The Empagran Exception: Between Illinois Brick and a Hard Place

Abstract

Before it was uncovered and prosecuted, the international vitamin cartel, known as “Vitamins, Inc.” by its perpetrators, was extraordinarily successful. Estimates of cartel profits run as high as $18 billion (in 2003 dollars). In addition to substantial criminal sanctions, cartel members paid over $2 billion to American plaintiffs. When foreign plaintiffs tried to sue the foreign defendants in American courts, however, they encountered resistance. A trial court read the Foreign Trade Antitrust Improvements Act (“FTAIA”) to restrict the reach of the Sherman Act and preclude foreign purchasers from suing the foreign defendants. The D.C. Circuit reversed, holding that the facts brought the case within FTAIA’s exceptions. [FN6] There already being a circuit split, the Supreme Court granted certiorari. In its unanimous decision, the Court ruled that the FTAIA exception did not apply where a claim rested solely on foreign harm that was independent of any adverse domestic effect. The FTAIA excludes most anti-competitive foreign trade and commercial activity from the Sherman Act’s reach. However, the Act carves out an exception to this general rule, though the parameters of the exception are less than clear.

In this article, I identify one narrow class of cases that would satisfy the statutory exception. I must emphasize the modest scope of this inquiry. I am not suggesting that this is a socially optimal policy, or, indeed, even a wise one. Instead of focusing on the interrelatedness of the foreign and domestic prices, the inquiry centers on the resale of goods to the domestic market. The argument, hinted at by Justice Scalia at oral argument, is a variant on Illinois Brick Co. v. Illinois, the Supreme Court’s landmark ruling rejecting a passing-on theory of injury suffered by indirect purchasers. Before developing this argument in Section III, I first briefly detail the Empagran decisions.