United States: DOJ And FTC Stand Their Ground On Comity Policy Despite Second Circuit's Decision In Vitamin C Case

Last Updated: March 2 2017
Article by Antitrust Watch

Authored by Daniel Streim, James J. Tierney and Richard Goldstein.

Last September, we discussed the U.S. Court of Appeals for the Second Circuit's opinion in In re Vitamin C Antitrust Litigation vacating a $147 million judgment against Chinese vitamin C manufacturers based on the doctrine of international comity.  That case stemmed from allegations that the defendants illegally fixed the price and output levels of vitamin C that they exported to the United States.  In reversing the district court's decision to deny the defendants' motion to dismiss, the Second Circuit held that the district court should have deferred to the Chinese government's explanation that Chinese law compelled the defendants to coordinate the price and output of vitamin C.

A few months later, on January 13, 2017, the U.S. Department of Justice and the Federal Trade Commission issued their revised Antitrust Guidelines for International Enforcement and Cooperation.  The revised version of the Guidelines, which were first released in 1995, "provide[s] updated guidance to businesses engaged in international activities on questions that concern the Agencies' international enforcement policy as well as the Agencies' related investigative tools and cooperation with foreign authorities."  Interestingly, Section 4 of the Guidelines, which "describes the Agencies' consideration of international comity concerns and the role of foreign government involvement in determining whether to open an investigation or bring an enforcement action," does not mention the Second Circuit's recent opinion or its analysis of comity principles.

The DOJ and FTC are in accord with the Second Circuit's view that concerns of international comity should be considered in determining whether and how to apply U.S. antitrust laws to foreign actors. But the implication of Section 4.1 of the Guidelines is that, in actions brought by the DOJ or FTC, it is the relevant agency's view of comity that should be determinative, not the court's.  This is evidenced in the statement, contained in the Guidelines, that in actions brought by the DOJ or FTC, the Agencies' decision to bring the action in the first place "represents a determination that the importance of antitrust enforcement outweighs any relevant foreign policy concerns.  That determination is entitled to deference."

The Guidelines cite to United States v. Baker Hughes, Inc., a 1990 decision by the United States Court of Appeals for the District of Columbia in a case brought by the United States to enjoin a merger under Section 7 of the Clayton Act, to support the Agencies' view that judicial discretion regarding deference to foreign governments should be limited to disputes between private parties.  In Baker Hughes, the defendants asked the court to decline jurisdiction based on principles of international comity where the Embassy of Finland had sent a note opposing the blocking of the proposed merger.  The court refused to do so in light of the U.S. State Department's prior consideration of the issue:  "[W]hatever the relevance of comity concerns in antitrust disputes between private parties . . . they are not a factor here.  The State Department has considered Finland's position, and the United States has decided to go ahead with the case.  It is not the Court's role to second-guess the executive branch's judgment as to the proper role of comity concerns under these circumstances."

The 1995 version of the Guidelines also cited Baker Hughes, but noted that although the FTC, like the DOJ, "considers comity issues and consults with foreign antitrust authorities," the FTC is an independent agency and "no [FTC] cases ha[d] presented the issue of the degree of deference that courts should give to the [FTC's] comity decisions."  The revised Guidelines now directly state that comity decisions by both the DOJ and FTC are entitled to deference.

In comparison, the Second Circuit's decision in Vitamin C did not limit the prerogative of U.S. courts to decide the relevance of comity:  "[W]e reaffirm the principle that when a foreign government, acting through counsel or otherwise, directly participates in U.S. court proceedings by providing a sworn evidentiary proffer regarding the construction and effect of its laws and regulations which is reasonable under the circumstances presented, a U.S. court is bound to defer to those statements.  If deference by any measure is to mean anything, it must mean that a U.S. court not embark on a challenge to a foreign government's official representation to the court regarding its laws or regulations, even if that representation is inconsistent with how those laws might be interpreted under the principles of our legal system."

The Guidelines could have addressed Vitamin C in Section 4.1, but did not.  That fact, combined with the Agencies' more forceful articulation in the revised Guidelines of their position that deference must be given to the Agencies' comity decisions, make clear the Agencies' view that the Second Circuit's opinion should be limited to private actions.  It will be interesting to see whether the Second Circuit's opinion in Vitamin C causes federal courts to afford any more or less deference to the executive branch than the Guidelines indicate are due on issues of international comity.

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