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Extraterritoriality of the Sherman Act and Deterrence of Private International Cartels


  • Connor, John M.


This paper presents two major economic arguments relevant to a decision facing the U.S. Supreme Court in early 2004. In Empagran v. F. Hoffmann-LaRoche the Court must decide whether companies like Empagran, an Ecuadorian animal-feed manufacturer, ought to be permitted to sue for treble damages under the 1890 Sherman Act, even though Empagran bought vitamins from a convicted global cartel wholly outside U.S. territory. Because of ineffective antitrust enforcement in its home country, Empagran and similarly situated buyers favor having this right, whereas Roche and 19 other members of the vitamins cartel oppose it. The first argument in favor of extraterritorial expansion concerns the effects on U.S. consumers and the competitiveness of U.S. markets. I argue that in the context of international price-fixing conspiracies, conduct relating to "wholly foreign" purchases necessarily affects domestic commerce. This is because international cartels must prevent international geographic arbitrage in order to succeed in controlling prices in any targeted national market. Second, this paper assembles empirical evidence that, should non-U.S. transactions be excluded from U.S. antitrust protection, the global aspirations of contemporary cartels offer an insuperable challenge to a core aim of the antitrust laws: Deterrence. The broad geographic harm generated by the scores of modern global price-fixing conspiracies has overwhelmed the ability of current laws about corporate antitrust sanctions to provide enough financial disincentives to discourage the formation of similar cartels in the future. Permitting foreign buyers who purchased the products of international cartels abroad to pursue civil antitrust damages actions in U.S. courts is necessary to yield the level of legal punishment needed to protect the U.S. economy and its consumers from future cartel injuries. Territorial expansion will also increase the probability of discovery of clandestine cartels by multiplying the number of jurisdictions in which private parties have an incentive to investigate collusive behavior.

Suggested Citation

  • Connor, John M., 2005. "Extraterritoriality of the Sherman Act and Deterrence of Private International Cartels," 2005 Annual meeting, July 24-27, Providence, RI 19499, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  • Handle: RePEc:ags:aaea05:19499

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    References listed on IDEAS

    1. Steven Shavell & A. Mitchell Polinsky, 2000. "The Economic Theory of Public Enforcement of Law," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 45-76, March.
    2. John M. Connor, 1998. "The global citric acid conspiracy: Legal-economic lessons," Agribusiness, John Wiley & Sons, Ltd., vol. 14(6), pages 435-452.
    3. Connor, John M., 2005. "Price-Fixing Overcharges: Legal And Economic Evidence," 2005 Annual meeting, July 24-27, Providence, RI 19254, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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    Cited by:

    1. Jeroen Hinloopen & Adriaan Soetevent, 2006. "Trust and Recidivism; the Partial Success of Corporate Leniency Program in the Laboratory," Tinbergen Institute Discussion Papers 06-067/1, Tinbergen Institute.
    2. Russian Presidential Academy of National Economy and Public Administration authors collective, 2012. "The Consequences of Weak Competition: Quantitative Evaluation and Policy Implications (Think Tank Report)," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 6, pages 1-49.

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    International Relations/Trade;


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