' allegations

plainly show that, notwithstanding the majority's contrary

assertion, see maj. op. at 14, the alleged domestic effect did in

fact give rise to the foreign plaintiff's anti-trust claim. In

Caribbean Broadcasting the court found the foreign plaintiff

had adequately alleged that (1) the defendants engaged in

"anticompetitive conduct"--"namely, that the defendants

made fraudulent misrepresentations to advertisers and sham

objections to a government licensing agency in order to

protect their monopoly" over FM radio advertising in "the

market for English-language radio broadcast advertising in

the Eastern Caribbean"; (2) "U.S. customers in the relevant

market suffered antitrust injury, to wit, they paid excessive

prices for advertising because of the unlawful actions of [the

defendants]"; and (3) the foreign plaintiff "was and remains

foreclosed from selling advertising to many of those U.S.

companies that had purchased advertising time from [the

defendant radio broadcaster]." 148 F.3d at 1087. Thus it is

clear that the defendants' fraudulent anticompetitive conduct

had the effect of causing U.S. companies to advertise only

with the defendants and that this effect gave rise to the

foreign plaintiff's claim for lost customers.

In sum, because I believe that the plain language in

subsection (2) of the FTAIA expressly limits jurisdiction to a

claim which itself arises from the domestic antitrust effect

required under subsection (1) of the statute, I respectfully

dissent.

Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.