Seventh Circuit reverses the district court’s denial of a
motion to dismiss a complaint alleging anticompetitive activities occurring
outside the United States pursuant to the Foreign Trade Antitrust Improvements
Act
Two groups of plaintiffs filed class action suits against a
number of defendants. Group one includes individuals who purchased potash in
the United States directly from the defendants. The second group includes
individuals who purchased potash products indirectly from the defendants. The
Defendants are seven companies whose principal mining operations are located in
Canada, Russia, and Belarus. They include Agrium Inc., Potash Corporation of
Saskatchewan Inc. (“PCS”), The Mosaic Company, JSC Uralkali, JSC Silvinit, JSC
Belarusian Potash Company (“BPC”), and JSC International Potash Company
(“IPC”). Agrium, PCS, and Mosaic operate potash mines in the Canadian province
of Saskatchewan. These three companies own Canpotex Ltd., a Canadian
corporation that is named as a coconspirator but not as a defendant. Canpotex
is a joint export marketing and distribution company tasked with coordinating
the offshore sales of the potash supply of each of its three stakeholders.
The complaint alleges that the Defendants accounted for
about 71% of the world’s potash supply. From 2003 to 2008, potash prices in the
United States increased by 600% for no apparent reason. The Plaintiffs allege
that the prices increased because the Defendants jointly agreed to restrict
output and increase prices of potash. The potash industry is an oligopoly made
up of high market concentration. The Plaintiffs also allege that the industry
is marked by a high degree of cooperation, which provides the defendants with
opportunities to conspire and share information, particularly for the three
Defendants involved with Canpotex. All of the anticompetitive activity alleged
in the complaint is said to have occurred outside of the United States. The
Defendants moved to dismiss the Sherman Act claim for lack of subject matter
jurisdiction under the Foreign Trade Antitrust Improvements Act (“FTAIA”). The
district court denied the motion and the Defendants appeal.
The United States Court of Appeals for the Seventh Circuit
reversed the district court’s decision and dismissed this suit pursuant to the
FTAIA. The Sherman Act looks to determine whether the challenged
anticompetitive conduct stems from an independent decision or from an
agreement, tacit or expressed. The Court found that the FTAIA limits the
applicability of the Sherman Act. The Sherman Act does not regulate the
competitive conditions of other nations’ economies. It can reach outside the
borders of the United States, but only when the conduct has an effect on
American commerce. However, the FTAIA makes it clear that the Sherman Act does
not prevent American exporters from entering into business arrangements as long
as it only adversely affects foreign markets.
The Court applied the FTAIA’s requirements to the
Plaintiff’s complaint, finding that it bars this suit. “The flaw in the
district court’s reasoning is that it essentially conflates the ‘import
commerce’ exception and the “direct effects” exception. If foreign
anticompetitive conduct can ‘involve’ U.S. import commerce even if it is
directed entirely at markets overseas, then the ‘direct effects’ exception is
effectively rendered meaningless. Under the district court’s reading of the
statute, a foreign company that does any import business in the United States
would violate the Sherman Act whenever it entered into a joint‑selling
arrangement overseas regardless of its impact on the American market. This
would produce the very interference with foreign economic activity that the
FTAIA seeks to prevent.” 657 F.3d 660‑61.
“The import‑commerce exception captures foreign
anticompetitive conduct (thus bringing it back within the Sherman Act’s reach)
if the overseas anticompetitive conduct actually ‘involves’ the U.S. import
market. The direct‑effects exception captures foreign anticompetitive conduct
that has a direct, substantial, and reasonably foreseeable effect on U.S.
domestic or import commerce regardless of whether the overseas anticompetitive
conduct actually ‘involves’ the U.S. import market.” “ Contrary to what the
district court seemed to think, it is not enough that the defendants are
engaged in the U.S. import market, though that may be relevant to the analysis.
Rather, the import trade or commerce exception requires that the defendants’
foreign anticompetitive conduct target U.S. import goods or services.” 657 F.3d
661 (internal citation omitted).
The Court stated that the complaint offers very little
information concerning the relationship between the Defendants’ alleged
overseas anticompetitive conduct and the American domestic market for potash.
“The problem with these generalized allegations is the absence of specific
factual content to support the asserted proposition that prices in China,
India, and Brazil serve as a benchmark for prices in the United States and that
this benchmark, if it exists, has a strong enough relationship with the
domestic potash market to raise a plausible inference that the defendants’
foreign anticompetitive conduct has a direct, substantial, and reasonably
foreseeable effect on domestic or import commerce. That is, the complaint only
generally alludes to a link between the cartelized prices in these three
foreign markets and American potash prices.” 657 F.3d 662.
According to the Seventh Circuit, these general allegations
are not enough to permit an inference that the increase in potash prices in
another country due to the Defendants’ anticompetitive behavior had anything to
do with the increased prices in the United States. The Court states that
without something more, the Plaintiffs’ complaint fails to satisfy the direct
and substantial effect test of the FTAIA. The complaint relied too heavily on
chain‑of‑events allegations that the Court finds to be too cryptic and
unreliable. Therefore, the Court holds that the complaint does not contain
sufficient factual content to plead a plausible direct, substantial, and
reasonably foreseeable connection between the alleged foreign anticompetitive
activity and the domestic potash market.
Citation: Minn–chem v. Agrium Inc., 657 F.3d 650 (7th
Cir. 2011).
*** K. Todd Wallace is an attorney at Wallace Meyaski in New Orleans. He has nearly 20 years of experience in the legal and business professions with established excellence in trial advocacy, negotiation, strategic and initiative planning, government relations, mergers and acquisitions, and team building. See http://www.walmey.com/our-attorneys/k-todd-wallace/
