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, 434 U.S. 308 (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, 355 U.S. 41, 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, 416 U.S. 232,
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.,
213 U.S. 347 (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., 274 U.S. 268, 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, 509 U.S. 764 (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., 475 U.S. 574, 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., 444 U.S. 232, 243 (1980); Zenith
Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 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., 434 U.S. 308 (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, 434 U.S. 308 (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, 493
U.S. 215 (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, 395 U.S. 411, 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., 475 U.S. 534, 541 (1986)
(citing Mitchell v. Maurer, 293 U.S. 237, 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, 459 U.S. 519, 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., 495 U.S. 328, 334 (1990) (quoting Brunswick
Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 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, 395 U.S. 100, 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., 467 U.S. 837, 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, 434 U.S. 308 (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.