Yale Journal of International Law Volume 31 Article 5 Issue 1Yale Journal of International Law 2006 Keeping U.S. Courts Open to Foreign Antitrust Plaintiffs: A Hybrid Approach to the Effective Deterrence of International Cartels Jonathan T. Schmidt Follow this and additional works at:http://digitalcommons.law.yale.edu/yjil Part of theLaw Commons Recommended Citation Jonathan T. Schmidt,Keeping U.S. Courts Open to Foreign Antitrust Plaintiffs: A Hybrid Approach to the Effective Deterrence of International Cartels, 31Yale J. Int'l L.(2006). Available at:http://digitalcommons.law.yale.edu/yjil/vol31/iss1/5 This Article is brought to you for free and open access by Yale Law School Legal Scholarship Repository. It has been accepted for inclusion in Yale Journal of International Law by an authorized administrator of Yale Law School Legal Scholarship Repository. For more information, please contact [email protected]. Note Keeping U.S. Courts Open to Foreign Antitrust Plaintiffs: A Hybrid Approach to the Effective Deterrence of International Cartels Jonathan T. Schmidt* I. INTRODUCTION ............................................................................................................................ 212 II. BACKGROUND .............................................................................................................................. 216 A The Sherman and Clayton Acts ..................................................................................... 216 B. Cartels- An Introduction. .............................................................................................. 217 C. InternationalC artels. ..................................................................................................... 220 D. ExtraterritoriaRl each ofAmerica's Antitrust Regime .................................................. 221 E. The Foreign Trade Antitrust Improvements Act ............................................................ 222 III. THE FTAIA CONTROVERSY ......................................................................................................... 223 A. Den Norske .................................................................................................................... 223 B. Kruman v. Christie's ...................................................................................................... 225 C. D. C. Circuit's Empagran Opinion. ................................................................................ 226 D. The Supreme Court's Empagran Opinion ...................................................................... 227 E. Analysis of the Supreme Court's Empagran Opinion .................................................... 227 IV . UNRESOLVED ISSUES ................................................................................................................... 232 A. Effects on Government Amnesty Policies ...................................................................... 233 1. United States Amnesty Programs. ........................................................................ 236 2. How the UnitedS tates Increasedt he Cost of Continuing in a Cartel. ................. 237 3. ForeignA mnesty Programsa nd CriminalS anctions ........................................... 239 4. Amnesty ProgramS uccesses ................................................................................ 240 5. The Governments'FearsR egarding the Amnesty Programs.. ............................. 240 B. Forum Shopping. ............................................................................................................ 241 V. PROPOSED SOLUTION ................................................................................................................... 245 A. Amnesty Policies- Domestic ......................................................................................... 246 B. Amnesty Programs- Foreign. ........................................................................................ 248 B. Forum Shopping. ............................................................................................................ 249 1. Interest-BalancingC omity Analysis ..................................................................... 250 2. Forum non conveniens .......................................................................................... 253 3. Problems with a JudicialR esponse ................................... .... ... .... ... 256 4. The Rebuttable Presumption- and its Inadequacy .............................................. 256 5. A New Approach to the Empagran Problem: Legislative Authorization to the Executive Branch To Limit JurisdictionB ased on the Principles ofForeignN on Conveniens ............................................................................................................ 258 6. Response to Possible Objections to this Proposal.. .............................................. 261 VI. CONCLUSION .......................................................2.6.3....................................................................... J.D. Candidate, 2006, Yale Law School; M.P.A., 2001, Woodrow Wilson School of Public and International Affairs. I am grateful to Alvin Klevorick for his guidance on this research, and to Robert Willig for initially developing my interest in antitrust and competition policy. THE YALE JOURNAL OF INTERNATIONAL LAW [Vol. 31:211 I. INTRODUCTION The global vitamins cartel was "the most pervasive and harmful criminal antitrust conspiracy ever uncovered."' From 1990 to 1999, multinational firms based in Canada, Germany, Japan, Switzerland, and the United States colluded to fix prices, rig bids, and allocate global market shares in their sale 2 of vitamin products. These products are critical for human and animal nutrition and affect more than $5 billion of global commerce.3 Reflecting the scope of the crime, the antitrust penalties imposed in the United States were staggering. Members of the cartel paid nearly $1 billion in fines.4 Hoffman- LaRoche, the cartel's leader, paid a $500 million fine, the largest criminal fine ever collected by the United States.5 Six of the main conspirators settled a private class action lawsuit by domestic purchasers of vitamin products for $1.05 billion, "the largest private anti-trust price-fixing settlement in history. 6 Individual corporate executives were sentenced to prison in the United States. Other jurisdictions-including Europe, Canada, Japan, and Australia-levied both criminal and civil penalties against the conspirators.7 "Vitamins Inc."8 exemplified the durability, breadth, and harm of international cartels.9 One study identified forty international cartels that operated in the 1990s; they had members in over thirty countries, operated in markets with annual sales of $30 billion,10 and survived an average of six years." The Organization of Economic Cooperation and Development (OECD) estimated that over $28 billion in total commerce was annually implicated in sixteen of the largest international cartels that were prosecuted between 1996 and 2000; the OECD estimated that the median amount of harm in each case was fifteen to twenty percent of the affected commerce.'2 For example, the graphite electrodes cartel of six American, German, and Japanese firms engaged in a five-year price-fixing conspiracy that affected 1. David Barboza, Tearing Down the Facade of 'Vitamins, Inc. ', N.Y. TIMES, Oct. 10, 1999, § 3, at I (quoting Joel Klein). 2. See Harry First, The Vitamins Case: Cartel Prosecutionsa nd the Coming of International Competition Law, 68 ANTITRUST L.J. 711, 712-22 (2001). 3. U.S. ATT'Y GEN. INT'L COMPETITION POLICY ADVISORY COMM. TO THE ATr'Y GEN. AND ASSISTANT ATT'Y GEN. FOR ANTITRUST, FINAL REPORT 174 (2000), available at www.usdoj.gov/atr/icpac/finalreport.htm [hereinafter ANTITRUST FINAL REPORT]. 4. Barboza, supra note 1, at 1. All corporate defendants pleaded guilty. 5. First, supra note 2, at 715. 6. Id. at 718. 7. ANTITRUST FINAL REPORT, supra note 3, at 174. 8. The cartel gave itself this nickname. See Barboza, supra note 1, at 1. 9. For this Note, "international cartels" are cartels with international effects. Their membership may be exclusively foreign, exclusively domestic, or a mix of the two. In contrast, "domestic cartels" are exclusively comprised of domestic firms with effects confined to their domestic market. "Domestic export cartels" are a subgroup of international cartels. They are exclusively comprised of domestic firms with effects exclusively in foreign markets. 10. Simon J. Evenett, Margaret C. Levenstein & Valerie Y. Suslow, International Cartel Enforcement: Lessons from the 1990s, WORLD ECON., Sept. 2001, at 1, 6. 11. Id. at 6. "Some of these cartels lasted for two decades before antitrust intervention. Other cartels lasted less than a year. Twenty-four of these forty cartels lasted for at least four years, certainly long enough to have had a significant effect on consumers." Id. at 6-7. 12. ORG. FOR ECON. COOPERATION AND DEV., HARD CORE CARTELS: RECENT PROGRESS AND CHALLENGES AHEAD 8-10 (2003) [hereinafter HARD CORE CARTELS]. 20061 Keeping US. Courts Open nearly $1.7 billion in American sales alone.' 3 The four-year citric acid cartel of American, German, Swiss, French, and Dutch firms involved a market of $1.2 billion in worldwide sales.14 The lysine cartel of American, Japanese, and Korean firms raised the product's price by seventy percent in a $600 million global market.'5 These conspiracies, and many others, were well-organized operations that were fully aware of their criminality and attempted to conceal their efforts by meeting overseas, using code names, and destroying evidence 6 of their efforts.' Vitamins Inc. also illustrated key aspects of the fight against these harmful conspiracies. First, government amnesty policies are critical to identify and prosecute cartels.' Second, enhanced fines and prison sentences are necessary to deter what is extremely profitable criminal activity. Third, private litigation enhances the punishment, and therefore the deterrence, of international cartels. Fourth, enforcement of antitrust laws is a multi-national effort that is greatly strengthened by cooperation among international authorities. However, Vitamins Inc. revealed weaknesses as well in the fight against international cartels. In particular, a series of cases in U.S. courts exposed latent tensions regarding the extraterritorial application of American antitrust laws and the difficulty of ensuring adequate global deterrence of international cartels. F. Hoffinan-LaRoche Ltd. v. Empagran &A.18 involved a lawsuit against the members of Vitamins Inc.-all foreign defendants-by foreign plaintiffs for harms caused by their foreign purchases of vitamins. (These will be referred to as "Empagran-type cases."'19) The case implicated the Foreign Trade Antitrust Improvements Act (FTAIA).20 The Supreme Court was asked to decide whether U.S. courts could exercise jurisdiction over lawsuits by foreigners for antitrust injuries sustained abroad. Many governments,21 13. ANTITRUST FINAL REPORT, supra note 3, at 172. 14. Id.a t 171. 15. Id The OECD notes that at Archer Daniels Midland Company (ADM), the lysine cartel's leader, the "oft-quoted unofficial motto" was "[o]ur competitors are our friends; our customers are our enemies." HARD CORE CARTELS, supra note 12, at 11. 16. First, supra note 2. 17. See ANTITRUST FINAL REPORT, supra note 3, at 174 ("The Antitrust Division's ability to crack the conspiracy turned on cooperation from a conspirator [Rhone Poulenc] which qualified for amnesty under the [U.S. Department of Justice's] Corporate Leniency Policy."). Parallel public and private investigations uncovered the cartel. See First, supra note 2. 18. 542 U.S. 155 (2004). 19. An "Empagran-type case" is one in which foreign plaintiffs bring a case in U.S. court for violations of the anti-cartel provisions of America's antitrust laws for harms sustained in foreign transactions. 20. Foreign Trade Antitrust Improvements Act of 1982, 15 U.S.C. § 6a (2000). 21. See Brief of the Governments of the Federal Republic of Germany and Belgium in Support of Petitioners, F. Hoffman-LaRoche Ltd. v. Empagran S.A., 542 U.S. 155 (2004) (No. 03-724) [hereinafter Germany Amicus Brief]; Brief of the United Kingdom of Great Britain and Northern Ireland, Ireland and the Kingdom of the Netherlands as Amici Curiae in Support of Petitioners, F. Hoffman-LaRoche Ltd. v. Empagran S.A., 542 U.S. 155 (2004) (No. 03-724) [hereinafter United Kingdom Amicus Brief]; Brief for the Government of Canada as Amicus Curiae Supporting Reversal, F. Hoffman-LaRoche v. Empagran S.A., 542 U.S. 155 (2004) (No. 03-724) [hereinafter Canada Amicus Brief]; Brief of the Government of Japan as Amicus Curiae in Support of Petitioners, F. Hoffman- LaRoche Ltd. v. Empagran S.A., 542 U.S. 155 (2004) (No. 03-724) [hereinafter Japan Amicus Brief]. THE YALE JOURNAL OF INTERNATIONAL LAW [Vol. 31:211 including the United States,22 argued strongly that U.S. courts should not have jurisdiction in such cases in order to prevent forum shopping and to protect the amnesty programs that are critical to uncovering these cartels. Instead of fully addressing this matter, the Supreme Court's Empagran decision focused on a more specific question. The Court asked whether U.S. courts had jurisdiction over lawsuits by foreigners for antitrust injuries sustained abroad when those injuries were independent of any injuries sustained domestically. The Court held that U.S. courts did not have jurisdiction "where the plaintiffs claim rests solely on the independent foreign harm. 23 The Supreme Court did not consider the plaintiffs contention that U.S. jurisdiction existed due to interdependence between the foreign and domestic harms, because the D.C. Circuit Court of Appeals had not addressed that argument. Instead, the Court remanded the case so the Court of Appeals could consider it.24 The Supreme Court's Empagran opinion was appropriately narrow, because the case involved complex policy questions better addressed by the political branches rather than the judiciary. By remanding the case, the Supreme Court gave the political branches an opportunity to craft a more nuanced policy response to the difficult problem posed by Empagran-type cases. In this Note, I explore what such a policy response might be. This Note proceeds as follows. Part II provides general economic and legal background. The concurrent jurisdiction issues presented by the Empagran case must be considered in light of the economic concerns raised by international cartels and addressed by America's antitrust laws. Part III discusses the more specific legal background regarding judicial interpretations of the FTAIA. Analyzing the Supreme Court's Empagran decision and the three lower court decisions that preceded it, I conclude that the Court attempted to redirect the U.S. judiciary to consider what plaintiffs must show to establish a sufficient connection to the United States to justify U.S. jurisdiction. The Empagran opinion hinted at the proper analytical frame for making this determination: 'inextricably linked' or intertwined foreign and domestic harms. Regrettably, the Court stepped back from fully articulating this economically sound basis for jurisdiction, and in remanding the case to the D.C. Circuit, it instead permitted that court to consider the conceptually unsatisfactory (in the cartel context) "but-for causation." As a result, a circuit split is emerging over whether inextricably linked or intertwined effects or some form of causation is the proper basis for considering jurisdiction in Empagran-type cases. I argue that the Supreme Court should fully endorse the concept of inextricably linked or intertwined effects as a basis of jurisdiction, thus ensuring U.S. jurisdiction over at least some Empagran-type cases. The Supreme Court may be reluctant to endorse such a basis because of two significant concerns advanced by the United States and foreign governments in their amici briefs in Empagran, but left unresolved by the 22. Brief for the United States as Amicus Curiae Supporting Petitioners, F. Hoffman-LaRoche v. Empagran S.A., 542 U.S. 155 (2004) (No. 03-724) [hereinafter United States Amicus Brief]. 23. Empagran, 542 U.S. at 159. 24. Id. at 175. As discussed in Part II infra, the D.C. Circuit dismissed the plaintiffs' remaining claims. Empagran S.A. v. F. Hoffman-LaRoche, Ltd., 417 F.3d 1267 (D.C. Cir. 2005). 2006] Keeping US. Courts Open Empagran decision. The first concern is policy-based, that U.S. jurisdiction in Empagran-type cases will undermine the government amnesty programs that have become the primary means of identifying international cartels. The second concern is legal, that because the U.S. courts are perceived to be more favorable to plaintiffs, U.S. jurisdiction in Empagran-type cases will encourage foreign plaintiffs to engage in forum shopping. Such forum shopping could undermine the antitrust regimes of the foreign governments, clog the U.S. court system, and undermine cooperation between the United States and foreign governments. In Part IV, I provide a detailed discussion of these concerns. In Part V, I turn to my proposed solution to these legal and policy concerns. I first emphasize that a satisfactory solution must achieve three U.S. foreign policy goals with respect to international antitrust: (1) maximum deterrence of international cartels, (2) a consistent and predictable national policy on jurisdiction that will reduce uncertainty regarding the cost of trading in U.S. commerce, and (3) harmonization of antitrust policies globally. With respect to the amnesty policies, I show that the problem posed by Empagran- type suits is one that depends on the specific structure of these policies. I argue that governments can ensure that U.S. jurisdiction over Empagran-type suits will strengthen use of these amnesty programs if they reciprocally agree to collaborate, in a predictable fashion, to mutually provide amnesty to the same member of a cartel. Turning to the forum shopping concerns expressed by the governments, I first note that an effective policy response must distinguish Empagran-type suits that concern litigants based in countries with effective antitrust regimes, from suits that concern litigants based in countries with ineffective antitrust regimes. Within this perspective, I consider the various proposals that have been offered to make this distinction. I first review the often-proposed suggestion of interest-balancing comity analysis; I find it completely inadequate. I suggest that the doctrine of forum non conveniens provides the correct principles to address Empagran-type suits. However, I conclude that forum non conveniens is an unsatisfactory response as it still relies on a case- by-case judicial review that fails to provide a consistent, predictable national policy on jurisdiction and that fails to encourage international harmonization in antitrust policies. I next consider a proposal to allow the executive branch to recommend to individual U.S. courts when jurisdiction should not be exercised in Empagran-type suits. I still find this response inadequate due to its case-by-case approach and the discretion it affords the judiciary to ignore the executive branch's determination. I therefore propose congressional legislation that would empower the executive branch to annually limit U.S. court jurisdiction of Empagran-type cases. This legislation would embrace the principles of forum non conveniens by refusing U.S. jurisdiction over Empagran-type cases that involve litigants from countries that provide a more convenient, effective forum through which the plaintiffs can receive adequate relief. I argue that this legislation would achieve the three U.S. foreign policy goals with respect to maximum deterrence of cartels, facilitation of international trade, and harmonization of antitrust policies. THE YALE JOURNAL OF INTERNATIONAL LAW [Vol. 31:211 These legislative and policy changes will bring both consistency and nuance to America's treatment of Empagran-type suits. I further argue that they will promote harmonization of antitrust policies, which must precede any attempt to create an international regime to address the problem of international cartels. These proposals will also advance U.S. interests much more than will the broad, judicial response of closing the U.S. courts to all foreign plaintiffs who bring suit for foreign injuries-a measure I view as a judicial surrender of America's interest in protecting its consumers and enterprises from collusion, which the Supreme Court has declared the "supreme evil of antitrust. '25 II. BACKGROUND A core aspect of America's antitrust regime is its encouragement of private litigation as an enforcement device. Private litigation is thought to be particularly effective against cartels, as the consumers in a cartel market may often be among the first entities to detect the cartel's damaging collusive behavior, and awarding damages-particularly a multiple of the cartel's profits-may make the illegal conduct cost-prohibitive. Thus, private litigation is viewed as an important mechanism for achieving one of the fundamental goals of the antitrust acts: the maximum deterrence of cartels.26 Initially, the application of America's antitrust regime was contained within its borders. But as commerce became increasingly international after World War II, U.S. courts applied the antitrust laws extraterritorially. America's extraterritorial application of its antitrust laws created tension with its trading partners, who disagreed with the American approach of relying on private litigation and treble damages as an enforcement device. They viewed the extraterritorial application of U.S. law as an anticompetitive maneuver aimed at furthering U.S. trade objectives. In the late 1970s and early 1980s, many of these countries passed legislation to frustrate the extraterritorial application of America's antitrust laws. The U.S. Congress responded by passing the FTAIA. This law barred foreigners from using America's laws against American companies when American consumers were not harmed. The Empagran decision-and the governments' amici briefs-must be understood within this context of antitrust policy as trade policy. A. The Sherman and Clayton Acts The Sherman and Clayton Acts are the statutory foundation for private antitrust litigation in the United States. The Sherman Antitrust Act outlaws "[e]very contract, combination . . . or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations.,27 Violations are 25. Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 408 (2004). 26. See Donald I. Baker, The Use of CriminalL aw Remedies To Deter and Punish Cartels and Bid-Rigging, 69 GEO. WASH. L. REV. 693, 713 (2001) ("[Dleterrence is the critical issue in prosecuting those who participate in highly profitable covert activities that are clearly illegal."). 27. 15 U.S.C. § 1 (2000). 2006] Keeping US. Courts Open *28 *t felonies, with corporations and individuals facing civil and criminal penalties, including imprisonment.29 To expand the enforcement of the antitrust laws and to facilitate the compensation of the victims of antitrust harms, Congress adopted the Clayton Act. Section 4 of the Clayton Act creates a private cause of action for individuals and companies harmed by antitrust violations,30 and section 12 grants jurisdiction over these lawsuits to any district in which the defendant does business.3' Plaintiffs in such lawsuits act as "private attorneys general, 32 who help alert authorities to violations of the antitrust laws while also punishing those violations. The Clayton Act allows private litigants to sue for treble damages. Treble damages enhance deterrence in two ways-they encourage private suits, which raise the probability the cartel will be detected,33 and they increase the penalty imposed on defendants found guilty of violating the acts.34 The Clayton Act has succeeded in encouraging such 35 suits. B. Cartels-An Introduction Cartels are "unambiguously bad' 36 and "the most egregious violations of competition law."37 The collusion they engage in the "supreme evil of 28. Originally, violations of the Sherman Act were misdemeanors. In 1974, Congress amended the act to make violations felonies. Antitrust Procedures and Penalties Act, Pub. L. No. 93- 528, 88 Stat. 1706, 1708 (1974) (current version at 15 U.S.C. § 1 (2000)). 29. Congressional amendments in the summer of 2004 raised the maximum allowable criminal fines to $100 million for organizations and $1 million for individuals and the maximum allowable prison sentence to ten years. Antitrust Criminal Penalty Enhancement and Reform Act of 2004, Pub. L. No. 108-237, 118 Stat. 665 (2004) (current version at 15 U.S.C.A. § 1 (West 2005)). 30. 15 U.S.C. § 15 (2000) ("[A]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefore ... and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee."). 31. 15 U.S.C. § 22 (2000) ("Any suit, action, or proceeding under the antitrust laws against a corporation may be brought not only in the judicial district whereof it is an inhabitant, but also in any district wherein it may be found or transacts business."). For a discussion of section 12's historical development, see Jeremy C. Bates, Comment, Home Is Where the Hurt Is: Forum Non Coveniens and Antitrust, 2000 U. CHI. LEGAL F. 281. 32. Hawaii v. Standard Oil Co., 405 U.S. 251, 262 (1972); see also Hannah L. Buxbaum, The Private Attorney General in a Global Age: Public Interests in Private InternationalA ntitrust Litigation, 26 YALE J. INT'L L. 219, 222 (2001) ("A private litigant acts as a private attorney general if the litigant asserts a cause of action not only to obtain compensation, but also to vindicate important public interests."). 33. See Spencer Weber Waller, The Incoherence of Punishment in Antitrust, 78 CHI.-KENT L. REV. 207, 211 (2003) (quoting PHILIP AREEDA & DONALD F. TURNER, ANTITRUST LAW 149-50 (1978)) ("Such awards generate a powerful incentive for injured persons to detect, disclose, attack, and end violations of the antitrust laws."). 34. See Baker, supra note 26, at 703 ("In most cases, the private recovery of treble damages under the Clayton Act continues to be an even bigger economic threat to a corporation than the amount of the Sherman Act fine."); Buxbaum, supra note 32, at 223 ("This statutory framework [for damages] reveals Congress's intention to motivate a level of private enforcement that would ensure significant compliance with the antitrust laws."). 35. See Donald I. Baker, Revisiting History--What Have We Learned About Private Antitrust Enforcement That We Would Recommend to Others?, 16 LoY. CONSUMER L. REV. 379, 380 (2004) ("[The Sherman and Clayton Acts] have been broadly successful in encouraging active private antitrust enforcement."); Buxbaum, supra note 32, at 223 ("In this, Congress was successful as private actions have constituted a substantial portion of antitrust litigation."); Waller, supra note 33, at 210 ("The vast majority of antitrust enforcement comes through private damage suits."). 36. HARD CORE CARTELS, supra note 12, at 15. THE YALE JOURNAL OF INTERNATIONAL LAW [Vol.31:211 antitrust.''3s A cartel is a group of firms in an industry that should be competitors but have instead agreed to coordinate their activities so that they can raise prices and earn profits above competitive market levels. Cartels utilize a number of mechanisms to coordinate their activities, including horizontal price fixing,39 bid rigging, territorial division,40 non-territorial customer division, and market-share agreements. In addition to harming the consumers of their products by charging supra-competitive prices, cartels also reduce economic efficiency by causing consumers to purchase less of a product than they otherwise would buy and by reducing the competitive pressures that member firms face to control costs and to innovate.41 A cartel must overcome four challenges to operate successfully. First, the cartel's members must reach agreement to restrict the supply of a product and increase its price. A cartel restricts supply so that the loss from the lower quantity of sales is more than offset by the increase in the price of each remaining sale. The optimal cartel quantity and price is that of a monopoly producer, but cartels rarely achieve that optimal level because cheating by members and market entry by new producers increases market supply. Thus, a second challenge for a cartel is to ensure that its members follow the agreed course of action. Each cartel member has an incentive-to sell more than the agreed quantity of the product-at the cartel price or one slightly below it-to gain even more profit.42 Because cheating threatens the cartel's viability, cartels must monitor their members and punish cheating.43 But monitoring is difficult because of the third challenge inherent to cartels: their illegal actions force them to operate in secrecy to avoid detection.44 Yet even if, while operating in secret, cartels are able to monitor and punish cheaters, they still must prevent entry by other firms into the market. Entrants will be enticed by the opportunity to earn profits due to the extra-competitive cartel prices, and their entry will drive down the cartel's profits. To maintain its hold on the market, the cartel must prevent new entry, again without making the cartel visible. The complexity of addressing these four challenges leads many economists to conclude that cartels are "inherently unstable."4 37. ORG. FOR ECON. COOPERATION AND DEV., RECOMMENDATION OF THE COUNCIL CONCERNING EFFECTIVE ACTION AGAINST HARD CORE CARTELS 2 (1998) [hereinafter RECOMMENDATION OF THE OECD COUNCIL]. 38. Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 408 (2004). 39. See United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940); United States v. Alston, 974 F.2d 1206 (9th Cir. 1992). 40. See Palmer v. BRG of Georgia, Inc., 498 U.S. 46 (1990); United States v. Topco Assocs., 405 U.S. 596 (1972). 41. ORG. FOR ECON. COOPERATION AND DEV., FIGHTING HARD CORE CARTELS: HARM, EFFECTIVE SANCTIONS AND LENIENCY PROGRAMMES 71-72 (2002) [hereinafter CARTELS: HARMS AND SANCTIONS]. 42. Evenett et al., supra note 10, at 3-4. 43. The OECD documents a variety of "elaborate enforcement and punishment mechanisms" that cartels have devised. In the citric acid and lysine cartels, "compensation schemes were devised, whereby a cartel member that exceeded its sales quota was required to purchase excess production from fellow cartel members the following year." See HARD CORE CARTELS, supra note 12, at 12. See generally Evenett et al., supra note 10, at 4-45. 44. Id. 45. Christopher R. Leslie, Trust, Distrust and Antitrust, 82 TEX. L. REv. 515, 518 (2004). 2006] Keeping US. Courts Open Certain market characteristics are conducive to collusive activity. Cartels often operate in concentrated markets with few firms, permitting easier coordination and more reliable confidentiality.46 Markets with high initial investment costs are also conducive to cartel activity. These costs deter other firms from quickly entering the market to take advantage of the cartel's artificially high prices.47 Products that are homogenous and fungible also facilitate cartel activity.a Such products are usually uniformly priced, making it easier for cartels to monitor member prices. Finally, market structures, such as public disclosure laws regarding prices and quantities, can help cartels monitor their members' activities. Market characteristics alone cannot sustain a cartel; cartel members must adopt a variety of practices to avoid detection and to enforce compliance. Cartels avoid detection by holding secret meetings, using code names, and creating legitimate-appearing trade associations to share information.49 Generally, cartel members meet periodically to review public and private sales and price figures from prior periods. They also force members who exceed their quotas to compensate the other members.50 Thus, cartels overcome their inherent instability by successfully providing supra-competitive profits to their members while maintaining the secrecy of their collusion and punishing any deviations. Indeed, based on the fact that twenty-four of the forty international cartels prosecuted in the 1990s had operated for at least four years, one study concluded, "market forces alone may be unable to quickly undermine attempts to fix prices, rig bids, allocate quotas, and market shares; perhaps implying a 51 potential role for national anti-cartel enforcement." 46. HARD CORE CARTELS, supra note 12, at 10; see also Robert C. Marshall, Leslie M. Marx & Matthew E. Raiff, Cartel Price Announcements: The Vitamins Industry 26 (Feb. I1, 2005) (unnumbered working paper), available at http://www.bateswhite.com/news/pdf/Cartel%20Price%2OAnnouncements-- The%20Vitamins%20Industry.pdf [hereinafter Cartel Price Announcements] ("The vitamins industry is highly concentrated."). Table A.2, Appendix A of the paper lists the number of vitamins manufacturers by vitamin. Id. at 28. 47. For example, vitamins are produced through chemical or fermentation processes that require large capital expenditures, costly inputs, and substantial time before a plant is effective in producing a given vitamin. Id.a t 26. Cartels also build artificial barriers to entry as explained by Evenett et al., supra note 10, at 5. 48. HARD CoRE CARTELS, supra note 12, at 10; see also Cartel Price Announcements, supra note 46, at 26 ("A given vitamin product made by one firm is chemically identical to the same product made by another firm.... Purchasers are aware of the fact that vitamin products are homogenous."). 49. See William J. Kolasky, Deputy Assistant Attorney General, Antitrust Division, U.S. Dep't of Justice, Antitrust Compliance Programs: The Government Perspective, Speech Before the Corporate Compliance 2002 Conference (July 12, 2002) ("The most startling characteristic of the multinational cartels we have prosecuted is how cold blooded and bold they are .... they went to great lengths to cover-up their actions-such as using code names with one another, meeting in secret venues around the world, creating false 'covers'-i.e., facially legal justifications-for their meetings, using home phone numbers to contact one another, and giving explicit instructions to destroy any evidence of the conspiracy."). 50. For additional descriptions of how international cartels adopt these practices, see ANTITRUST FINAL REPORT, supra note 3. For a description specific to the vitamins cartel, see Cartel Price Announcements, supra note 46. 51. Julian L. Clarke & Simon J. Evenett, The Deterrent Effects of National Anticartel Laws: Evidence from the InternationalV itamins Cartel, 48 ANTITRUST BULL. 689, 690 (2003).