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Business antitrust laws enforced outside of U.S.

For American companies, compliance with US antitrust laws has long been a well understood fact of life.

What has often been unclear, however, is the extent to which US antitrust laws apply to business conduct outside of the US.

Recently the Justice Department and Federal Trade Commission issued final guidelines explaining those agencies' policy on international enforcement of US antitrust laws. The guidelines discuss the factors to be considered by the agencies when deciding whether to exercise jurisdiction and challenge anti-competitive conduct abroad.

The guidelines also take into account when and how the agencies will take into account enforcement of antitrust laws by foreign governments (comity); mutual assistance by foreign governments on international antitrust enforcement; and the effects of foreign government involvement on the antitrust liability of private entities.

The four major principles of US antitrust enforcement philosophy with regard to international operations are:

* Foreign commerce cases can involve almost any provision of antitrust law.

* Enforcement agencies don't discriminate in the enforcement of the antitrust laws on the basis of the nationality of the parties.

* Agencies don't use antitrust authority to further nonantitrust objectives.

* After taking into account considerations of foreign government involvement, the substantive antitrust rules apply domestically with equal force to international operations.

The guidelines indicate that anticompetitive conduct that affects US domestic or foreign commerce may violate the US antitrust laws regardless of where such conduct occurs or the nationality of the parties involved.

The guidelines note there are two tests for determining whether US antitrust laws apply to foreign operations.

The first concerns foreign conduct that was meant to produce and did in fact produce some substantial effect in the US.

The guidelines point out that imports intended for sale in the US by definition affect the US market directly and will therefore almost invariably satisfy this test.

An example is given of the type of conduct to which the laws might apply. The example shows four foreign firms producing a product in various foreign countries, with none of the firms having any US production or US subsidiaries. It's assumed that these firms organize a cartel to raise the price for the product and, collectively, they make substantial sales into the US, in absolute terms and relative to total US production.

Under the guidelines, these facts present a straightforward case of cartel participants selling products directly into the US. Accordingly, US jurisdiction is clear in such instances.

The second test as to whether the US antitrust laws apply to foreign conduct not involving imports, is whether the foreign conduct has a direct, substantial, and reasonably foreseeable effect on US commerce.

In addition to anticompetitive conduct by importers that is meant to produce some substantial effect in the US, the guidelines list other kinds of conduct over which the US antitrust authorities might assert jurisdiction.

They include:

* A merger of foreign firms that account for substantial US sales and where the effects on US domestic or import commerce are direct, substantial and reasonably foreseeable.

* Conduct by foreign firms that has a direct, substantial, and reasonably foreseeable anticompetitive effect on commerce within the US or on US firms' export business.

* Certain instances of anticompetitive conduct by foreign firms selling to the US government.

As to the extent to which the Justice Department and the FTC will honor antitrust enforcement by foreign governments, the guidelines list eight factors that these agencies will consider in analyzing whether to assert jurisdiction.

The factors include the relative significance to the alleged violation of conduct within the US as compared to conduct and its effects abroad.

Other factors include the extent to which the enforcement activities of another country with respect to the same persons may be affected, and the effectiveness of foreign enforcement as compared to US enforcement action.

The guidelines also explain when the agencies can take action when foreign governments are involved in the challenged conduct, as for example, when they compel conduct that would violate US antitrust laws.

The guidelines are a reminder that when US companies do business abroad, their activities will be scrutinized under the same antitrust principles that are applied to their domestic activities.

Malcolm D. MacArthur is legal counsel to the Flexible Packaging Association, other trade groups and corporations.

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