—A USEFUL Reference For China

ABSTRACT: While China’s Anti-Monopoly Law has provided extraterritorial jurisdiction over monopolist conduct that has a restrictive effect on competition in China’s domestic market, it is expected that the scope of this extraterritorial application will be further specified in the future. This article reviews the evolution of extraterritorial application of the Sherman Act in the United States, where courts have developed substantial case law defining the scope of the statute’s extraterritorial reach. In particular, this article examines the considerations of international comity and deterrence underlying the evolution. Finally, this article suggests that China should exercise its extraterritorial jurisdiction moderately in consideration of its own economic circumstances and policies and deference toward foreign laws.
KEY WORDS: extraterritorial jurisdiction antitrust law effect test

Introduction
The world today is witnessing an economic globalization, marked by increasingly fluid markets and industry integration. The globalization not only promotes international trade but also creates opportunities for international cartel conduct and presents challenges for countries policing such cartels. To protect the interests of domestic consumers, ensure market competition, and deter global cartels, countries have extended their antitrust reach beyond their own borders.
China has joined other major antitrust regimes by including a provision in its newly enacted Anti-Monopoly Law (“AML”) to provide for extraterritorial jurisdiction. The AML applies to extraterritorial conduct that “has eliminative or restrictive effects on competition in the domestic market.”[i] This provision, however, does not specify the criteria for the “effects” requirement, i.e., whether the anticompetitive effects must be direct or substantial.[ii] In this respect, the experiences of other countries in applying extraterritorial jurisdiction will be useful references for China when it constructs its own roadmap for such application.
Many countries and regional organizations including the United States and the European Union have adopted antitrust extraterritorial provisions.[iii] The United States limits the jurisdictional reach of the Sherman Act to conduct that has, in part, a “direct, substantial and reasonably foreseeable effect” on U.S. commerce. The European Union has also adopted language embracing the effects doctrine, allowing application of its antitrust law beyond its border as long as there is a foreseeable, immediate, and substantial effect in the European Union.[iv] Despite this seemingly similar statutory language, the views on the limits of extraterritorial application of antitrust law are not uniform and the extraterritorial application of antitrust law varies among these regimes. The United States, having the most extensive private antitrust litigation, is the most active in applying its antitrust jurisdiction extraterritorially. However, the United States has also been criticized for its aggressiveness in exercising its jurisdiction extraterritorially. Indeed, there has been constant debate on the proper scope of antitrust extraterritorial jurisdiction.
This article analyzes the evolution of the extraterritorial application of antitrust law by the United States, as well as the rationale and policy concerns behind this evolution. In particular, the article focuses on the underlying considerations of international comity and deterrence, culminating with the U.S. Supreme Court’s most recent decision on extraterritorial jurisdiction. Lastly, this article places this discussion in the particular context of Chinese economic and political policy and suggests that China carefully choose a moderate approach in exercising its antitrust jurisdiction extraterritorially.

The Evolution of U.S. Extraterritorial Jurisdiction – BalancING International Comity and Economic Policy
There are two fundamental doctrinal concerns underlying the debate on the proper limits of antitrust extraterritorial jurisdiction – the importance of international comity[v] and the economic consideration of deterrence. On the one hand, U.S. courts are mindful that comity considerations, international cooperation, and international law traditions dictate a limited exercise of extraterritorial antitrust jurisdiction. Some have argued that an excessive extraterritorial reach of U.S. antitrust law may even undermine cooperative amnesty programs and undermine the antitrust regimes in other countries, encourage forum shopping and threaten the cooperation between governmental enforcement agencies.[vi] On the other hand, scholars and economists have argued that U.S. courts cannot ignore the reality that adverse foreign effects are interconnected with adverse domestic effects, and that a narrower extraterritorial application will fail to effectively deter global cartels and will undermine domestic competition.[vii] Courts have historically balanced the desire to deter anticompetitive behavior with the desire to respect the sovereignty of other countries. As set forth in detail below, these two themes are intertwined with the evolution of U.S. antitrust extraterritorial jurisdiction.

The “Effects Test” and The “Jurisdictional Rule of Reason”
Traditionally, when business was confined within its borders, the U.S. restricted its antitrust authority to conduct within its geographical limits. In American Banana Co. v. United Fruit Co, the U.S. Supreme Court held that the Sherman Act did not apply to conduct occurring outside of the United States when the injury was also outside the United States.[viii] A conspiracy to restrain trade designed in the United States, but executed in a foreign country, was only subject to the local laws of that foreign country.[ix] The Court noted that “the general and almost universal rule” was that the determination of unlawfulness of a particular conduct must be decided by the state within which the act was committed.[x]
This restrictive territorial view soon faded. In U.S. v. Am. Tobacco Co., the U.S. Supreme Court held that it had the right to test the legality of an agreement made outside the U.S. in accordance with U.S. law, even if foreign law would be contrary.[xi] The Court accordingly held that the alleged agreement to divide the global tobacco market was illegal because it had a substantial anticompetitive effect on the U.S. tobacco market.[xii] Over time, U.S. courts have continued to recognize that conduct occurring outside the United States which violates the Sherman Act may still have anticompetitive effects beyond the place of the conduct, justifying a U.S. court’s assertion of jurisdiction.[xiii]
The well-known “effects test” was first introduced in U.S. v. Aluminum Co. of America (the Alcoa case).[xiv] There, the Second Circuit explicitly abandoned the principle that the law of the country where an act is performed must determine the lawfulness of the act. The court extended the reach of the Sherman Act to a foreign cartel joined by French, Swiss and British ingot manufacturers and Alcoa’s Canadian subsidiary. There was no evidence of any adverse effect of this completely foreign cartel on the U.S. domestic market. Still, the court held that where the cartel agreements “were intended to affect imports and did affect them … the situation certainly falls within [the jurisdiction of the Sherman Act].”[xv] This view was subsequently adopted by the U.S. Supreme Court.[xvi]
As more courts adopted the Alcoa effects test, there was a concern that it failed to adequately account for other countries’ interests.[xvii] In Timberlane Lumber Co. v. Bank of America, the Ninth Circuit considered “whether the interests of, and link to, the United States – including the magnitude of the effect on American foreign commerce – are sufficiently strong, vis-à-vis those of other countries, to justify an assertion of extraterritorial authority.”[xviii] The court recognized: “That American law covers some conduct beyond this nation’s borders does not mean that it embraces all, however. Extraterritorial application is understandably a matter of concern for the other countries involved.… In any event, it is evident that at some point the interests of the United States are too weak and the foreign harmony incentive for restraint too strong to justify an extraterritorial assertion of jurisdiction.”[xix] The court identified a list of factors to be weighed in determining jurisdiction, now known as the “jurisdictional rule of reason”:
The degree of conflict with foreign law or policy, the nationality or allegiance of the parties and the locations of principal places of business of corporations, the extent to which enforcement by either state can expected to achieve compliance, the relative significance of effects on the United States as compared with those elsewhere, the extent to which there is explicit purpose to harm or affect American commerce, the forseeability of such effect, and the relative importance to the violations charged of conduct within the United States as compared with conduct abroad.[xx]
In effect, the jurisdictional rule of reason added a consideration of international comity to the Alcoa effects test.

The Passage of The Foreign Trade Antitrust Improvement Act and Its Progeny
In 1982, the U.S. Congress adopted the Foreign Trade Antitrust Improvement Act (“FTAIA”),[xxi] codified as §7 of the Sherman Act, to set forth the limits of the reach of the Sherman Act. The FTAIA was enacted at a time when there was concern in some areas that American companies were at a competitive disadvantage in comparison to foreign rivals due to the constraints of American antitrust laws.[xxii] During the same time period, foreign governments and companies also expressed concern that U.S. courts had overstepped their boundaries by purporting to enforce U.S. laws in matters of foreign commerce.[xxiii] Amid these debates, the FTAIA exempted export transactions from antitrust scrutiny, except if there was a “direct, substantial and reasonably foreseeable effect” on U.S. foreign commerce, as well as transactions that were wholly foreign. The statute did not substantially modify many prior case law principles. In broad and opaque terms, [xxiv] the FTAIA essentially restates elements of the “effects test.”
The FTAIA operates by first excluding all foreign anticompetitive conduct that causes only foreign harm, and then creating an exception for foreign commerce that harms imports, domestic commerce, or American exporters. The FTAIA does not prevent American exporters from entering into business arrangements, regardless of the anticompetitive consequences, so long as those consequences are confined to foreign markets.[xxv] The Sherman Act applies to foreign transactions unless the conduct “has a direct, substantial, and reasonably foreseeable effect” on American commerce and “such effect gives rise to a claim under the [Sherman Act].”[xxvi]
The path to focusing on “effects” and departing from the comity-based balancing test continued after the passage of the FTAIA. In the nineties, the FTAIA and the effects test became the center of attention as enforcement activities against international cartels increased. Many cases involved actions against foreign defendants for conduct outside of the United States. Courts did not hesitate to implement the “direct, substantial and reasonably foreseeable” effects standard. As a general matter, if a wholly foreign conspiracy targets the American market, the requisite domestic effects will usually be found.[xxvii]
In Hartford Fire Ins. Co. v. California,[xxviii] the Court took a step further, applying the effects test and subjugating the consideration of comity. In Hartford, a group of London reinsurers were found to have illegally conspired, primarily in London, to restrict the terms of coverage for commercial general liability, effectively limiting the types of insurance coverage available in the U.S. A 5-4 majority of the Court held: “[I]t is well established by now that the Sherman Act applies to foreign­­ conduct that was meant to produce and did in fact produce some substantial effect in the United States.”#p#分页标题#e#[xxix] The Court decided that the jurisdictional rule of reason is not in fact jurisdictional and is only relevant to the issue of whether a court should decline jurisdiction as a matter of discretion. The only substantial inquiry is whether there is a “true conflict” between domestic and foreign law, which occurs only when foreign law requires the defendants to act in certain ways incompatible with U.S. laws. Like the Congress in enacting FTAIA, the Court specifically declined to address the question of whether a court with jurisdiction under the Sherman Act should abstain from exercising such jurisdiction on the grounds of international comity.
Case law applying the “effects test” to determine the extraterritorial jurisdiction of U.S. antitrust law has subsequently diverged. At issue is the FTAIA language that requires that a direct, substantial and foreseeable effect “give rise to a claim.” On one hand, a broad interpretation of extraterritorial jurisdiction was generated, where courts heavily favored deterrence and punishment over considerations of comity. Some courts interpreted Hartford Fire as relegating comity to a mere “aspiration” or “more a matter of grace than a matter of obligation,” only to be applied in “those few cases in which the foreign sovereign required a defendant to act in a matter incompatible with the Sherman Act or in which full compliance with both statutory schemes was impossible.”[xxx] Therefore, in international commerce, there was no reason why the principles of comity should shield a defendant whose conduct on foreign soil had an intended and substantial negative impact on American markets.[xxxi]
By contrast, other courts adopted a narrower interpretation of FTAIA’s language regarding U.S. extraterritorial jurisdiction. Their analyses emphasized a nexus between a plaintiff’s claim and harm to U.S. domestic markets.[xxxii] These courts declined to interpret the FTAIA’s requirement that the domestic “effect” give rise to a claim under the antitrust laws as merely requiring that a defendant’s domestic “conduct” give rise to a claim.[xxxiii] They believed that “under such an expansive interpretation, any entities, anywhere, that were injured by any conduct that also had sufficient effects on United States commerce could flock to United States federal court for redress, even if those plaintiffs had no commercial relationship with any United States market and their injuries were unrelated to the injuries suffered in the United States.” [xxxiv] Therefore, there must be more than a “close relationship” between the domestic injury and the claim of a foreign plaintiff; the domestic effect must actually give rise to the claim at hand.[xxxv]

Reaching Middle Ground – The Supreme Court’s Interpretation of The FTAIA’s “Effects” Requirement
In 2004, the U.S. Supreme Court granted certiorari in Empagran S.A. v. F. Hoffman LaRoche, Ltd. (“Empagran”)to resolve the Circuit split on the FTAIA’s “effects” requirement, in particular the domestic injury exception to the FTAIA’s general exclusionary rule.[xxxvi] Empagran involved a class action lawsuit filed on behalf of foreign and domestic purchasers of vitamins against foreign and domestic companies who allegedly engaged in a price-fixing conspiracy. The question before the Supreme Court was whether the lower court had jurisdiction over foreign plaintiffs under the Sherman Act where the plaintiffs’ claim rested solely on an independent injury suffered outside the United States.
The Court first held that ambiguous statutes such as the FTAIA should generally be construed so as to “avoid unreasonable interference with the sovereign authority of other nations.”[xxxvii] While the Court acknowledged that applying American antitrust law to foreign conduct might interfere with a foreign nation’s ability to regulate its own commerce, the Court concluded that the Sherman Act may be invoked to the extent that Congress sought to redress domestic antitrust injury caused by foreign conduct.[xxxviii] However, it would be unreasonable to apply U.S. antitrust law to foreign conduct where the conduct caused foreign injury independent of domestic injury and where the foreign injury alone gave rise to claims by foreign plaintiffs.[xxxix]
The Court specifically rejected the plaintiffs’ interpretation of the FTAIA that the statute did not bar jurisdiction so long as the conduct at issue had domestic effects giving rise to a claim.[xl] The Court noted that the Sherman Act covers many different kinds of anticompetitive agreements and therefore determined that jurisdiction must to be evaluated on a case-by-case basis.[xli] The Court held that considerations of comity and legislative history made clear that an expansive reading of the FTAIA was inconsistent with the statute’s intent to limit rather expand the reach of U.S. antitrust laws involving foreign commerce.
Empagran essentially requires a “double effects test.” First, there must be sufficient adverse effects within the United States. Second, the U.S. effects must in turn affect the effects outside the U.S. The decision now appears to stand for the general proposition that a global conspiracy, in and of itself, lacks the requisite effect to permit suit by a foreign plaintiff.
It is worth noting that there are still unsettled issues after Empagran on the standard of the effects test, although there seems to be a majority applying “proximate cause” standard and not “but for” causation.[xlii] Proponents of Empagran assert that the Court’s attention to comity considerations is necessary to achieve effective international antitrust cooperation. Critics assert that Empagran fail to properly distinguish between “effect” and “conduct” because “harm is never caused proximately from the U.S. effect but by the conduct prohibited by the U.S. antitrust law.[xliii] Moreover, the global interdependence will ultimately make the “double effects test” meaningless. These critics warn that the Empagran approach will lead to diminished deterrence and cartel activities will likely continue.

Policy concerns in extending EXTRATERRITORIAL antitrust jurisdiction
The nearly one hundred years of evolution of U.S. extraterritorial application of antitrust law reflects the paradox of comity and deterrence considerations, many of which were fully noted in Empagran. These considerations are set forth below.
The Deterrence Argument in Support of Expansive Jurisdiction
Historically, it has been noted that “[i]f foreign plaintiffs were not permitted to seek a remedy for their antitrust injuries, persons doing business both in this country and abroad might be tempted to enter into anticompetitive conspiracies affecting American consumers in the expectation that the illegal profits they could safely extort abroad would offset any liability to plaintiffs at home.”[xliv] Such views are frequently based on an assumption that other countries’ private action remedies are insufficient. Private action is a core enforcement aspect of U.S. antitrust regime and is considered to be particularly effective against cartels by allowing consumers to readdress their injuries and make the illegal conduct cost-prohibitive by imposing treble damages. In Empagran, scholars argued in briefs that any enforcement of American antitrust law is beneficial because it only furthers economic and policy goals of this country.[xlv] The success of deterrence “depends on the expected penalty, which in turn is determined by the probability of detection and conviction multiplied by the size of the penalty if convicted.”[xlvi] Therefore, to effectively deter international cartel activity, the penalty must correspond with the full scope of the cartel.[xlvii] Because of the global market power of the United States, “legal remedies based on domestic transactions alone are typically insufficient to deter price-fixing behavior in the case of cartels that operate in international markets that include the United States.”[xlviii] Therefore, all defendants must be subject to American antitrust law in suits against all potential plaintiffs worldwide.[xlix]

The Comity Considerations in Support of Limited Exterritorial Jurisdiction
The economic deterrence view met with vigorous opposition in Empagran[l] and was rejected by the Court in favor of comity considerations. Writing for the Empagran majority, Justice Breyer stated that the application of U.S. antitrust laws to foreign conduct can “interfere with a foreign nation’s ability independently to regulate its own commercial affairs” and therefore the FTAIA should be construed to “avoid unreasonable interference with the sovereign authority of other [states].”[li]
There is concern that an overbroad extraterritorial jurisdiction may interfere with the ability to maintain its own enforcement focus and the ability to develop its antitrust enforcement of a foreign country. [lii] The U.S. economic –based deterrence focus has not been accepted by other countries. Certain countries have an interest in limiting enforcement of their own antitrust policies. With an overbroad U.S. exterritorial jurisdiction, a foreign country is left to either adopt an antitrust law similar to the U.S. or fight for the right to assert jurisdiction over matters affecting its own market. An overbroad exterritorial jurisdiction also means greater chance of inconsistent laws in foreign countries and less predictability of risk for international business community. Furthermore, applying American antitrust law extraterritorially will encourage widespread forum shopping; U.S. may attract more antitrust cases.[liii] If cases are attracted to the United States, foreign courts will not have a steady flow of cases with which to develop their own body of antitrust jurisprudence.[liv]
For enforcement agencies, there is concern that overbroad extraterritorial jurisdiction will undermine governmental amnesty programs. The U.S. has led the world in creating an effective governmental amnesty program that encourages cartel members to expose their cartels. Other countries have similar programs. Permitting independently injured foreign plaintiffs to pursue private treble-damages remedies would undermine foreign nations’ own antitrust enforcement policies by expanding the scope of the cartel members’ potential civil liability and diminishing foreign firms’ incentive to cooperate with antitrust authorities and make voluntary disclosures in return for prosecutorial amnesty.[lv]
Such perceived infringements of foreign sovereignty have caused backlash against the U.S. antitrust regime. Other countries are wary of the burden of often exorbitant treble damages and the extensive discovery procedure in private antitrust actions and thus resist the U.S. extraterritorial reach of antitrust law. Other countries have responded by enacting “blocking statutes,” which make it lawful for foreign citizens to refuse discovery in a U.S. antitrust action or make it unlawful for non-citizens to make discovery requests of their citizens in a U.S. antitrust litigation.[lvi] Still other countries also passed frustration-of-judgment measures allowing government officials to refuse to recognize or enforce judgments against their citizens obtained in foreign courts,[lvii] or “clawback” statutes enabling certain defendants who have paid multiple damage judgments in an overseas country to recover the multiple portion of that judgment from the successful plaintiff.[lviii]

Applying Extraterritorial jurisdiction in the context of Chinese economic policy – A balanced Consideration
Given the diverse sovereign interests implicated, there is no international consensus on the limits of extraterritorial jurisdiction. The evolution of U.S. extraterritorial jurisdiction is also noted to have shifted from the diverging interest and policy concerns and the debate is still ongoing. As China exercises its antitrust authority, it is also expected to choose its own path pursuant to its own economic policy and concerns.#p#分页标题#e#
Legislators were well aware of China’s special economic circumstances and policy focus when drafting the AML. These important policy concerns are reflected in Article 15 of the AML, including protecting small and medium enterprises and safeguarding China’s proper interest in foreign trade. As one of the largest economies in the world, China’s economy is still predominantly composed of small and medium-sized companies.[lix] The government is concerned that most of its enterprises have insufficient scale and little competitiveness,[lx] and that foreign conglomerates with technical expertise, efficient management, and ample capital may crush many of China’s growing industries.[lxi]
Consideration of these specific circumstances suggests China carefully choose its exercise of exterritorial jurisdiction on a case-by-case basis. On the domestic front, by explicitly excluding export activities from its extraterritorial reach, China can encourage export and assist small and medium-sized companies in gaining a foothold in international competition. Blocking statutes and frustration-of-judgment statutes would also be useful in protecting Chinese domestic companies engaged in export activities from the exercise of extraterritorial jurisdiction by the U.S.
On the international front, China may want to take a moderate approach similar to that delineated in Empagran, pursuant to its own economic and political context. On one hand, Chinese courts should not hesitate in exercising extraterritorial jurisdiction to maintain its sovereign interest and reinforce deterrence, in particular when international cartels impact China’s domestic market, infringe upon Chinese consumers’ interests, or when an international merger or acquisition is likely to have a negative impact on China’s domestic market and consumer welfare. This is of particular importance in areas where international conglomerates already have a dominant presence in the Chinese market. Deterrence is necessary for those cases because cartels will pose a severe threat to Chinese consumers’ interests and threaten the sustainability of Chinese domestic industries. On the other hand, China may want to give deference to international comity and refrain from engaging in an expansive extraterritorial jurisdiction. This will help China maintain international cooperation in antitrust enforcement and create predictability for international businesses which are doing business in China or are interested in investing in China. Such a middle ground would thus serve both the interests of deterrence and international comity.





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* Jiangxiao Athena Hou is a partner at Zelle Hofmann Voelbel & Mason LLP.
[i] The AML, art. 2 (“This Law is applicable to monopolistic conduct outside the People’s Republic of China that had eliminative or restrictive effects on competition in the domestic market of the People’s Republic of China.”).
[ii] Some legal scholars were concerned that the AML would possibly apply to extraterritorial conduct with indirect, insubstantial, or unforeseeable effects in China and suggested that the provision include such criteria. Their suggestions, however, were not taken. H. Stephen Harris, Jr., The Making of an Antitrust Law: The Pending Anti-Monopoly Law of the People's Republic of China, 7 Chi. J. Int'l L. 169, 186 (Summer 2006).
[iii] Note, A Most Private Remedy: Foreign Party Suites and the U.S. Antitrust Laws, 114 Harv. L. Rev. 2122, 2144 (2001).
[iv] See, e.g., Treaty Establishing the European Community, Nov. 10, 1997, 1997 O.J., arts. 81-82.
[v] International comity is a doctrine that counsels voluntary forbearance when a sovereign which has a legitimate claim to jurisdiction concludes that a second sovereign also has a legitimate claim to jurisdiction under principles of international law. See Harold G. Maier, Extraterritorial Jurisdiction at a Crossroads: An Intersection Between Public and Private International Law, 76 Am. J. Int'l L. 280, 281, n.1 (1982).
[vi] Jonathan T. Schmidt, Keeping U.S. Courts Open to Foreign Antitrust Plaintiffs: A Hybrid Approach to the Effective Deterrence of international Cartels, 31 Yale J. Int’l L. 211, 233 (Winter 2006).
[vii] See, e.g., Brief for Economists Joseph E. Stiglitz And Peter R. Orszag as Amici Curiae Supporting Respondents, F. Hoffman-La Roche, Ltd. v. Empagran, 124 S. Ct. 2359 (No. 03-724), 2004 WL 533934 (hereinafter Brief of Stiglitz & Orszag).
[viii] American Banana Co. v. United Fruit Co., 213 U.S. 347 (1909).
[ix] Id. at 356.
[x] Id.
[xi] U.S. v. Am. Tobacco Co., 221 U.S. 106 (1911).
[xii] Id. at 181-183 .
[xiii] See, e.g., U.S. v. Pacific & Arctic Ry. & Nav. Co., 228 U.S. 87, 106 (1913); U.S. v. Sisal Sales Corp., 274 U.S. 268 (1927); U.S. v. Hamburg-Amerikanische Packet-Fahrt-Actien Gesellschaft, 200 F. 806 (S.D. N.Y. 1911) (it is well settled that a foreign combination in restraint of trade is within the reach of U.S. antitrust laws if it affects the foreign trade of the United States and requires that acts be done in the U.S.)
[xiv] U.S. v. Aluminum Co. of America, 148 F.2d 416 (2d. Cir. 1935).
[xv] Id. at 444.
[xvi] See, e.g., Cont’l Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 704 (1962) (“[a] conspiracy to monopolize or restrain the domestic or foreign commerce of the United States is not outside the reach of the Sherman Act just because part of the conduct complained of occurs in foreign countries.”).
[xvii] Timberlane Lumber Co. v. Bank of America, 549 F.2d 597, 609 (9thth Cir. 1976) (“The effects test by itself is incomplete because it fails to consider other nations’ interests.”) In Timberlane, the plaintiff alleged that officials of the Bank of America and others located in the United States and Honduras conspired to prevent Timberlane, through its Honduran subsidiaries, from milling lumber in Honduras and exporting it to the United States, thus maintaining control of the Honduran lumber export business in the hands of a few select individuals financed and controlled by the Bank. Timberlane argued that there was a direct impact on U.S. foreign trade.
[xviii] Id.
[xix] Id.at 609.
[xx] Id. at 614.
[xxi] Title IV, Pub. L. No. 97-290, §§402 and 403, 96 Stat. 1246 (1982), 15 U.S.C. § 6a (year).
[xxii] H.R. Rep. No. 97-686, at 4 (1982); The “In” Porters, S.A. v. Hanes Printables, Inc., 663 F. Supp. 494, 498 (M.D.N.C. 1987) (the FTAIA was passed in response to complaints from American firms that antitrust law impaired their ability to increase exports through aggressive competition or cooperation.).
[xxiii] J.S. Stanford, The Application of the Sherman Act to Conduct Outside of the United States: A View from Abroad, 11 Cornell Int’l L.J. 196 (1978).
[xxiv] 1A Phillip Areeda & Herbert Hovenkamp, Antitrust Law, ¶272 (1997) (the statute is “cumbersome and inelegant”); U.S. v. Nippon Paper Indus. Co. Ltd., 109 F.3d 1, 4 (1sts Cir. 1997) (the statute is “inelegantly phrased”).
[xxv] H.R. Rep. No. 7-686, at 1-3, 9-10 (1982).
[xxvi] 15 U.S.C.§ 6a (year).
[xxvii]U.S. v. Nippon Paper Indus. Co. Ltd., 109 F.3d 1, 9 (1st Cir. 1997).
[xxviii] Hartford Fire Ins. Co. v. California, 509 U.S. 764, 770 (1993).
[xxix] Id.
[xxx] U.S. v. Nippon Paper Indus. Co., 109 F.3d 1, 8 (1st Cir. 1997) (allowing criminal prosecution of an international fax paper cartel).
[xxxi] Id.
[xxxii] Den Norske Stats Oljeselskap AS v. Heeremac VOF, 241 F.3d 420, 427 (5th Cir. 2001) (Norwegian company conducting business solely in the North Sea sought redress under U.S. antitrust laws for an antitrust conspiracy that inflated its business costs. Defendants were alleged to have conspired to fix bids and allocate geographic territories between themselves to artificially inflate prices in the international markets.)
[xxxiii] Id.
[xxxiv] Id. at 427-28.
[xxxv] Id. at 428.
[xxxvi] Empagran S.A. v. F. Hoffman LaRoche, Ltd., 542 U.S. 155, 124 S. Ct. 2359 (2004).
[xxxvii] Id., 124 S. Ct. at 2366.
[xxxviii] Id. at 2366.
[xxxix]#p#分页标题#e# Id. at 2372.
[xl] Id. at 2368.
[xli] Id.
[xlii] See, e.g., S.Lynn Diamond, Empagran, the FTAIA and Extraterritorial Effects: Guidance to Courts Facing Questions of Antitrust Jurisdiction Still Lacking, 31 Brooklyn J. Int’l. L. 805 (2006).
[xliii] See, e.g., Eleanor Fox, Testimony before the Antitrust Modernization Commission, Hearings on International Issues, §IV (Feb. 15, 2006), available at <http://www.abanet.org/antitrust/at-committees/at-ic/pdf/spring/06/012.pdf>.
[xliv] Pfizer, Inc. v. Gov’t of India, 434 U.S. 308, 315 (1978).
[xlv] Brief of Stiglitz and Orszag, F. Hoffman-La Roche, Ltd. v. Empagran, 124 S. Ct. 2359 (No. 03-724), 2004 WL 226597, at *2.
[xlvi] Id. at *3.
[xlvii] Id.
[xlviii] Brief for Certain Professors of Economics as Amici Curiae Supporting Respondents at 3.
[xlix] Brief of Stiglitz & Orszag, at 5.
[l] Several countries including Germany, Belgium, Canada, Japan, the U.K., Ireland, and the Netherlands filed briefs in opposition to the economic deterrence argument, which presumes that other nations’ antitrust laws are deficient.
[li] Empagran, 124 S. Ct. at 2366-69.
[lii] Margaret Bloom, Should Foreign Purchasers Have Access to U.S. Antitrust Damages Remedies? A Post-Empagran Perspective from Europe, 61 N.Y.U. ANN. SURV. AM. L. 433, 436 (2005).
[liii] Id.
[liv] Id. at 451.
[lv] See, e.g., Brief for the Governments of the Federal Republic of Germany and Canada Supporting Petitioners, F. Hoffman-La Roche, Ltd. v. Empagran, 124 S. Ct. 2359 (No. 03-724); Brief for the United States (arguing the same with respect to American antitrust enforcement).
[lvi] Joseph P. Griffin, Foreign Government Reactions to U.S. Assertions of Extraterritorial Jurisdiction, 6 Geo. Mason L. Rev. 505 (1998).
[lvii] Id.
[lviii] Joseph E. Neuhaus, Power to Reverse Foreign Judgments: The British Clawback Statute Under International Law, 81 Colum. L. Rev. 1097, 1098 (1981).
[lix] Bruce Owen, et al., China’s Competition Policy Reforms, 75 Antitrust L.J. 231, 239 (2008).
[lx] Wu Zhengguo, Perspectives on the Chinese Anti-Monopoly Law, 75 Antitrust L.J. 73, 97 (2008).
[lxi] B. Hewitt Pate, What I Heard in the Great Hall of the People – Realistic Expectations of Chinese Antitrust, 75 Antitrust L.J. 195, 204 (2008).: While China’s Anti-Monopoly Law has provided extraterritorial jurisdiction over monopolist conduct that has a restrictive effect on competition in China’s domestic market, it is expected that the scope of this extraterritorial application will be further specified in the future. This article reviews the evolution of extraterritorial application of the Sherman Act in the United States, where courts have developed substantial case law defining the scope of the statute’s extraterritorial reach. In particular, this article examines the considerations of international comity and deterrence underlying the evolution. Finally, this article suggests that China should exercise its extraterritorial jurisdiction moderately in consideration of its own economic circumstances and policies and deference toward foreign laws.
KEY WORDS: extraterritorial jurisdiction antitrust law effect test

Introduction
The world today is witnessing an economic globalization, marked by increasingly fluid markets and industry integration. The globalization not only promotes international trade but also creates opportunities for international cartel conduct and presents challenges for countries policing such cartels. To protect the interests of domestic consumers, ensure market competition, and deter global cartels, countries have extended their antitrust reach beyond their own borders.
China has joined other major antitrust regimes by including a provision in its newly enacted Anti-Monopoly Law (“AML”) to provide for extraterritorial jurisdiction. The AML applies to extraterritorial conduct that “has eliminative or restrictive effects on competition in the domestic market.”[i] This provision, however, does not specify the criteria for the “effects” requirement, i.e., whether the anticompetitive effects must be direct or substantial.[ii] In this respect, the experiences of other countries in applying extraterritorial jurisdiction will be useful references for China when it constructs its own roadmap for such application.
Many countries and regional organizations including the United States and the European Union have adopted antitrust extraterritorial provisions.[iii] The United States limits the jurisdictional reach of the Sherman Act to conduct that has, in part, a “direct, substantial and reasonably foreseeable effect” on U.S. commerce. The European Union has also adopted language embracing the effects doctrine, allowing application of its antitrust law beyond its border as long as there is a foreseeable, immediate, and substantial effect in the European Union.[iv] Despite this seemingly similar statutory language, the views on the limits of extraterritorial application of antitrust law are not uniform and the extraterritorial application of antitrust law varies among these regimes. The United States, having the most extensive private antitrust litigation, is the most active in applying its antitrust jurisdiction extraterritorially. However, the United States has also been criticized for its aggressiveness in exercising its jurisdiction extraterritorially. Indeed, there has been constant debate on the proper scope of antitrust extraterritorial jurisdiction.
This article analyzes the evolution of the extraterritorial application of antitrust law by the United States, as well as the rationale and policy concerns behind this evolution. In particular, the article focuses on the underlying considerations of international comity and deterrence, culminating with the U.S. Supreme Court’s most recent decision on extraterritorial jurisdiction. Lastly, this article places this discussion in the particular context of Chinese economic and political policy and suggests that China carefully choose a moderate approach in exercising its antitrust jurisdiction extraterritorially.

The Evolution of U.S. Extraterritorial Jurisdiction – BalancING International Comity and Economic Policy
There are two fundamental doctrinal concerns underlying the debate on the proper limits of antitrust extraterritorial jurisdiction – the importance of international comity[v] and the economic consideration of deterrence. On the one hand, U.S. courts are mindful that comity considerations, international cooperation, and international law traditions dictate a limited exercise of extraterritorial antitrust jurisdiction. Some have argued that an excessive extraterritorial reach of U.S. antitrust law may even undermine cooperative amnesty programs and undermine the antitrust regimes in other countries, encourage forum shopping and threaten the cooperation between governmental enforcement agencies.[vi] On the other hand, scholars and economists have argued that U.S. courts cannot ignore the reality that adverse foreign effects are interconnected with adverse domestic effects, and that a narrower extraterritorial application will fail to effectively deter global cartels and will undermine domestic competition.[vii] Courts have historically balanced the desire to deter anticompetitive behavior with the desire to respect the sovereignty of other countries. As set forth in detail below, these two themes are intertwined with the evolution of U.S. antitrust extraterritorial jurisdiction.
The “Effects Test” and The “Jurisdictional Rule of Reason”
Traditionally, when business was confined within its borders, the U.S. restricted its antitrust authority to conduct within its geographical limits. In American Banana Co. v. United Fruit Co, the U.S. Supreme Court held that the Sherman Act did not apply to conduct occurring outside of the United States when the injury was also outside the United States.[viii] A conspiracy to restrain trade designed in the United States, but executed in a foreign country, was only subject to the local laws of that foreign country.[ix] The Court noted that “the general and almost universal rule” was that the determination of unlawfulness of a particular conduct must be decided by the state within which the act was committed.[x]
This restrictive territorial view soon faded. In U.S. v. Am. Tobacco Co., the U.S. Supreme Court held that it had the right to test the legality of an agreement made outside the U.S. in accordance with U.S. law, even if foreign law would be contrary.[xi] The Court accordingly held that the alleged agreement to divide the global tobacco market was illegal because it had a substantial anticompetitive effect on the U.S. tobacco market.[xii] Over time, U.S. courts have continued to recognize that conduct occurring outside the United States which violates the Sherman Act may still have anticompetitive effects beyond the place of the conduct, justifying a U.S. court’s assertion of jurisdiction.[xiii]
The well-known “effects test” was first introduced in U.S. v. Aluminum Co. of America (the Alcoa case).[xiv] There, the Second Circuit explicitly abandoned the principle that the law of the country where an act is performed must determine the lawfulness of the act. The court extended the reach of the Sherman Act to a foreign cartel joined by French, Swiss and British ingot manufacturers and Alcoa’s Canadian subsidiary. There was no evidence of any adverse effect of this completely foreign cartel on the U.S. domestic market. Still, the court held that where the cartel agreements “were intended to affect imports and did affect them … the situation certainly falls within [the jurisdiction of the Sherman Act].”[xv] This view was subsequently adopted by the U.S. Supreme Court.[xvi]
As more courts adopted the Alcoa effects test, there was a concern that it failed to adequately account for other countries’ interests.[xvii] In Timberlane Lumber Co. v. Bank of America, the Ninth Circuit considered “whether the interests of, and link to, the United States – including the magnitude of the effect on American foreign commerce – are sufficiently strong, vis-à-vis those of other countries, to justify an assertion of extraterritorial authority.”[xviii] The court recognized: “That American law covers some conduct beyond this nation’s borders does not mean that it embraces all, however. Extraterritorial application is understandably a matter of concern for the other countries involved.… In any event, it is evident that at some point the interests of the United States are too weak and the foreign harmony incentive for restraint too strong to justify an extraterritorial assertion of jurisdiction.”[xix] The court identified a list of factors to be weighed in determining jurisdiction, now known as the “jurisdictional rule of reason”:
The degree of conflict with foreign law or policy, the nationality or allegiance of the parties and the locations of principal places of business of corporations, the extent to which enforcement by either state can expected to achieve compliance, the relative significance of effects on the United States as compared with those elsewhere, the extent to which there is explicit purpose to harm or affect American commerce, the forseeability of such effect, and the relative importance to the violations charged of conduct within the United States as compared with conduct abroad.[xx]
In effect, the jurisdictional rule of reason added a consideration of international comity to the Alcoa effects test.
The Passage of The Foreign Trade Antitrust Improvement Act and Its Progeny
In 1982, the U.S. Congress adopted the Foreign Trade Antitrust Improvement Act (“FTAIA”),[xxi] codified as §7 of the Sherman Act, to set forth the limits of the reach of the Sherman Act. The FTAIA was enacted at a time when there was concern in some areas that American companies were at a competitive disadvantage in comparison to foreign rivals due to the constraints of American antitrust laws.[xxii] During the same time period, foreign governments and companies also expressed concern that U.S. courts had overstepped their boundaries by purporting to enforce U.S. laws in matters of foreign commerce.[xxiii] Amid these debates, the FTAIA exempted export transactions from antitrust scrutiny, except if there was a “direct, substantial and reasonably foreseeable effect” on U.S. foreign commerce, as well as transactions that were wholly foreign. The statute did not substantially modify many prior case law principles. In broad and opaque terms, [xxiv] the FTAIA essentially restates elements of the “effects test.”
The FTAIA operates by first excluding all foreign anticompetitive conduct that causes only foreign harm, and then creating an exception for foreign commerce that harms imports, domestic commerce, or American exporters. The FTAIA does not prevent American exporters from entering into business arrangements, regardless of the anticompetitive consequences, so long as those consequences are confined to foreign markets.[xxv] The Sherman Act applies to foreign transactions unless the conduct “has a direct, substantial, and reasonably foreseeable effect” on American commerce and “such effect gives rise to a claim under the [Sherman Act].”[xxvi]
The path to focusing on “effects” and departing from the comity-based balancing test continued after the passage of the FTAIA. In the nineties, the FTAIA and the effects test became the center of attention as enforcement activities against international cartels increased. Many cases involved actions against foreign defendants for conduct outside of the United States. Courts did not hesitate to implement the “direct, substantial and reasonably foreseeable” effects standard. As a general matter, if a wholly foreign conspiracy targets the American market, the requisite domestic effects will usually be found.[xxvii]
In Hartford Fire Ins. Co. v. California,[xxviii] the Court took a step further, applying the effects test and subjugating the consideration of comity. In Hartford, a group of London reinsurers were found to have illegally conspired, primarily in London, to restrict the terms of coverage for commercial general liability, effectively limiting the types of insurance coverage available in the U.S. A 5-4 majority of the Court held: “[I]t is well established by now that the Sherman Act applies to foreign­­ conduct that was meant to produce and did in fact produce some substantial effect in the United States.”#p#分页标题#e#[xxix] The Court decided that the jurisdictional rule of reason is not in fact jurisdictional and is only relevant to the issue of whether a court should decline jurisdiction as a matter of discretion. The only substantial inquiry is whether there is a “true conflict” between domestic and foreign law, which occurs only when foreign law requires the defendants to act in certain ways incompatible with U.S. laws. Like the Congress in enacting FTAIA, the Court specifically declined to address the question of whether a court with jurisdiction under the Sherman Act should abstain from exercising such jurisdiction on the grounds of international comity.
Case law applying the “effects test” to determine the extraterritorial jurisdiction of U.S. antitrust law has subsequently diverged. At issue is the FTAIA language that requires that a direct, substantial and foreseeable effect “give rise to a claim.” On one hand, a broad interpretation of extraterritorial jurisdiction was generated, where courts heavily favored deterrence and punishment over considerations of comity. Some courts interpreted Hartford Fire as relegating comity to a mere “aspiration” or “more a matter of grace than a matter of obligation,” only to be applied in “those few cases in which the foreign sovereign required a defendant to act in a matter incompatible with the Sherman Act or in which full compliance with both statutory schemes was impossible.”[xxx] Therefore, in international commerce, there was no reason why the principles of comity should shield a defendant whose conduct on foreign soil had an intended and substantial negative impact on American markets.[xxxi]
By contrast, other courts adopted a narrower interpretation of FTAIA’s language regarding U.S. extraterritorial jurisdiction. Their analyses emphasized a nexus between a plaintiff’s claim and harm to U.S. domestic markets.[xxxii] These courts declined to interpret the FTAIA’s requirement that the domestic “effect” give rise to a claim under the antitrust laws as merely requiring that a defendant’s domestic “conduct” give rise to a claim.[xxxiii] They believed that “under such an expansive interpretation, any entities, anywhere, that were injured by any conduct that also had sufficient effects on United States commerce could flock to United States federal court for redress, even if those plaintiffs had no commercial relationship with any United States market and their injuries were unrelated to the injuries suffered in the United States.” [xxxiv] Therefore, there must be more than a “close relationship” between the domestic injury and the claim of a foreign plaintiff; the domestic effect must actually give rise to the claim at hand.[xxxv]
Reaching Middle Ground – The Supreme Court’s Interpretation of The FTAIA’s “Effects” Requirement
In 2004, the U.S. Supreme Court granted certiorari in Empagran S.A. v. F. Hoffman LaRoche, Ltd. (“Empagran”)to resolve the Circuit split on the FTAIA’s “effects” requirement, in particular the domestic injury exception to the FTAIA’s general exclusionary rule.[xxxvi] Empagran involved a class action lawsuit filed on behalf of foreign and domestic purchasers of vitamins against foreign and domestic companies who allegedly engaged in a price-fixing conspiracy. The question before the Supreme Court was whether the lower court had jurisdiction over foreign plaintiffs under the Sherman Act where the plaintiffs’ claim rested solely on an independent injury suffered outside the United States.
The Court first held that ambiguous statutes such as the FTAIA should generally be construed so as to “avoid unreasonable interference with the sovereign authority of other nations.”[xxxvii] While the Court acknowledged that applying American antitrust law to foreign conduct might interfere with a foreign nation’s ability to regulate its own commerce, the Court concluded that the Sherman Act may be invoked to the extent that Congress sought to redress domestic antitrust injury caused by foreign conduct.[xxxviii] However, it would be unreasonable to apply U.S. antitrust law to foreign conduct where the conduct caused foreign injury independent of domestic injury and where the foreign injury alone gave rise to claims by foreign plaintiffs.[xxxix]
The Court specifically rejected the plaintiffs’ interpretation of the FTAIA that the statute did not bar jurisdiction so long as the conduct at issue had domestic effects giving rise to a claim.[xl] The Court noted that the Sherman Act covers many different kinds of anticompetitive agreements and therefore determined that jurisdiction must to be evaluated on a case-by-case basis.[xli] The Court held that considerations of comity and legislative history made clear that an expansive reading of the FTAIA was inconsistent with the statute’s intent to limit rather expand the reach of U.S. antitrust laws involving foreign commerce.
Empagran essentially requires a “double effects test.” First, there must be sufficient adverse effects within the United States. Second, the U.S. effects must in turn affect the effects outside the U.S. The decision now appears to stand for the general proposition that a global conspiracy, in and of itself, lacks the requisite effect to permit suit by a foreign plaintiff.
It is worth noting that there are still unsettled issues after Empagran on the standard of the effects test, although there seems to be a majority applying “proximate cause” standard and not “but for” causation.[xlii] Proponents of Empagran assert that the Court’s attention to comity considerations is necessary to achieve effective international antitrust cooperation. Critics assert that Empagran fail to properly distinguish between “effect” and “conduct” because “harm is never caused proximately from the U.S. effect but by the conduct prohibited by the U.S. antitrust law.[xliii] Moreover, the global interdependence will ultimately make the “double effects test” meaningless. These critics warn that the Empagran approach will lead to diminished deterrence and cartel activities will likely continue.

Policy concerns in extending EXTRATERRITORIAL antitrust jurisdiction
The nearly one hundred years of evolution of U.S. extraterritorial application of antitrust law reflects the paradox of comity and deterrence considerations, many of which were fully noted in Empagran. These considerations are set forth below.
The Deterrence Argument in Support of Expansive Jurisdiction
Historically, it has been noted that “[i]f foreign plaintiffs were not permitted to seek a remedy for their antitrust injuries, persons doing business both in this country and abroad might be tempted to enter into anticompetitive conspiracies affecting American consumers in the expectation that the illegal profits they could safely extort abroad would offset any liability to plaintiffs at home.”[xliv] Such views are frequently based on an assumption that other countries’ private action remedies are insufficient. Private action is a core enforcement aspect of U.S. antitrust regime and is considered to be particularly effective against cartels by allowing consumers to readdress their injuries and make the illegal conduct cost-prohibitive by imposing treble damages. In Empagran, scholars argued in briefs that any enforcement of American antitrust law is beneficial because it only furthers economic and policy goals of this country.[xlv] The success of deterrence “depends on the expected penalty, which in turn is determined by the probability of detection and conviction multiplied by the size of the penalty if convicted.”[xlvi] Therefore, to effectively deter international cartel activity, the penalty must correspond with the full scope of the cartel.[xlvii] Because of the global market power of the United States, “legal remedies based on domestic transactions alone are typically insufficient to deter price-fixing behavior in the case of cartels that operate in international markets that include the United States.”[xlviii] Therefore, all defendants must be subject to American antitrust law in suits against all potential plaintiffs worldwide.[xlix]
The Comity Considerations in Support of Limited Exterritorial Jurisdiction
The economic deterrence view met with vigorous opposition in Empagran[l] and was rejected by the Court in favor of comity considerations. Writing for the Empagran majority, Justice Breyer stated that the application of U.S. antitrust laws to foreign conduct can “interfere with a foreign nation’s ability independently to regulate its own commercial affairs” and therefore the FTAIA should be construed to “avoid unreasonable interference with the sovereign authority of other [states].”[li]
There is concern that an overbroad extraterritorial jurisdiction may interfere with the ability to maintain its own enforcement focus and the ability to develop its antitrust enforcement of a foreign country. [lii] The U.S. economic –based deterrence focus has not been accepted by other countries. Certain countries have an interest in limiting enforcement of their own antitrust policies. With an overbroad U.S. exterritorial jurisdiction, a foreign country is left to either adopt an antitrust law similar to the U.S. or fight for the right to assert jurisdiction over matters affecting its own market. An overbroad exterritorial jurisdiction also means greater chance of inconsistent laws in foreign countries and less predictability of risk for international business community. Furthermore, applying American antitrust law extraterritorially will encourage widespread forum shopping; U.S. may attract more antitrust cases.[liii] If cases are attracted to the United States, foreign courts will not have a steady flow of cases with which to develop their own body of antitrust jurisprudence.[liv]
For enforcement agencies, there is concern that overbroad extraterritorial jurisdiction will undermine governmental amnesty programs. The U.S. has led the world in creating an effective governmental amnesty program that encourages cartel members to expose their cartels. Other countries have similar programs. Permitting independently injured foreign plaintiffs to pursue private treble-damages remedies would undermine foreign nations’ own antitrust enforcement policies by expanding the scope of the cartel members’ potential civil liability and diminishing foreign firms’ incentive to cooperate with antitrust authorities and make voluntary disclosures in return for prosecutorial amnesty.[lv]
Such perceived infringements of foreign sovereignty have caused backlash against the U.S. antitrust regime. Other countries are wary of the burden of often exorbitant treble damages and the extensive discovery procedure in private antitrust actions and thus resist the U.S. extraterritorial reach of antitrust law. Other countries have responded by enacting “blocking statutes,” which make it lawful for foreign citizens to refuse discovery in a U.S. antitrust action or make it unlawful for non-citizens to make discovery requests of their citizens in a U.S. antitrust litigation.[lvi] Still other countries also passed frustration-of-judgment measures allowing government officials to refuse to recognize or enforce judgments against their citizens obtained in foreign courts,[lvii] or “clawback” statutes enabling certain defendants who have paid multiple damage judgments in an overseas country to recover the multiple portion of that judgment from the successful plaintiff.[lviii]

Applying Extraterritorial jurisdiction in the context of Chinese economic policy – A balanced Consideration
Given the diverse sovereign interests implicated, there is no international consensus on the limits of extraterritorial jurisdiction. The evolution of U.S. extraterritorial jurisdiction is also noted to have shifted from the diverging interest and policy concerns and the debate is still ongoing. As China exercises its antitrust authority, it is also expected to choose its own path pursuant to its own economic policy and concerns.#p#分页标题#e#
Legislators were well aware of China’s special economic circumstances and policy focus when drafting the AML. These important policy concerns are reflected in Article 15 of the AML, including protecting small and medium enterprises and safeguarding China’s proper interest in foreign trade. As one of the largest economies in the world, China’s economy is still predominantly composed of small and medium-sized companies.[lix] The government is concerned that most of its enterprises have insufficient scale and little competitiveness,[lx] and that foreign conglomerates with technical expertise, efficient management, and ample capital may crush many of China’s growing industries.[lxi]
Consideration of these specific circumstances suggests China carefully choose its exercise of exterritorial jurisdiction on a case-by-case basis. On the domestic front, by explicitly excluding export activities from its extraterritorial reach, China can encourage export and assist small and medium-sized companies in gaining a foothold in international competition. Blocking statutes and frustration-of-judgment statutes would also be useful in protecting Chinese domestic companies engaged in export activities from the exercise of extraterritorial jurisdiction by the U.S.
On the international front, China may want to take a moderate approach similar to that delineated in Empagran, pursuant to its own economic and political context. On one hand, Chinese courts should not hesitate in exercising extraterritorial jurisdiction to maintain its sovereign interest and reinforce deterrence, in particular when international cartels impact China’s domestic market, infringe upon Chinese consumers’ interests, or when an international merger or acquisition is likely to have a negative impact on China’s domestic market and consumer welfare. This is of particular importance in areas where international conglomerates already have a dominant presence in the Chinese market. Deterrence is necessary for those cases because cartels will pose a severe threat to Chinese consumers’ interests and threaten the sustainability of Chinese domestic industries. On the other hand, China may want to give deference to international comity and refrain from engaging in an expansive extraterritorial jurisdiction. This will help China maintain international cooperation in antitrust enforcement and create predictability for international businesses which are doing business in China or are interested in investing in China. Such a middle ground would thus serve both the interests of deterrence and international comity.





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* Jiangxiao Athena Hou is a partner at Zelle Hofmann Voelbel & Mason LLP.
[i] The AML, art. 2 (“This Law is applicable to monopolistic conduct outside the People’s Republic of China that had eliminative or restrictive effects on competition in the domestic market of the People’s Republic of China.”).
[ii] Some legal scholars were concerned that the AML would possibly apply to extraterritorial conduct with indirect, insubstantial, or unforeseeable effects in China and suggested that the provision include such criteria. Their suggestions, however, were not taken. H. Stephen Harris, Jr., The Making of an Antitrust Law: The Pending Anti-Monopoly Law of the People's Republic of China, 7 Chi. J. Int'l L. 169, 186 (Summer 2006).
[iii] Note, A Most Private Remedy: Foreign Party Suites and the U.S. Antitrust Laws, 114 Harv. L. Rev. 2122, 2144 (2001).
[iv] See, e.g., Treaty Establishing the European Community, Nov. 10, 1997, 1997 O.J., arts. 81-82.
[v] International comity is a doctrine that counsels voluntary forbearance when a sovereign which has a legitimate claim to jurisdiction concludes that a second sovereign also has a legitimate claim to jurisdiction under principles of international law. See Harold G. Maier, Extraterritorial Jurisdiction at a Crossroads: An Intersection Between Public and Private International Law, 76 Am. J. Int'l L. 280, 281, n.1 (1982).
[vi] Jonathan T. Schmidt, Keeping U.S. Courts Open to Foreign Antitrust Plaintiffs: A Hybrid Approach to the Effective Deterrence of international Cartels, 31 Yale J. Int’l L. 211, 233 (Winter 2006).
[vii] See, e.g., Brief for Economists Joseph E. Stiglitz And Peter R. Orszag as Amici Curiae Supporting Respondents, F. Hoffman-La Roche, Ltd. v. Empagran, 124 S. Ct. 2359 (No. 03-724), 2004 WL 533934 (hereinafter Brief of Stiglitz & Orszag).
[viii] American Banana Co. v. United Fruit Co., 213 U.S. 347 (1909).
[ix] Id. at 356.
[x] Id.
[xi] U.S. v. Am. Tobacco Co., 221 U.S. 106 (1911).
[xii] Id. at 181-183 .
[xiii] See, e.g., U.S. v. Pacific & Arctic Ry. & Nav. Co., 228 U.S. 87, 106 (1913); U.S. v. Sisal Sales Corp., 274 U.S. 268 (1927); U.S. v. Hamburg-Amerikanische Packet-Fahrt-Actien Gesellschaft, 200 F. 806 (S.D. N.Y. 1911) (it is well settled that a foreign combination in restraint of trade is within the reach of U.S. antitrust laws if it affects the foreign trade of the United States and requires that acts be done in the U.S.)
[xiv] U.S. v. Aluminum Co. of America, 148 F.2d 416 (2d. Cir. 1935).
[xv] Id. at 444.
[xvi] See, e.g., Cont’l Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 704 (1962) (“[a] conspiracy to monopolize or restrain the domestic or foreign commerce of the United States is not outside the reach of the Sherman Act just because part of the conduct complained of occurs in foreign countries.”).
[xvii] Timberlane Lumber Co. v. Bank of America, 549 F.2d 597, 609 (9thth Cir. 1976) (“The effects test by itself is incomplete because it fails to consider other nations’ interests.”) In Timberlane, the plaintiff alleged that officials of the Bank of America and others located in the United States and Honduras conspired to prevent Timberlane, through its Honduran subsidiaries, from milling lumber in Honduras and exporting it to the United States, thus maintaining control of the Honduran lumber export business in the hands of a few select individuals financed and controlled by the Bank. Timberlane argued that there was a direct impact on U.S. foreign trade.
[xviii] Id.
[xix] Id.at 609.
[xx] Id. at 614.
[xxi] Title IV, Pub. L. No. 97-290, §§402 and 403, 96 Stat. 1246 (1982), 15 U.S.C. § 6a (year).
[xxii] H.R. Rep. No. 97-686, at 4 (1982); The “In” Porters, S.A. v. Hanes Printables, Inc., 663 F. Supp. 494, 498 (M.D.N.C. 1987) (the FTAIA was passed in response to complaints from American firms that antitrust law impaired their ability to increase exports through aggressive competition or cooperation.).
[xxiii] J.S. Stanford, The Application of the Sherman Act to Conduct Outside of the United States: A View from Abroad, 11 Cornell Int’l L.J. 196 (1978).
[xxiv] 1A Phillip Areeda & Herbert Hovenkamp, Antitrust Law, ¶272 (1997) (the statute is “cumbersome and inelegant”); U.S. v. Nippon Paper Indus. Co. Ltd., 109 F.3d 1, 4 (1sts Cir. 1997) (the statute is “inelegantly phrased”).
[xxv] H.R. Rep. No. 7-686, at 1-3, 9-10 (1982).
[xxvi] 15 U.S.C.§ 6a (year).
[xxvii]U.S. v. Nippon Paper Indus. Co. Ltd., 109 F.3d 1, 9 (1st Cir. 1997).
[xxviii] Hartford Fire Ins. Co. v. California, 509 U.S. 764, 770 (1993).
[xxix] Id.
[xxx] U.S. v. Nippon Paper Indus. Co., 109 F.3d 1, 8 (1st Cir. 1997) (allowing criminal prosecution of an international fax paper cartel).
[xxxi] Id.
[xxxii] Den Norske Stats Oljeselskap AS v. Heeremac VOF, 241 F.3d 420, 427 (5th Cir. 2001) (Norwegian company conducting business solely in the North Sea sought redress under U.S. antitrust laws for an antitrust conspiracy that inflated its business costs. Defendants were alleged to have conspired to fix bids and allocate geographic territories between themselves to artificially inflate prices in the international markets.)
[xxxiii] Id.
[xxxiv] Id. at 427-28.
[xxxv] Id. at 428.
[xxxvi] Empagran S.A. v. F. Hoffman LaRoche, Ltd., 542 U.S. 155, 124 S. Ct. 2359 (2004).
[xxxvii] Id., 124 S. Ct. at 2366.
[xxxviii] Id. at 2366.
[xxxix]#p#分页标题#e# Id. at 2372.
[xl] Id. at 2368.
[xli] Id.
[xlii] See, e.g., S.Lynn Diamond, Empagran, the FTAIA and Extraterritorial Effects: Guidance to Courts Facing Questions of Antitrust Jurisdiction Still Lacking, 31 Brooklyn J. Int’l. L. 805 (2006).
[xliii] See, e.g., Eleanor Fox, Testimony before the Antitrust Modernization Commission, Hearings on International Issues, §IV (Feb. 15, 2006), available at <http://www.abanet.org/antitrust/at-committees/at-ic/pdf/spring/06/012.pdf>.
[xliv] Pfizer, Inc. v. Gov’t of India, 434 U.S. 308, 315 (1978).
[xlv] Brief of Stiglitz and Orszag, F. Hoffman-La Roche, Ltd. v. Empagran, 124 S. Ct. 2359 (No. 03-724), 2004 WL 226597, at *2.
[xlvi] Id. at *3.
[xlvii] Id.
[xlviii] Brief for Certain Professors of Economics as Amici Curiae Supporting Respondents at 3.
[xlix] Brief of Stiglitz & Orszag, at 5.
[l] Several countries including Germany, Belgium, Canada, Japan, the U.K., Ireland, and the Netherlands filed briefs in opposition to the economic deterrence argument, which presumes that other nations’ antitrust laws are deficient.
[li] Empagran, 124 S. Ct. at 2366-69.
[lii] Margaret Bloom, Should Foreign Purchasers Have Access to U.S. Antitrust Damages Remedies? A Post-Empagran Perspective from Europe, 61 N.Y.U. ANN. SURV. AM. L. 433, 436 (2005).
[liii] Id.
[liv] Id. at 451.
[lv] See, e.g., Brief for the Governments of the Federal Republic of Germany and Canada Supporting Petitioners, F. Hoffman-La Roche, Ltd. v. Empagran, 124 S. Ct. 2359 (No. 03-724); Brief for the United States (arguing the same with respect to American antitrust enforcement).
[lvi] Joseph P. Griffin, Foreign Government Reactions to U.S. Assertions of Extraterritorial Jurisdiction, 6 Geo. Mason L. Rev. 505 (1998).
[lvii] Id.
[lviii] Joseph E. Neuhaus, Power to Reverse Foreign Judgments: The British Clawback Statute Under International Law, 81 Colum. L. Rev. 1097, 1098 (1981).
[lix] Bruce Owen, et al., China’s Competition Policy Reforms, 75 Antitrust L.J. 231, 239 (2008).
[lx] Wu Zhengguo, Perspectives on the Chinese Anti-Monopoly Law, 75 Antitrust L.J. 73, 97 (2008).
[lxi] B. Hewitt Pate, What I Heard in the Great Hall of the People – Realistic Expectations of Chinese Antitrust, 75 Antitrust L.J. 195, 204 (2008).