FTC/DOJ Release Proposed Update to International Enforcement Guidelines: 14 Important Questions

On November 1, 2016, the two federal antitrust agencies, the Federal Trade Commission (FTC) and the Antitrust Division of the U.S. Department of Justice (DOJ) jointly issued a proposed update to the Agencies’ 1995 Antitrust Guidelines for International Enforcement and Cooperation. Much has changed since 1995. Today, international cartel cases account for a much more significant percentage of DOJ’s criminal enforcement than they did a generation ago. Likewise, international mergers were rarer in the years preceding the dot.com boom. The number and sophistication of antitrust enforcers and regulators outside of the United States has also grown exponentially since the 1990s, and convergence on a wide range of procedural and substantive issues has occurred thanks to the efforts of participants in the International Competition Network and other international organizations.

The Proposed Guidelines address a wide range of international issues. Following a brief exposition on the provisions of various U.S. antitrust and trade statutes that are most likely to have significance for businesses engaged in international activities, the Guidelines are divided into three substantive sections: (1) the scope of the extraterritorial application of U.S. antitrust law; (2) the Agencies’ analysis of international comity concerns and the role of foreign governments’ involvement in the underlying conduct when determining whether to open an investigation or bring an enforcement action; and, (3) an overview of the Agencies’ tools for conducting investigations abroad, including a detailed analysis of the Agencies’ cooperation efforts with their foreign counterparts. The Guidelines also contain a detailed discussion of confidentiality issues that arise in the context of any such cooperation.

Although the Proposed Guidelines are a draft, the very brief comment period suggests that the Agencies view them as in near-final form. If so, we note that the Proposed Guidelines take an aggressively expansionist view of U.S. antitrust law by, among other things:

• Adopting the questionable Ninth Circuit rule that the substantive provisions of the FTAIA replace the Hartford Fire “substantial and intended” effect test.
• Trivializing the “substantiality” prong of the “direct effects exception” to the FTAIA both by claiming that it does not “require the effects to be quantified” and by claiming it may be satisfied by proof that effect “was not insignificant.”
• Providing that U.S. antitrust law reaches wholly foreign commerce, even where the sale of a component overseas represents “a small fraction of the cost of the finished product” manufactured overseas for sale into the United States where “pricing is closely tied to input costs.”
• Suggesting that U.S. antitrust law reaches sales by foreign manufacturers to foreign distributors, even where the manufacturer may not intend that its products be sold into the United States.
• Stating that the Agencies’ determination of conflict of laws in a comity analysis is entitled to judicial deference.
• Neglecting to address how the Agencies will balance fines for purely foreign conduct where the same underlying sales form the basis for fines in multiple jurisdictions.

As the Proposed Guidelines are in draft form, in lieu of formal summary, the following are answers to frequently asked questions about the issues covered by the Proposed Guidelines and international antitrust investigations generally.

Read FTC/DOJ Propose Update to International Enforcement Guidelines: 14 Important Questions.

See also: DOJ/FTC Formalize Aggressive Extraterritorial Enforcement of US Antitrust Law