District Court Dismisses Price-Fixing Claims for Transactions in “Foreign” Currency Exchange Rates Except for Direct Transactions between U.S. Plaintiffs and Non-U.S. Trading Desks of Non-U.S. Banks

The World in U.S. Courts: Summer and Fall 2016 - Antitrust/Competition/Foreign Trade Antitrust Improvements Act (FTAIA) | June.29.2016

In Re Foreign Exchange Benchmark Rates Antitrust Litigation, U.S. District Court for the Southern District of New York, September 20, 2016

This large class action litigation alleges that many U.S. and non-U.S. banks conspired to fix prices in the “foreign exchange” or “foreign currency” (either referred to as “FX”) market in violation of Section 1 of the Sherman Act and the Commodities Exchange Act.  Among other issues, a number of the non-U.S. banks moved to dismiss the antitrust claims on grounds that they were based on transactions “executed” by U.S. entities outside the country, and thus were barred by the FTAIA as having an insufficient connection with the U.S.  

The District Court in New York explained that the FTAIA permitted antitrust claims based on non-U.S. conduct only insofar as the conduct caused “direct, substantial, and reasonably foreseeable” effect on U.S. commerce.  (The Court also noted that the FTAIA did not apply at all to potential claims arising from imports.)  Noting that the banks had not clearly defined the meaning of “executed,” the term on which their motion was based, the Court ruled on several different types of transactions arguably included in the case.  First, it held that transactions between a U.S. entity and the non-U.S. desk of a defendant bank constituted “import commerce” because the U.S. entity acquired an interest in FX from a non-U.S. bank; because the FTAIA does not apply to bar such “import” claims, these claims were not dismissed.  In contrast, it held that actions by U.S. entities transacting outside the U.S. with non-U.S. desks of the defendant banks did not involve “import” commerce.  Indeed, because those transactions did not affect U.S. commerce, antitrust claims based on them were precluded by the FTAIA.  The defendants tried to bring non-U.S. injuries within the scope of the Sherman Act by arguing that they only arose because of an alleged worldwide conspiracy, of which price-fixing effects in the U.S. integrally tied with conspiratorial pricing elsewhere.  But the Court rejected this argument, concluding that effects on commerce in the U.S. could not be considered to have been “proximately caused” by injuries suffered in other countries. 

[Editor’s Note:  The In re Foreign Exchange case is also addressed in the Securities Law/Commodities Exchange Act section of this report.]

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