Enforcement Provides Important Update for Auto Industry

20 July 2015 Dashboard Insights Blog

For the last several years, the global auto industry has been rocked by unprecedented investigations and prosecution. Numerous international cartels, involving scores of companies and individuals, have engaged in price-fixing. Most of these cartels operated in foreign countries, fixing prices for automotive components that were incorporated into vehicles and shipped to the United States. Many individuals have been convicted and sentenced to prison in the United States. Massive treble damage class actions are pending.

Essentially all of these U.S. government and private civil antitrust actions have been based on the extraterritorial application of U.S. antitrust laws to these international cartels. The underlying legal basis for all these actions – criminal and civil – is the Foreign Trade Antitrust Improvements Act (“FTAIA”). The FTAIA was enacted in 1982 to help achieve clarity in the application of U.S antitrust laws to international trade. Recently, several federal circuit courts of appeal decisions compounded confusion and conflicts about how and under what circumstances the FTAIA should be interpreted. Such confusion threatened the legal basis on which these auto parts investigations, prosecutions, incarcerations and damage actions had proceeded.

On June 15, 2015, the U.S. Supreme Court denied petitions for writs of certiorari from the Seventh and Ninth Circuits which involved the same price-fixing conspiracy. One can speculate on the reasons why the Court declined the invitations to resolve the conflicts surrounding the FTAIA. Ironically, the losing party in the Ninth Circuit decision (an individual whose criminal price-fixing conviction was affirmed) was an officer of the foreign company, which was the winning party in the Seventh Circuit decision.

On July 30, 2015, Foley & Lardner partners, Melinda Levitt and myself, will present a webinar on the FTAIA detailing these developments. The webinar will discuss the current muddled state of the law focusing on:

  1. the substantive or jurisdictional underpinnings of the FTAIA;
  2. what constitutes “import commerce;”
  3. how are “direct domestic effects” to be measured;
  4. and when does challenged conduct in international trade “give rise to a claim” under the FTAIA.

For the automotive industry, the webinar will focus on possible differences between public and private enforcement which may have importance to the automotive industry.

Suffice to say, with the Supreme Court’s decision not to accept certiorari, confusion and conflict will continue. If there is any glimmer of increased clarity, the latest round of cases suggests that the FTAIA reduces the chances for plaintiffs to prevail in international trade antitrust disputes (unless the plaintiff is the U.S. Department of Justice) but, paradoxically, increases the pressures on defendants to settle treble damages cases before incurring years of costly discovery and motion practice due to the fact that some courts have interpreted the FTAIA as establishing substantive elements of a Sherman Act violation rather than as a question of subject matter jurisdiction.

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