where "goods, wares and merchandise" are involved and where certain safeguards are met.28 In fact, Webb-Pomerene has proven to be of little practical importance because most joint export arrangements may be carried on under the Sherman Act, and because American firms selling highly differentiated products have generally not wanted to merge sales efforts with their competitors. To eliminate any doubt, however, the Administration has in 1974 proposed to expand Webb-Pomerene to cover various types of services.2

29

There are, of course, several kinds of situations in which private arrangements may foreclose export and investment opportunities for American firms abroad, and may therefore be subject to our antitrust laws. One is the classic cartel, already discussed, whereby the American firm agrees to limit its own exports into a foreign competitor's market as part of an international market allocation scheme.3

30

Another is where a joint venture is formed among the leading firms in an industry to promote exports to a foreign country or countries. Such a joint venture may not exclude the remaining American firms, where this would deprive them of the benefit of making export sales. This is but a particular application of the standard antitrust principle that, where different firms in an industry jointly control an essential facility, they must grant equal access to this facility to all competitors in the trade; this principle has been applied to enterprises as diverse as a terminal railway, a fish market, the Associated Press and the New York Stock Exchange.31 It seems fully applicable to joint arrangements designed to promote or sell American goods or services abroad.

Yet another situation in which market opportunities abroad may be unlawfully foreclosed would be where American firms conspire to drive another American firm out of an export market. A leading example involved predatory pricing by a group of American steamship lines for the purpose of driving an independent line off a route reserved for American-flag carriers (i.e., an export market for U.S. services).32 A variant would be where an American firm, enjoying monopoly power

28. Webb-Pomerene Act § 40, 40 Stat. 516-18, 15 U.S.C. §§ 61-65 (1970). 29. S. 1774, 93d Cong., 1st Sess., tit. II (1973). See also testimony of Assistant Attorney General Thomas E. Kauper, September 6, 1973 on this bill and on S. 1483.

30. See, e.g., Timken Roller Bearing Co. v. United States, 341 U.S. 593 (1951). 31. United States v. Terminal Railroad Association of St. Louis, 224 U.S. 383 (1912); United States v. New England Fish Exchange, 258 F. 732 (D. Mass. 1919); Associated Press v. United States, 326 U.S. 1 (1945); Silver v. New York Stock Exchange, 373 U.S. 341 (1963).

32. See Pacific Seafarers, Inc. v. Pacific Far East Line, Inc., 404 F.2d 804 (D.C. Cir. 1968).

in a foreign market, exercised it to exclude other American imports from that market. The Continental Ore case, discussed below, is a leading example.3

33

Exclusive dealing arrangements can also create problems by excluding other American firms from export opportunities. For example, if a leading U.S. firm enters into an exclusive, long-term contract with a leading foreign customer, this contract would have the necessary effect of preventing any other American firms from competing for that customer's business. Such contract would have to be scrutinized in terms of its competitive effect, particularly with regard to the foreign buyer's importance in the total market for U.S. exports.34 A tie-in may have a similar effect. Thus, a patent license which requires procurement of goods from the U.S. licensor may run afoul of U.S. law, although an arrangement which simply ties the procurement to any U.S. supplier might be permissible, since such an arrangement involves no restraint on U.S. foreign commerce.

A final example illustrating the way in which foreign market opportunities can be foreclosed is the foreign buying cartel. If a group of foreign firms combine to allocate their purchasing among various American sources, they are necessarily limiting competition within our domestic economy for goods which will be exported. Such buying cartels are of direct interest to our government, and should be subject to American antitrust scrutiny to the extent that we can assert jurisdiction over the parties.

What is equally important is the broad range of export arrangements which are not covered by U.S. antitrust laws because they involve no unreasonable restraint of U.S. foreign commerce. The Department of Justice discussed this issue during the 1972 Congressional hearings on an "export promotion" bill giving the Secretary of Commerce broad authority to grant antitrust exemptions for the promotion of exports. The Department (which was obviously concerned by the open-ended authority) pressed the bill's proponents, inside government and out, to provide some real examples of where antitrust was limiting exports. A rather short list was then produced, which the Department analyzed in its testimony.35

33. Continental Ore Co. v. Union Carbide Corp. 370 U.S. 690 (1962). 34. Cf. Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320 (1961).

35. Testimony of Deputy Assistant Attorney General Walker B. Comegys, Export Expansion Hearings, supra note 1, at 807-16 (1972); see also 5 CCH Trade Reg. Rep. ¶ 50,129 (1972).

Among other things, the Department dealt with a series of examples of territorial restrictions outside the United States. It concluded that such restrictions, whether vertically or horizontally imposed, were generally unobjectionable from the standpoint of U.S. antitrust law (even if highly objectionable under Common Market or foreign antitrust law). Some of the examples involved territorial schemes based on patent and know-how licenses. The Department indicated that a patent is territorial by nature and that know-how restrictions are reasonable, if limited in time and scope and truly related to valuable know-how. Tie-ins on foreign licensing arangements were said by the Department probably to be reasonable so long as they did not foreclose competing American sellers (as opposed to foreign sellers) of the tied products. Several other examples concerned various types of joint venture arrangements, including joint construction contracts, joint bidding on foreign jobs, and joint manufacturing. The Department indicated:

In general, joint ventures abroad by American companies in cooperation with foreign companies present no antitrust problems unless (1) participation in the joint venture is a prerequisite to competition and some American firms are arbitrarily excluded . . . or (2) the activities of the joint venturers has [sic] some substantial impact on the domestic commerce of the United States, in which case the venture will be judged by rules applying domestically. Joint ventures have been held illegal in a number of international cartel cases but the joint

venturers there went down as part of larger illegal schemes and involved dominant enterprises.36

The law indeed affords American firms considerable discretion in the structuring and conduct of their export operations. Moreover, explicit protection is provided by the Webb-Fomerene Act for certain joint-sale arrangements involving goods, wares, and merchandise.37 The main utility of this statute has been in its application to sales abroad of primary products where United States exporters have enjoyed some monopoly power. Here American firms found it worthwhile to create a genuine export cartel. Webb-Pomerene has not proven particularly useful as a joint-selling tool for highly technical or differentiated products-the most important of our national exports—since each American firm has wished to push its own distinct product rather than to undertake a joint effort for the benefit of all.

Even under the Sherman Act, American exporters of goods and services enjoy wide latitude in how they structure their arrangements and carry on their business. Of course, the Sherman Act may be

36. Export Expansion Hearings, supra note 1, at 815.

37. Webb-Pomerene Act § 40, 40 Stat. 516-18, 15 U.S.C. §§ 61-65 (1970).

60-363 - 75 - 17

applied to foreign arrangements which impose substantial limitations on re-export back into the United States of the good: exported abroad, or which prevent foreign firms (e.g., joint venture partners) from themselves exporting into the United States market. Generally, such restraints would be examined under the rule of reason. The question here concerns the spillover effect into the American market and, where such effect is significant, the restriction should be struck down. Where it is not significant, it may qualify if an ancillary restraint to a legitimate venture. To give broader antitrust protection would be to make the American consumer subsidize exports of our firms by paying noncompetitive, or less competitive, prices here in the United States.

There is one other relatively minor caveat to the general liberality of American antitrust law with respect to exports. That concerns exports financed by the United States Government and reserved to American suppliers. Thus, in the 1968 Concentrated Phosphate case,38 the Supreme Court held that a Webb-Pomerene export cartel could not be used in a foreign fertilizers sale to Korea financed under the American A.I.D. program. The Court noted that the main Congressional motive behind the Act was to ". . . increase American exports by depriving foreigners of the benefits of competition among American firms, without in any

significant way injuring American consumers. "39 In this case, the Court stressed that the particular market (i.e., A.I.D.-financed fertilizer) was reserved to American suppliers by law and that, therefore, particular transactions did not come within the scope of the statute. "The major impact of allowing the combination appellees desire would not be to encourage American exports; it would be to place the burden of noncompetitive pricing on the shoulders of the American taxpayer.

"40

Somewhat related is Pacific Seafarers, Inc. v. Pacific Far East Lines, Inc., decided by the D.C. Circuit earlier the same year.41 This case involved a conspiracy among the members of a conference of American-flag lines to drive the non-conference plaintiff line off the route for transportation of fertilizer from Viet Nam to Korea. The cargoes were financed by A.I.D. and the business was reserved by law to U.S.-flag carriers. However, since only services were involved there was not even an arguable Webb-Pomerene exemption. The Court of Appeals re

38. United States v. Phosphate Export Assn., 393 U.S. 199 (1968).

39. Id. at 208.

40. Id. at 209.

41. 404 F.2d 804 (D.C. Cir. 1968).

jected defendant's contention that the commerce in question was not in the reach of the Sherman Act. The court found that carriers “in participating in the market of supplying the service of transportation in United States-flag vessels, were engaged in foreign commerce of the United States."42 In essence, the court found the parties were engaged in the export of U.S. services.

[S]ince there is an identifiable, distinctive market for American-flag shipping service where the American characteristic is dominant-a market defined as involving the transportation of A.I.D.-financed cargoes, which has a definite nexus with significant interests of the United States-the Sherman Act is applicable to a conspiracy to exclude newcomers from the trade."

Earlier the court had indicated:

43

It may be assumed that, as a matter of construing Congressional intent, the Sherman Act has no application where the market involved consists of shipping services between two foreign ports, without any American characteristic, and the only American aspect is that one or some of the persons competing in the transportation market is offering American-flag ships. . . ."

44

I find Concentrated Phospate and Pacific Seafarers to be rather narrow-and wise--exceptions to the general rule. Where the U.S. Government is financing the transactions involved and reserving the business to U.S. firms, we have no national interest in having American firms restrain commerce in that area.

Finally, in the export area, there may be some special problems posed by the activities of foreign governments. This subject is discussed in a succeeding section. Suffice it to say, however, that where a foreign government requires an American firm to do something that would otherwise be illegal under the antitrust laws of the United States, no antitrust violation follows.

V

COMPETITION AND CRITICISM

This twofold approach-emphasizing domestic compensation and competitive export opportunities—has been criticized from both sides. Some feel that it leaves a wider role for antitrust than is “realistic" in the modern world. Others think it assumes too narrow an antitrust role.

The first group would generally like to roll back antitrust, even at the

42. Id. at 811. 43. Id. at 816.

44. Id.