The Seventh Circuit's Expansive Take on Extraterritorial Reach of U.S. Antitrust Laws

Determining the extraterritorial reach of the U.S. antitrust laws as defined by the Foreign Trade Antitrust Improvements Act of 1982 (FTAIA) is often challenging.  The FTAIA limits the reach of U.S. antitrust laws to conduct that has a “direct, substantial, and reasonably foreseeable effect” on U.S. commerce.  The vagaries of interpreting this limitation—in particular the meaning of “direct” as used in the statute—were in full view in private litigation against an alleged cartel of overseas potash producers, culminating in the Seventh Circuit’s recent decision in Minn-Chem, Inc. v. Agrium Inc. __ F.3d __, No. 10-1712 (7th Cir. June 27, 2012) (en banc). The en banc opinion addressed two points.  First, it held that the FTAIA does not limit federal court subject matter jurisdiction but rather places limits on plaintiffs’ claims, and thus at the pleadings stage is properly the subject of a Rule 12(b)(6) challenge.  Second, and more significantly, the opinion endorses a broader reading of the FTAIA’s reach over commercial activities outside the United States, accepting the position articulated in an amicus brief submitted by the Department of Justice and the Federal Trade Commission, and diverging from the Ninth Circuit’s narrower interpretation of the scope of the Act in United States v. LSL Biotechs., 379 F.3d 672 (9th Cir. 2004).  The Seventh Circuit’s rejection of the Ninth Circuit’s prior interpretation means that the Supreme Court could soon be asked to decide upon a definitive construction of this term, further clarifying the reach of U.S. antitrust laws over alleged overseas pricing-fixing conspiracies.