The Foreign Trade Antitrust Improvements Act (the FTAIA)—a federal statute that governs the reach of the Sherman Act to foreign conduct—has become a central focus of antitrust law in recent years as U.S. antitrust authorities aggressively ramped up efforts to police anticompetitive conduct abroad. Unfortunately for parties involved in litigation, particularly defendants, the increasing importance of the FTAIA has coincided with significant turmoil relating to judicial interpretation of the law. Specifically, several recent circuit court rulings have shifted the law in a decidedly pro-plaintiff direction by simultaneously upsetting established precedent relating to procedural aspects of the FTAIA and advancing new approaches to interpreting its substantive provisions.
The U.S. Court of Appeals for the Second Circuit’s decision last month in Lotes v. Hon Hai Precision Industry1 is the latest contribution to this rapidly evolving jurisprudence, as the court grappled with three critical issues: (1) whether the FTAIA’s limits on the Sherman Act are jurisdictional or substantive, (2) the correct standard to evaluate whether foreign conduct has a “direct, substantial, and reasonably foreseeable effect” on U.S. commerce and (3) the proper framework for assessing whether the anticompetitive effects “give rise to a claim under” the Sherman Act. While the Second Circuit’s holding with respect to the first issue has garnered the most attention, the latter two questions are more likely to be the focal points of future litigation involving the FTAIA.
