Antitrust and Unfair Competition Law

Competition: Fall 2014, Vol. 23, No. 2


By Dominique-Chantale Alepin1 and Jonathan Guss2


The importance of foreign trade of material and industrial goods to the United States economy cannot be overstated. In 2013, total U.S. trade with foreign countries (goods and services) was $5.02 trillion.3 Goods are the most important piece of foreign commerce: in 2013, they accounted for more than 80% of all U.S. imports ($2.263 trillion) and 66% of U.S. exports ($1.5 trillion).4

Labels like "Made in America" and "Made in China" belie the complex international networks of production underlying many products. "Nothing is more common nowadays than for the products imported to the United States to include components that producers had bought from foreign manufacturers."5 Take the average smartphone: a device may be assembled in China using parts from multiple suppliers manufactured on several different continents.6 As modern manufacturing has become increasingly globalized, the production of goods has been fragmented across the globe and dispersed among many different companies.

Whether and how much the U.S. antitrust laws should touch the complex, globalized production of goods is an important issue that affects foreign and U.S. companies alike. U.S. competition law can have a meaningful impact on imports to, and exports from, the United States as well as the extraterritorial production of goods. Policies that raise import barriers in the United States may increase costs for foreign producers, but they also have a parallel effect on U.S. multinational companies with foreign manufacturing operations.

Three decades ago, Congress passed the Federal Trade Antitrust Improvement Act ("FTAIA") to provide clearer guidance on what foreign conduct could be tried in the United States. The FTAIA sets consistent boundaries on the extraterritorial reach of U.S. antitrust laws; it requires that to implicate liability under U.S. law, the conduct must have had direct effects on U.S. commerce.7 This limit serves an important role in ensuring that U.S. competition law does not reach too far into foreign affairs. As the Supreme Court has recognized, the foreign application of U.S. law "creates serious risk of interference with a foreign nation’s ability independently to regulate its own commercial affairs."8 It can also create friction and "resentmen[t at] the apparent effort of the United States to act as the world’s competition police officer."9

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In recent years, indirect purchasers have been trying to get around the limitations imposed by the FTAIA by using state antitrust laws to sue foreign manufacturers for conduct that has an indirect effect on U.S. commerce. Courts that have encountered these claims have rejected them.10 Courts should continue to block these efforts. Foreign commerce "is preeminently a matter of national concern," over which the federal government has exclusive power of regulation.11 With respect to foreign commerce, "the need for uniformity" of the U.S.’s policies is "essential."12 "In international relations and with respect to foreign intercourse and trade the people of the United States act through a single government with unified and adequate national power."13 The application of state antitrust laws to foreign conduct outside the reach of federal antitrust laws is no exception.

Given the importance placed on uniformity in the area of foreign commerce, courts must maintain the consistent boundaries imposed by the FTAIA and block efforts to undermine federal policy through the use of state antitrust laws. Subjecting foreign manufacturers to a patchwork of state antitrust laws for conduct that has no direct effects in the United States undercuts the ability of the federal government to regulate foreign commerce and creates unnecessary uncertainty in business transactions. Allowing state laws to reach further than the FTAIA will deny "businessmen, attorneys, and judges as well as our trading partners" a "clear benchmark" as to liability for antitrust violations in the United States.14 It also ensures that the federal government can "continue[] to speak with a single, unified voice" over foreign commerce which is "pre-eminently a matter of national concern."15 By enforcing consistent boundaries for state and federal antitrust law and ensuring that only one body speaks on foreign trade, the United States can reduce friction with trading partners and continue to increase its stature in the global marketplace.16

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The Commerce Clause gives Congress exclusive power over commerce with foreign countries.17 The commerce clause of the Constitution provides Congress the power "[t]o regulate Commerce with foreign Nations."18 This clause has given rise to the dormant commerce clause, which is the negative — or dormant — corollary to the commerce power. It is negative in that it implicitly limits states’ power in interstate and foreign commerce.19 Article I, Section 8 reflects a desire by the Framers of the Constitution to ensure uniform regulation of foreign commerce and consistent regulation of foreign affairs by one body.20 Congress’ exclusive jurisdiction derives from the principle that "[f]oreign commerce is pre-eminently a matter of national concern."21 Exclusive policy making by one body is important to ensuring that the federal government can "speak with one voice when regulating commercial relations with foreign governments."22 State laws must be consistent with federal law and policy in their effect on foreign commerce. So if a state law implicates foreign commerce, courts must examine the regulation to determine whether it "may impair uniformity in an area where federal uniformity is essential."23 State laws that are not consistent with federal law and policy as to foreign commerce violate the Commerce Clause. 24


The Sherman Act explicitly prohibits acts unreasonably restraining trade in the course of "commerce among the several States, or with foreign nations."25 However, what Congress meant by "commerce with foreign nations" was not entirely clear. This ambiguity created inconsistent legal decisions in different parts of the country in civil, government, and criminal cases.26 Prior to the enactment of the FTAIA, there was "disparity among judicial interpretations and between those interpretations and executive enforcement policy regarding the quantum and nature of the effects required to create jurisdiction."27

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In 1982, Congress enacted the FTAIA to establish clear boundaries for the extraterritorial reach of the Sherman Act.28 The House Judiciary Report reflects that one of the major concerns Congress sought to address with the FTAIA was the ambiguity in the legal test used to determine whether American antitrust laws applied to foreign transactions.29 Congress was concerned that inconsistency as to whether foreign conduct could be tried in the United States had made "American antitrust law an unnecessarily complicating factor in a fluid environment in which prompt decisionmaking may be critical."30 Congress wanted to create a "single, clear standard" which would "reduce the amount of legal research and analysis that will be necessary to make an accurate prediction as to whether United States antitrust laws ‘indicate problems.’"31 The consistent application of one standard was intended to free companies "from the possibility of dual and conflicting antitrust regulation."32

Congress struck a delicate balance with the FTAIA, weighing the interests of U.S. consumers against the unnecessary interference in foreign affairs. The FTAIA established that the Sherman Act is applicable to conduct that involves foreign commerce, but that conduct must have a "direct, substantial, and reasonably foreseeable effect" on commerce within the United States.33

In recent years, indirect purchaser plaintiffs have tried to evade the FTAIA requirement of "direct, substantial, and reasonably foreseeable effect[s]" by filing claims under state antitrust laws to reach conduct beyond the purview of the federal antitrust laws.34 Given the growing amount of litigation attempting to apply California (and other state) law to foreign conduct, it is important that there be clarity and consistency that California law reach no further than the FTAIA permits for federal antitrust law.

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The FTAIA clearly bars plaintiffs from reaching foreign transactions that have no "direct, substantial and reasonably foreseeable effect" under the Sherman Act. If California law is allowed to reach those same transactions, Congress cannot speak with "one voice" as to antitrust liability for foreign conduct and the FTAIA’s goal of setting a "benchmark" for businessmen, attorneys, judges and trading partners will be obstructed.

A growing number of federal and state courts have agreed that state law cannot exceed the boundaries imposed by the FTAIA.35 Those courts have correctly concluded that that principles of federalism including the commerce clause, supremacy clause, comity, and statutory construction support the conclusion that state law must not create a standard different from the FTAIA regarding foreign conduct.

A. California Law Must Comport with the FTAIA or Run Afoul of the Commerce Clause

The purpose of the foreign commerce clause is "to promote uniformity and to allow the federal government to set an appropriate uniform level of regulation of trade with other nations."36 Under the dormant commerce clause, the states’ role in foreign affairs, if any, is deliberately limited.37 State laws infringing on Congress’ foreign commerce power and obstructing national uniformity have been held by the Supreme Court to be unconstitutional.38 This rule protects the "unified" voice of the federal government with respect to issues touching on foreign commerce.

Allowing California law to touch foreign conduct and commerce beyond the reach of the FTAIA would violate the Commerce Clause. Courts should construe California law as subject to the limitations of the FTAIA in order to respect the goals of the FTAIA. This will allow the United States to continue to speak with "one voice" on issues involving antitrust and foreign commerce.39 In enacting the FTAIA, Congress specifically sought to eliminate the different standards being imposed by courts across the country as to what foreign conduct would implicate liability in the United States. If California law were allowed to reach additional conduct that was beyond the bounds of federal law, it would undermine that unitary voice.

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And those involved in the foreign production of goods will be no better off trying to predict whether their conduct implicated U.S. antitrust laws than they were before Congress enacted the FTAIA. It would make it impossible for those involved in foreign manufacturing to "make an accurate prediction to whether U.S. antitrust laws ‘indicate problems.’"40 With production of goods becoming increasingly global, it is even more important today to ensure consistent and reliable standards as to what foreign conduct will be prosecuted in the United States.41

B. California Law must comport with the FTAIA or run afoul of the Supremacy Clause

The Supremacy Clause also constrains the reach of California law over foreign commerce. The Supremacy Clause establishes that federal statutes are to be treated as "the supreme law of the land."42 It mandates that all state law is preempted by federal law when a conflict between federal law and state law arises.

While the Sherman Act was not intended to preempt state antitrust regimes altogether, the Act does preempt state law when the challenged state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress."43 A court determines the "full purposes and objectives" by discerning "congressional intent."44

As noted above, Congress’ "ultimate purpose" in enacting the FTAIA was "to promote certainty in the applicability of American antitrust law to international business transactions."45 Applying California law beyond the limits established in the FTAIA would hinder these important objectives by reinserting "ambiguity in the precise legal standard to be employed in determining whether American antitrust law is to be applied to a particular transaction."46 A patchwork of state laws each with different standards of liability for foreign conduct would create significant uncertainty for foreign manufacturers and would impede their ability to "make accurate predictions" as to whether U.S. antitrust laws "indicate problems."47 Congress would be unable to give foreign and U.S. companies confidence regarding when they would encounter liability for certain activities.48

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In addition, preemption of California law is especially important where foreign affairs are implicated.49 This is because extraterritorial matters are traditionally viewed as a markedly national concern.50 The Supreme Court has recognized that international relations are "the one aspect of our government that from the first has been most generally conceded imperatively to demand broad national authority," and that, as a consequence, "[a]ny concurrent state power that may exist is restricted to the narrowest of limits."51 California courts have also acknowledged that preemption issues are particularly important when a state law touches on foreign affairs.52

Application of state law beyond the bounds of the FTAIA violates the Supremacy Clause because it would pose a significant obstacle to the implementation of the FTAIA and would intrude on the federal government’s traditionally singular role in foreign affairs.53

C. California Law is subject to the extraterritorial limitations of the FTAIA under California principles of statutory construction

Not only does the Supremacy Clause preempt California law from reaching beyond the FTAIA’s boundaries, California principles of statutory construction require that California law be construed in harmony with federal law. With respect to antitrust law in California, courts have held that California law follows the federal courts’ interpretation of the federal antitrust laws.54

Because the Sherman Act is subject to the limitations of the FTAIA, California law cannot be construed to disavow those boundaries. If it did, it would not "prevent clashes between the laws of the United States and other nations" or avoid ensnaring the "conduct occurring in a foreign jurisdiction in the prohibitions and remedies of a domestic statute."55

And if California intended to protect its citizens by extending liability to conduct excluded by the FTAIA, it could seek to pass a law expressly stating so just as it did in allowing indirect purchasers to recover under state law.56 In 1977, the Supreme Court held that the Sherman Act would not allow indirect purchasers to recover for violations of Section 1 or 2.57 The California legislature disagreed with this precedent, and, in 1978, amended the Cartwright Act to allow indirect purchasers to recover under California antitrust law.58 Had the California legislature not wanted courts to construe California law as limited by the FTAIA, it could have passed legislation explicitly seeking to allow for such recovery.

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D. California Law must comport with the FTAIA or run afoul of fundamental principles of comity

Well-established principles of comity also caution against extending California law beyond the limits set forth in the FTAIA. Comity is the legal principle that political entities (such as states, foreign nations, and courts from different jurisdictions) will mutually recognize each other’s legislative, executive, and judicial acts. The FTAIA seeks to respect foreign sovereign regulatory prerogatives and to "encourage our trading partners to take more effective steps to protect competition in their markets."59

Since 1982, countries around the globe — especially those where manufacturing has exploded — have risen to this occasion. International antitrust enforcement is at an all-time high. Today, 115 countries have antitrust regimes in place; several strongly enforce their laws.60 For example, China passed its first comprehensive competition law and it went into effect in 2008.61 It recently prosecuted conduct that took place outside its borders.62 India passed a comprehensive competition law in 2002 which established a quasi-judicial party for enforcing provisions of India’s competition laws63 and has opened investigations into the practices of some major U.S. companies.64 Likewise, countries that had existing antitrust regimes have strengthened them and shown a desire to begin to more strictly enforce them. For example, although Japan has had an antitrust enforcement body and antitrust laws since 1947, it is only recently that the Japanese Fair Trade Commission began putting some teeth in its prosecution of cartel activity.65 In 2009, for the first time in many years, the JFTC pursued criminal liability for a price-fixing cartel.66 It also recently was given the power to conduct "compulsory" investigations of potential criminal offenses.67

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Given that foreign enforcement of antitrust laws is strengthening and will provide consumers more protection worldwide, it is even more imperative that U.S. or state antitrust laws do not interfere with foreign competition regulation. As the Supreme Court in Empagran noted, applying United States antitrust regulations to foreign conduct that was independent of any domestic injury seriously risks interfering with a foreign nation’s ability to regulate and enforce its own antitrust laws.68 Empagran also recognized that a consistently-applied limitation was better than a "case-by-case approach," which would generate uncertainty as to which laws applied and which jurisdiction had the authority to hear the case. The specter of "procedural costs and delays could themselves threaten interference with a foreign nation’s ability to maintain the integrity of its own antitrust enforcement system."69

The application of any state’s antitrust law beyond the reach of the FTAIA would implicate the same concerns—interference with a foreign nation’s antitrust enforcement scheme and the practical difficulties of determining which jurisdiction’s laws applied to certain conduct—and multiply them fiftyfold.


The principles of federalism in the sphere of foreign affairs restrain state antitrust law’s ability to reach conduct that does not have a "direct, substantial, and reasonably foreseeable effect" on the United States. Courts should continue to respect the limitation of U.S. law over foreign conduct as provided by the FTAIA. This policy will assist the U.S. in continuing to grow its participation in global trade and manufacturing by allowing U.S. and foreign business leaders to listen to "one voice" in determining whether their conduct implicates U.S. antitrust laws.

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1. Dominique-Chantale Alepin is an associate in the Litigation and Dispute Resolution Practice at Mayer Brown LLP in its Palo Alto office. She specializes in representing high technology companies on issues involving class actions and antitrust issues.

2. Jonathan Guss is an associate in the Litigation and Dispute Resolution Practice at Mayer Brown LLP in its Palo Alto office.

3. Kimberly Amadeo, "U.S. Imports and Exports Components," available at

4. Id.

5. Motorola v. AU Optronics, Case No. 14-8003 (7th Cir. 2014) available at

6. Alex Hillsberg, "How and Where iPhone is Made: A Surprising Report on How Much of Apple’s Top Product is US-Manufactured," Finances Online, available at

7. 15 U.S.C. §6(a) (2006).

8. F. Hoffmann-La Roche Ltd. v. Empagran S.A., 542 U.S. 155, 165 (2004).

9. United Phosphorus, Ltd. v. Angus Chemical Co., 322 F.3d 942, 960-62 (7th Cir. 2003) (en banc) (dissenting opinion).

10. See infra note 34.

11. Japan Line, LTD v. County of Los Angeles, 441 U.S. 434, 448 (1979)

12. Id.

13. Id. (citing Board of Trustees v. United States, 289 U.S. 48, 59 (1933)).

14. H.R. Rep. No. 97-686, at 2-3.

15. In re Intel Microprocessor Antitrust Litig., 476 F. Supp. 2d 452, 457 (D. Del. 2007).

16. Empagran, 542 U.S. at 165 (holding that clear limitations on the reach of U.S. antitrust law are "particularly needed in today’s highly interdependent commercial world.").

17. U.S. Const. art. I § 8, cl 3.

18. U.S. Const. art. I, § 8, cl. 3.

19. Cheryl Tate, The Constitutionality of State Attempts to Regulate Foreign Investment, 99 Yale L.J. 2023, 2033 (1990).

20. Brannon P. Denning & Jack H. McCall, Jr., "The Constitutionality of State and Local ‘Sanctions’ Against Foreign Countries: Affairs of State, States’ Affairs, or a Sorry State of Affairs?", 26 HSTCLQ 307, 317. Indeed, it has been argued that one of the primary purposes of the Constitution was to place control of foreign relations firmly in the hands of the federal government. Louis Henkin, Foreign Affairs and the Constitution 227 (1972).

21. Japan Line, 441 U.S. at 448; see also Intel, 476 F.Supp.2d at 457.

22. Japan Line, 441 U.S. at 449 (citations omitted).

23. Pac. Nw. Venison Producers v. Smith, 20 F.3d 1008, 1014 (9th Cir. 1994) (citing Japan Line, 441 U.S. at 448).

24. See e.g., Rust v. Sullivan, 500 U.S. 173, 190-91 (1991) (collecting cases).

25. 15 U.S.C. §1.

26. H.R. Rep. No. 97-686, at 5-6.

27. Id. at 5. Very recent decisions by the Ninth and Seventh Circuit have held that the issue of "direct effects" on U.S. commerce goes to the merits of the case. Motorola, supra note 5; United States v. AU Optronics, Case No. 12-10514 (9th Cir. July 10, 2014), available at

28. 15 U.S.C. § 6a (2006).

29. H.R. Rep. No. 97-686, at 5-6.

30. Id. at 6.

31. Id.

32. Id. at 10.

33. 15 U.S.C. §6(a) (2006).

34. In re Intel Corp. Microprocessor Antitrust Litig., 476 F.Supp.2d 452 (D. Del. 2007); In re TFT-LCD (Flat Panel) Antitrust Litigation, Case No. 3:12-cv-03802-SI (N.D. Cal.); In re Optical Disk Drive Products Antitrust Litigation Acer Inc. v. Life-On It Corp. , Case No. 13-cv-04991-RS (N.D. Cal.); Sony Electronics v. LG Display Co. Ltd. , Case No. 10-cv-05616 (N.D. Cal.); In re Cathode Ray Tube Antitrust Litigation, Case No. 06-01665-PJH (N.D. Cal.); In re Rubber Chemicals Antitrust Litigation, Case No. 07-cv-01057 (N.D Cal.); Commercial Street Express LLC v. Sara Lee Corporation, Case No. 08-cv-01179 (N.D. Ill.); In re Refrigerant Compressors Antitrust Litig., Case No. 09-MD-02042-SFC (E.D. Mich.); In re Air Cargo Services Antitrust Litigation, Case No. 06-MDL-1775-JG (E.D.N.Y. 2008). The majority of these cases were brought in California and include a California antitrust claim (either under the Cartwright Act or the Unfair Competition Law).

35. Intel, 476 F. Supp. 2d at 457-58 (holding the FTAIA barred indirect purchaser’s Cartwright Act and UCL claims); Ubiquiti Networks, Inc. v. Kozumi USA Corp., No. C 12-2582 CW, 2013 WL 368365, at *9 (N.D. Cal. Jan. 29, 2013); Amarel v. Connell, 202 Cal. App. 3d 137, 149 (1988); see also CSR Ltd. v. Cigna Corp., 405 F. Supp. 2d 526, 552 (D.N.J. 2005); The ‘In’ Porters, S.A. v. Hanes Printables, Inc., 663 F.Supp. 494, 502, n.8 (M.D.N.C. 1987); In re Potash Antitrust Litig., No. 08-C-6910, 2009 WL 3583107, at *23 (N.D. Ill. Nov. 3, 2009).

36. Japan Line, 441 U.S. at 448.

37. Richard A. Bilder, The Role of States and Cities in Foreign Relations, 83 Am. J. Int’l, L. 821, 823-24 (1989).

38. Japan Line, 441 U.S. at 448.

39. See In re. Static Random Access Memory (SRAM) Antitrust Litig., No. 07-MD-01819, 2010 WL 5477313, at *4 (N.D. Cal. Dec. 31, 2010).

40. H.R. Rep. 97-686, at 6.

41. Id. (finding that uncertainly regarding application of U.S. antitrust laws interfered with "a fluid environment in which prompt decision-making may be critical.").

42. U.S. Const. art. 6, cl. 2.

43. Crosby v. National Foreign Trade Council, 530 U.S. 363, 373 (2000) (quoting Hines v. Davidowitz, 312 U.S. 52, 67 (1941)) (holding that a state law prohibiting doing business with Burmese companies was "an obstacle to the accomplishment of Congress’ full objectives" of a federal law imposing sanctions on Burma).

44. Bronco Wine Co. v. Jolly, 33 Cal.4th 943, 955 (2004).

45. H.R. Rep. 97-686, at 5, 9.

46. For all of Mr. Pilotin’s rhetorical maneuverings around the preemption issue and what the statute says or does not say, he cannot obscure a simple and sensible conclusion: if Congress’s intent in passing the FTAIA was to create certainty around when American antitrust laws do and do not apply to foreign transactions, how could it possibly countenance a scenario in which an international transaction could be subject to as many as fifty different legal regimes? Why even enact the FTAIA if it envisions such a scenario?

47. Id. at 6.

48. Id. at 5-6.

49. While Mr. Pilotin invokes high school civics for the proposition that the federal government is one of limited powers, those same civics lessons also teach that one of those limited powers—arguably the foundational one—is the exclusive power to conduct foreign affairs. See Intel, 475 F.Supp.2d at 457.

50. Intel, 475 F.Supp.2d at 457.

51. Hines v. Davidowitz, 312 U.S. 52, 68 (1941).

52. See e.g. Viva! Int’l. Voice for Animals v. Adidas Promotional Retail Operations, Inc., 41 Cal. 4th 929, 939 (2007) (assuming, without formally deciding, that the normal presumption against preemption does not apply in the context of foreign affairs).

53. Japan Line, 441 U.S. at 448; see also Intel, 476 F.Supp.2d at 457.

54. See Partee v. San Diego Chargers Football Co., 668 P.2d 674, 677 (Cal. 1983); Vinci v. Waste Mgmt., Inc., 36 Cal. App. 4th 1811, 1814 n.1 (Cal. Ct. App. 1995).

55. Diamond Multimedia Sys., Inc. v. Superior Court, 968 P.2d 539, 554 n.20 (Cal. 1999).

56. Cal. Bus. & Prof. Code § 16750(a).

57. Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977).

58. B.W.I. Custom Kitchen v. Owens-Illinois, Inc., 191 Cal.App.3d 1341, 1346 (1987).

59. H.R Rep. 97-686, at 9.

60. John Terzaken, "Antitrust Enforcement Goes Global," Reuters, November 22, 2013, available at

61. China Anti-Monopoly Law.

62. Susan Ning and Kate Peng, "NRDC Imposed Stiff Fines on Multinational LCD Manufacturers in China’s First Antitrust Enforcement Action against International Cartels," January 15, 2013, available at

63. The India Competition Act of 2002

64. John Ribeiro, "Google under antitrust investigation in India over AdWords," May 13, 2014, available at

65. James Fry, "Struggling to teethe: Japan’s antitrust enforcement regime," Law and Policy in International Business, Summer 2001.

66. Yoji Maeda, "Japan Antimonopoly Act: Precedent-Setting Criminal and Administrative Fines in Japanese Galvanized Steel Sheet Cartel Investigation," September 25, 2009.

67. Id.

68. 542 U.S. at 165-67.

69. Id. at 168-69.

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