STATE TRADING ENTERPRISES AND THE U.S. ANTITRUST LAWS
There can be no doubt that State Trading Enterprises (STE) have the capacity
to eliminate competition, distort trade, and produce anticompetitive effects
of the type interdicted by U.S. antitrust laws. "For more than a century
[those laws] have stood as the ultimate protector of the competitive process
that underlies our free market economy .. [and] maximizes consumer choice
and maintains competitive prices." Department of Justice and Federal
Trade Commission Antitrust Enforcement Guidelines for International Operations--1995
("Guidelines"). Under well-settled principles, the facts that
(a) the anticompetitive conduct occurs abroad and (b) a foreign government
may be involved does not shield the STE from antitrust liability.
The following basic rules apply to STEs and other foreign cartels:
- Foreign Conduct That Harms U.S. Commerce is Subject to The Sherman
Act. The long-established principle that foreign firms that conspire
to harm the commerce of the U.S. are fully subject to our antitrust laws,
even though all of their acts occur abroad, was recently reaffirmed by
the Supreme Court's ruling in the Hartford Fire Insurance case that
"The Sherman Act applies to foreign commerce that was meant to produce
and in fact did produce some substantial effect in the United States."
- Foreign Governments Can Be Subject To U.S. Antitrust Law. Foreign
governments that participate in anticompetitive STEs are subject to U.S.
antitrust law since the Foreign Sovereign Immunities Act of 1976 ("FSIA")
provides no immunity when foreign governments engage in commercial activity.
This exclusion applies to conduct "outside the territory of the United
States in connection with a commercial activity of the foreign state ...[which]
causes a direct effect in the United States." Guidelines Sec. 3.31.
Consequently, 'most activities of foreign government-owned corporations
operating in the commercial marketplace will be subject to the United States
antitrust laws to the same extent as the activities of foreign privately-owned
firms.' Id.
- The Foreign Government Compulsion Defense is Strictly Construed.
Where an STE is organized and operated by private foreign exporters, those
exporters are fully subject to the U.S. antitrust laws unless their conduct
is compelled by the foreign government. This defense, however, has
been very narrowly construed and, as the Guidelines spell out, will be
recognized "only when certain criteria are satisfied." Id
Sec. 3.32. There must, first of all, be actual compulsion "in
circumstances in which a refusal to comply with the foreign government's
command would give rise to the imposition of penal or other severe sanctions."
A foreign government's promotion, encouragement, or other "measures
short of compulsion" will not suffice. Secondly, no foreign compulsion
"defense arises when a foreign government...requires its firms to
fix mandatory resale prices for their U.S. distributors to use in the United
States." Finally, the foreign government's command "must come
from the foreign government acting in its governmental capacity. The defense
does not arise from conduct that would fall within the FSIA commercial
activity exception." Id.
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