Extraterritoriality of the Sherman Act and Deterrence of Private International Cartels

This paper argues that the facts in the vitamins cartel support decisions in the 2nd and DC circuits to permit wholly foreign direct buyers of globally cartelized products standing to sue in U.S. courts. Such an interpretation of the Sherman Act is justified by conduct that is essentially linked to the management of successful international cartels, namely, the prevention of geographic arbitrage. This paper shows that the degree of injuries imposed on U.S. consumers could not have occurred were it not for coordinated price increases in countries with weak or nonexistent anticartel laws. Moreover, this paper endeavors to demonstrate that, ex post, the vaunted worldwide sanctions imposed on the vitamins cartel failed to disgorge as much as half of the cartel’s illegal profits. When expected antitrust sanctions are viewed from the proper ex ante perspective, it is abundantly clear that antitrust sanctions are woefully below optimal deterrence. This is a characteristic commonly shared by all of the nearly 200 international cartels prosecuted in the past decade. Permitting treble damages on global purchases rather than just the minor portion of sales transacted in the United States would go far in remedying antitrust under deterrence