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to protect each other's markets and to eliminate outside competition, and participated in specific cartel arrangements to restrict imports to and exports from the United States.53 The defendant American firm held 30 percent of the outstanding stock of the British company and 50 percent of the outstanding stock of the French company.

On these facts, the defendant made the unsuccessful argument that the three firms were a single "joint venture" or enterprise, and hence exempt from the antitrust laws. What the Court was left with, having dealt with the affiliation question, was a broad world-wide cartel of leading firms engaged in selling an important product amid elaborate arrangements to ensure noncompetition. The defendants did argue. that "... the Sherman Act should not be enforced in this case because what appellant has done is reasonable in view of current foreign trade conditions."54 The Court responded,

The argument in this regard seems to be that tariffs, quota restrictions and the like are now such that the export and import of antifriction bearings can no longer be expected as a practical matter, that appellant cannot successfully sell its American-made goods abroad; and that the only way it can profit from business in England, France and other countries is through the ownership of stock in companies organized and manufacturing there. This position ignores the fact that the provisions in the Sherman Act against restraints of foreign trade are based on the assumption, and reflect the policy, that export and import trade in commodities is both possible and desirable. Those provisions of the Act are wholly inconsistent with appellant's argument that American business must be left free to participate in international cartels, that free foreign commerce in goods must be sacrificed in order to foster export of American dollars for investment in foreign factories which sell abroad. Acceptance of appellant's view would make the Sherman Act a dead letter insofar as it prohibits contracts and conspiracies in restraint of foreign trade. If such a drastic change is to be made in the statute, Congress is the one to do it.55

What the Supreme Court did here was to reject a very broad argument in favor of cartels-a point on which it was clearly correct. What the Court did not do was to say that all domestic antitrust rules are going to be applied in precisely the same way in the international field. As the Court stressed, the Sherman Act does reflect the policy that export and import trade in commodities is both possible and desirable. The reality is that the defendant over-argued its case. If in fact it was impossible for it to sell its bearings in foreign markets without manufacturing there, then the elaborate territorial allocation scheme was not necessary. Even if it could not sell its bearings in

53. Id. at 595-96.

54. Id. at 599.

55. Id.

certain foreign markets, this was not a justification for a private arrangement that prevented others from selling their bearings in the American market. The Timken decision never explicitly stated that the cartel scheme at issue was per se illegal, let alone that all domestic per se rules would be applied in a foreign context. In fact, as I have argued, such a naked territorial allocation scheme designed to isolate the United States from outside competition should be treated as per se illegal under the Topco standard. The impact on the domestic American market is fundamental and immediate, especially where a leading competitor is involved.

Nor is the issue one of jurisdiction. In an early antitrust case, American Banana v. United Fruit Co.,56 the Supreme Court held fairly broadly that acts done abroad were subject only to the laws of the place where they were committed, even if they injured foreign commerce. Subsequent antitrust cases have retreated from this broad statement of territoriality.57 The full sweep of the reversal is seen, for example, in Judge Hand's celebrated Alcoa decision in 1945. He stated that “it is settled law... that any state may impose liabilities, even upon persons not within its allegiance, for conduct outside its borders that has consequences within its borders which the state reprehends. . . ."58 This very broad language had caused some perhaps appropriate concern. Suffice it to say, however, that it is no longer the place of the act that is key. When the act or agreement can be shown to have a direct effect on markets within the United States, our law should reach it—and this is especially so where the act was clearly intended to affect our market. Of course, under our traditional jurisprudence, it is necessary to have personal jurisdiction over the party committing the act.59 This normally presents no problem with respect to the subsidiary of an American corporation, let alone the corporation itself. It may, of course, pose a problem where the potential defendants are foreign corporations which do no business in the United States.

Thus, in the end, we are not dealing with a legal issue of jurisdiction, but of substance. The ultimate question is whether American antitrust laws, particularly the Sherman Act, are sufficiently broad to allow the application of more flexible rules to foreign transactions. The answer, I submit, is “yes.” Kingman Brewster makes this case very clearly and

56. 213 U.S. 347 (1909).

57. See K. Brewster, AntITRUST AND AMERICAN BUSINESS ABROAD 65 (1958). 58. United States v. Aluminum Co. of America, 148 F.2d 416, 443 (2d Cir. 1945). 59. See International Shoe Co. v. Washington, 326 U.S. 310 (1945).

analytically in his treatise.60 He indicates that a naked economic restraint isolating the United States should not be treated any differently than a naked territorial restraint within the country. The principal area in which a different rule applies is where a restraint which is imposed on export sales neither has nor is intended to have direct impact on the American market. For example, an agreement between an American firm and a British firm that the American firm will sell only in South Africa and the British firm will sell only in Australia may restrain American exports to the latter and hence, is arguably within the jurisdiction of the Sherman Act; beyond that, competition within Australia or within South Africa is a matter for their respective governments rather than our own. On the other hand, an agreement between the British firm and the American firm that the British firm will not sell in the United States and the American firm will not sell abroad raises an immediate and direct United States interest, which we should protect by strict antitrust enforcement.



National governments are especially important in the international business realm. They are conspicuously active in organizing producer cartels for primary products; they sometimes impose anticompetitive restrictions on foreign firms and products; and in communist countries, they operate state trading monopolies for internal distribution of goods and services.

Government activity can create special antitrust problems. For example, long-term exclusive arrangements between an American firm and a state trading monopoly may necessarily exclude all other American firins from that market. The antitrust answer to these problems turns on the factual realities of the situation. Where the foreign government, as sovereign, requires an American firm to engage in some activity which would otherwise be offensive to our antitrust laws, that is the end of the antitrust inquiry. The same is not true where the American firm has been the moving force in getting the anticompetitive contractual restrictions adopted-or has discretion in how they are administered.

The law in this area can be traced to the Supreme Court's 1943

60. K. BREWSTER, supra note 57, at 79-96.

decision in Parker v. Brown.61 There, the Supreme Court held that a California state scheme for regulating raisin marketing was on its facts exempt from the antitrust laws.

The state in adopting and enforcing the prorata program made no contract or agreement and entered into no conspiracy in restraint of trade . . ., but as sovereign, imposed the restraint as an act of government which the Sherman Act did not undertake to prohibit.62

This policy is broadly applicable in the international field.

The other side of the coin is illustrated by the Supreme Court's 1962 decision in Continental Ore v. Union Carbide. 63 A defendant subsidiary of an American company had been appointed during the war to act for the Canadian Metals Controller as the sole buyer for Canada of a particular metal, and it had used its position to favor its own interests and to squeeze the plaintiff (another American firm) out of the Canadian market. The Supreme Court held that this was actionable as part of an alleged attempt to monopolize U.S. foreign commerce. The Court noted that the defendant's control “. . . was aided by discriminatory legislation of the foreign country . . ." but that the action was “taken within the area of its discretionary powers granted by the Metals Comptroller.


To summarize, that which is required by a foreign government is exempt from antitrust liability; but that which the foreign government simply affords one the opportunity to do, may or may not be illegal, depending upon its effect on American commerce.


The world of international trade is competitive and complex. It is also changing. Such circumstances offer a constant temptation to unwise policies-including antitrust repeals and protectionist devices. We should resist that temptation, because those policies are expensive to us as a nation of consumers, and because they fail to come to grips with the hard issues of skill and efficiency.

We must face up to the complexities of the real world. In fact, the antitrust laws are conducive to such pragmatism.

The draftsmen of the Sherman Act created a statute of great breadth and flexibility (the same is true of the amended Clayton Act § 7). The

61. 317 U.S. 341 (1943).

62. Id. at 352 (emphasis added).

63. 370 U.S. 690 (1962).

64. Id. at 706 (emphasis added).

Sherman Act has worked well because generations of prosecutors and judges have given it specificity in dealing with particular types of conduct in the ever-changing world of business. Some kinds of conduct have been found to be so generally harmful as to be deemed per se illegal, without actual proof of anticompetitive impact or other public harm. Other kinds of conduct have been subjected to full factual inquiry in both section 1 and section 2 cases.

Of course, the line has been close in certain cases-particularly joint business ventures-as to whether particular conduct should be subjected to a per se rule or not. Crucial in this determination are the particular circumstances of the case and the attitude of the courts.65 To this extent, there is uncertainty in the law-and there always will be-for, by definition, close cases are uncertain in their effect as precedent. One alternative is to have inflexible rules, to be applied without regard to real facts or consequences (as we have in parts of the Internal Revenue Code and in various forms of absolute tort liability). The other alternative is to have no law at all. The proponents of absolute antitrust exemption for all export activity are clearly asking for the latter. Such a solution does eliminate legal uncertainty, but at an unacceptable price to our consumer and business interests.

In fact, antitrust has been used relatively infrequently against foreign business operations, and most of the actual use has been in "easy" cases involving straight old-fashioned cartels. The Supreme Court has not locked us into inflexible rules in the broad international business area, and it has given no indication that it would do so.

In these circumstances, what is needed is rational argument, not irrational recrimination; facts not footnotes; and a sense of our national public interest as competitive buyers and sellers and international traders. With these, we can in fact protect our consumers at home and allow our producers the fullest capability to compete abroad. That which would be a clearly illegal restraint of trade in the domestic market, can be a rational attempt by a group of American firms to improve their export trade position in the face of stiff foreign competition abroad; it may even promote competition in the foreign market. At the other extreme, the group agreement may purport to improve export competitiveness, yet in reality produce clear adverse effects on

65. E.g., United States v. Topco Associates, 405 U.S. 596 (1972); Worthen Bank & Trust Co. v. National BankAmericard, 485 F.2d 119 (8th Cir. 1973), cert. denied, 415 U.S. 918 (1974).

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