The return of Timberlane?: the Fifth Circuit signals a return to restrictive notions of extraterritorial antitrust

Vanderbilt Journal of Transnational Law, Jan, 2003 by William J. Tuttle

ABSTRACT

Over the past 100 years, the United States has remained ambivalent regarding the potential extraterritorial application of its antitrust laws. The executive, legislative, and judicial branches began with a doctrine of strict territoriality but promptly shifted toward an examination of the effects of the antitrust activity on U.S. commerce. Since the 1970s, the branches of government have reframed the question as one of statutory interpretation, embraced considerations of international comity, modified those considerations, and eventually rejected many of those same considerations.

Throughout this chaos, however, the results reached by the various branches of government have typically been consistent with the economic theory of international antitrust. This theory suggests that a country will use its domestic antitrust laws to regulate foreign conduct when that country is both a net importer and maintains the political power to compel international compliance. Thus, with one major deviation in the 1970s, the United States, since becoming a net importer, has extended jurisdiction over foreign parties for antitrust activity organized and occurring abroad whenever it has maintained sufficient international political power.

The Fifth Circuit has now entered the debate on extraterritorial application of U.S. antitrust law. In Den Norske Stats Oljeselskap As v. HeereMac v.o.f., the court, in an opinion rooted solely in statutory interpretation, declined to exercise jurisdiction over the claims of a foreign plaintiff injured by cartel activity occurring exclusively outside of the United States. While this result may seem consistent with traditional notions of the role of U.S. courts, it is inconsistent with both the economic theory of international antitrust and the antitrust laws' goal of protecting the U.S. consuming public. This Note argues that the Fifth Circuit should have exercised jurisdiction over the foreign plaintiff's claims, thereby protecting U.S. consumers from rising prices and avoiding further uncertainty regarding the extraterritorial application of U.S. antitrust law.

TABLE OF CONTENTS

  I.   INTRODUCTION
 II.   THE ECONOMIC THEORY OF INTERNATIONAL
       ANTITRUST
       A.   The Conceptual Framework
       B.   Implications to a Trading Marketplace
III.   THE ORIGINS OF EXTRATERRITORIAL ANTITRUST IN THE
       UNITED STATES
       A.   Congress Legislates
       B.   The Courts Interpret
            1.   The Courts Consider Extraterritorial
                 Jurisdiction
            2.   The Court Reconsiders
            3.   The Court Adopts a New Approach
 IV.   THE TIMBERLANE PROGENY
       A.   Considerations of International Comity
       B.   Rejecting the Timberlane Rationale
       C.   The Restatements Address Timberlane and
            Laker Airways
       D.   Implications on the Economic Theory of
            International Antitrust
  V.   THE FTAIA AND NEW DOJ GUIDELINES
       A.   Congress Attempts to Eliminate Ambiguity
       B.   The 1988 Guidelines
       C.   Hartford Fire and Firm Rejection of
            Broad Interpretations of International
            Comity
       D.   The Ineffective IAEAA and Clinton's
            Guidelines
       E.   Implications on the Economic Theory of
            International Antitrust
 VI.   THE FIFTH CIRCUIT REJECTS EXPANSIVE NOTIONS OF
       EXTRATERRITORIALITY
       A.   The Alleged Cartel and the District
            Court's Holding
       B.   The Fifth Circuit Affirms
       C.   A Poignant Dissent
       D.   Subsequent Developments
       E.   Den Norske's Outlook
VII. CONCLUSION

I. INTRODUCTION

Despite the stated goal of protecting the U.S. consuming public, the United States has remained ambivalent regarding the potential extraterritorial application of its antitrust laws. In domestic cases, the courts and legislature have oscillated between the per se and rule of reason tests to determine antitrust violations. The debate regarding extraterritorial application, meanwhile, has been far more complex. The various branches of government began with a doctrine of strict territoriality that required that the antitrust activity occur in U.S. territory but promptly shifted toward an examination of the effects of the antitrust activity on U.S. commerce to determine violations. Since the 1970s, the branches of government have reframed the question as one of statutory interpretation, embraced considerations of international comity, modified those considerations, and eventually rejected many of those same considerations.

Throughout this chaos, however, the results of extraterritorial antitrust enforcement have been remarkably consistent with the economic theory of international antitrust. This theory suggests that a country will use its domestic antitrust laws to regulate foreign antitrust activity when that country is both a net importer and maintains the political power to compel international compliance. Thus, with one major deviation in the 1970s, the United States, since becoming a net importer, has extended jurisdiction over foreign defendants for antitrust activity organized and occurring abroad whenever it has maintained sufficient international political power.