The World in U.S. Courts: Winter 2018 - Antitrust/Competition/Foreign Trade Antitrust Improvements Act (FTAIA)
A prior opinion in this class action by direct and indirect US purchasers of Korean-made ramen held that the claim alleged an injury to US “import commerce,” and as a result the FTAIA did not bar the action from proceeding. (The Court’s November 4, 2014 opinion is discussed in our Fall 2014 issue.) This opinion addresses motions for summary judgment filed by the defendants following the close of discovery.
After finding that the plaintiffs had come forward with sufficient evidence of an illegal conspiracy to raise prices in Korea, the Court addressed the question whether the conspiracy produced any effect in the US that could give rise to a claim under the Sherman Act. The Court observed that no direct evidence linked the Korean conspiracy with products (i) sent to the US from Korea or (ii) manufactured by the defendants’ subsidiaries in the US. It then focused on the plaintiffs’ allegation that indirect evidence of this linkage could be found in the “connections between and the control exercised by the Korean parent companies over their wholly-owned subsidiaries.” General information about the operation of Korean “chaebols” was deemed inadequate without more to inform the facts of this case, and the Court turned to the facts presented regarding two of the defendants, Ottogi and Nongshim.
The Court identified the key factual question to be the price at which Ottogi Korea sold ramen for export: “If the export price was inflated due to the conspiracy, then products with an inflated price were sent into the U.S. market and sold by Ottogi America.” The Court concluded that the plaintiffs had come forward with “some (albeit slim) evidence” of such impact, and found it sufficient to allow the claim to proceed to trial. The Court did not detail its reasoning but cited the presence of directors, senior officers, and employees with “day-to-day operations” shared between Ottogi Korea and its US subsidiary. It also noted the exchange of information in Korea between officials responsible for domestic and export pricing. Ottogi cited evidence that US pricing was subject to discounting and otherwise competitively set to “gain a stronger foothold” in the US market, but the Court dismissed the significance of it as providing “at most” an argument about the amount of damages.
Nongshim ramen sold in the US was made in both Korea and the US. As to the Korean ramen, Nongshim argued that the price for sales to Nongshim’s US subsidiary was set through negotiations, with the price of US sales determined solely by officials having no link to the alleged conspiracy. But the Court cited evidence that pricing to the US was affected by the “factory price” in Korea, or otherwise affected by ramen prices in the Korean market, as well as disputed evidence that Nongshim-US “allowed input if not control by [Nongshim Korea] for the prices it charged.” As with Ottogi, the Court concluded that the existence of negotiations and discounting by Nongshim-US would go to the question of potential damages if liability were found.
By contrast, the Court found documentary evidence that the sales price of US-manufactured ramen was affected by the Korean conspiracy to be “extremely thin,” consisting mainly of speculation and inferences from ambiguous documents and testimony. The Court did, however, give credence to plaintiffs’ expert opinions that pricing between Korea and the US was correlated, with the apparent inference that a conspiracy affecting the former was thereby shown to have affected the latter. The Court noted that the plaintiffs did not attempt to correlate pricing between the Ottogi and Nongshim defendants, and suggested that this might have undermined their argument if there had not been other evidence of an effect of a Korean conspiracy on US pricing: that a conspiracy existed, that it affected the price of ramen sold to the defendants’ US subsidiaries, that the Korean defendants exercised control over prices charged by their US subsidiaries, and that economic models showed “artificially high prices” in the US.
The Court observed that the plaintiffs were required to establish that they had standing to sue and that their alleged injuries were proximately caused by the violations of law alleged. It surveyed recent cases addressing principally the causation requirement, and relied on its prior discussion to conclude that the plaintiffs had created genuine issues of fact for trial based on the existence of a conspiracy and the impact of that conspiracy on US purchaser-plaintiffs.
The Court denied the defendants’ motions and set the case to proceed to trial. To underscore that it had not made determinations of fact but was leaving these to the jury, the Court cited evidence that the export price of Korean ramen did not rise for two years after the alleged conspiracy began, noting that the jury “might or might not” conclude from this evidence that a conspiracy existed and affected US pricing.