Vitamins Antitrust Litigation - International

Empagran, S.A. v. F. Hoffman-LaRoche

Cohen Milstein filed this class action lawsuit in 2000 in the United States District Court for the District of Columbia on behalf of foreign direct vitamin purchasers, under Section 4 of the Clayton Act, which confers a private right of action upon persons "injured in [their] business or property by reason of anything forbidden in the antitrust laws." The case stems from a DOJ criminal investigation that began in the mid-1990s and has yielded more than $2.2 billion in criminal fines issued by competition authorities around the world, as well as civil settlements with U.S. purchasers totaling $2.4 billion.

Defendants, more than twenty U.S. vitamins producers and distributors and their foreign affiliated companies, moved to dismiss on subject matter jurisdiction grounds contending, among other things, that the complaint was subject to the FTAIA's Clause 2 requirement that the effect of the defendants' conduct on U.S. commerce "give rise to a claim under" the Sherman Act. The district court agreed and Cohen Milstein appealed to the D.C. Circuit.

The D.C. Circuit reversed, holding that Clause 2 of the FTAIA does not require that "plaintiff's claim" arise from the effect of the defendants' conduct on U.S. commerce, and concluded that respondents have a right to sue. Judge Harry Edwards wrote in the 2-1 decision that "[t]he same conduct injures both foreign plaintiffs and domestic plaintiffs, and it is clearly the conduct that Congress aims to reach with our antitrust laws."

Specifically, the D.C. Circuit held: "where the anticompetitive conduct has the requisite effect on United States commerce, FTAIA permits suits by foreign plaintiffs who are injured solely by that conduct’s effect on foreign commerce. The anticompetitive conduct itself must violate the Sherman Act and the conduct’s harmful effect on United States commerce must give rise to ‘a claim’ by someone, even if not the foreign plaintiff who is before the court. Thus, the conduct’s domestic effect must do more than give rise to a government action for violation of the Sherman Act, but it need not necessarily give rise to the particular plaintiff’s (private) claim . . . the words "a claim" . . . refer to a private action, not merely a government action to enforce the Sherman Act. . . ."[G]iving rise to a claim" means giving rise to someone’s private claim for damages or equitable relief. To satisfy this requirement, the plaintiff must allege that some private person or entity has suffered actual or threatened injury as a result of the U.S. effect of the defendant’s violation of the Sherman Act."

Defendants' petition for writ of certiorari to the U.S. Supreme Court was subsequently granted on December 15, 2003. Respondents, led by Cohen Milstein lawyers and Supreme Court specialist Thomas C. Goldstein, filed their Supreme Court brief on March 15, 2004. Argument was held on April 26, 2004.

On June 14, 2004, the Supreme Court held that "[w]here the price-fixing conduct significantly and adversely affects both customers outside the United States and within the United States, but the adverse foreign effect is independent of any adverse domestic effect, the FTAIA exception does not apply, and thus, neither does the Sherman Act, to a claim based solely on the foreign effect."

In reaching this conclusion, the Supreme Court emphasized that its decision was based on the assumption "that the anticompetitive conduct here independently caused foreign injury; that is, the conduct’s domestic effects did not help to bring about that foreign injury." The Court noted, however, that the appellants had argued in the alternative that the foreign injury was not independent: "Respondents argue, in the alternative, that the foreign injury was not independent. Rather, they say, the anticompetitive conduct’s domestic effects were linked to that foreign harm. Respondents contend that, because vitamins are fungible and readily transportable, without an adverse domestic effect (i.e., higher prices in the United States), the sellers could not have maintained their international price-fixing arrangement and respondents would not have suffered their foreign injury. They add that this "but for" condition is sufficient to bring the price-fixing conduct within the scope of the FTAIA’s exception."

The Court stated that the D.C. Circuit had not addressed this alternative theory in their opinion, declined to do so itself, and remanded the case to the D.C. Circuit for further proceedings. After briefing before the D.C. Circuit, the panel found that the alternative theory had been properly pled and preserved. The D.C. Circuit then ordered full merits briefing on the question of whether "the nature of the alleged link between foreign injury and domestic effects is legally sufficient to trigger application of the FTAIA’s domestic-injury exception" and set oral argument for April 20, 2005.