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American antitrust laws were not designed to protect foreign businesses from anticompetitive conduct — even if the alleged illegal conduct occurred in the United States, a federal judge has ruled. In Turicentro S.A. v. American Airlines et al., Judge J. Curtis Joyner of the U.S. District Court for the Eastern District of Pennsylvania dismissed a class action suit brought by travel agents in the Caribbean and Latin America who claimed that four airlines based in the United States conspired to reduce their commissions to a flat rate of 7 percent. “While it may be true that the antitrust conspiracy alleged here has significantly injured the plaintiffs’ businesses in the Caribbean and Latin America, American antitrust laws do not regulate the competitive conditions of other nations’ economies,” Joyner wrote. “The plaintiffs must look to the laws of the Caribbean and Latin America for redress in this case and we therefore find that this court lacks the requisite subject matter jurisdiction to hear this matter,” Joyner wrote. Attorneys Joseph C. Kohn, Robert J. LaRocca and William E. Hoese of Kohn Swift & Graf filed the suit against the International Air Transport Association and four U.S. airlines — Delta, American, United and Continental. The suit focused on a decision made in July 1999 during a meeting of the IATA’s passenger tariff coordinating conference in Montreal to lower the commission paid to some IATA-accredited travel agents to the 7 percent flat rate. Until then, commission rates paid to travel agents in Latin America and the Caribbean varied, depending upon the country. In the case of Peru, Panama, Bolivia and Nicaragua, the commission rate was as high as 10 percent to 11 percent. According to the suit, Latin American and Caribbean travel agents must be licensed or accredited by the IATA to make international reservations. Without such registration, the agents cannot receive the identification number needed to enter the airlines’ reservation systems. The suit also said reservations on American, Continental, Delta and United airlines account for most of the business done by travel agents in Latin America and the Caribbean. The named plaintiffs were four travel agencies — in San Jose, Calif.; Costa Rica; and Managua, Nicaragua. The suit alleged that the airlines tried to hide the roles they played in pushing for the reduced commissions. Minutes from the IATA meeting show that U.S.-based members didn’t participate in the discussions, but the plaintiffs alleged that the four airlines were “aware of and endorsed and encouraged IATA to adopt and implement this change in commission structure” and “assisted in planning this agenda, were aware this vote would be taken, and endorsed the tariff conference’s lowering the commission rates.” As a result, the suit said, the airlines had acted in concert to lower the commission rates — an action that had devastating effects on the plaintiffs’ businesses. But defense lawyers for the airlines and the IATA joined forces to urge the court to dismiss the suit, arguing that even if all the allegations were true, there was no violation of the Sherman Antitrust Act. The plaintiffs, they said, lack antitrust standing because American antitrust laws do not regulate competitive conditions in foreign countries. As a result, they said, the federal courts lack subject matter jurisdiction over the case. Joyner agreed, saying, “Generally speaking, American antitrust laws do not regulate the competitive conditions of other nations’ economies.” The Sherman Act, he said, “does reach conduct outside our borders, but only when the conduct has an effect on American commerce.” In 1982, Joyner said, Congress placed specific limits on the geographic scope of antitrust law when it passed the Foreign Trade Antitrust Improvement Act (FTAIA). The act, he said, was designed to facilitate the export of domestic goods by exempting export transactions that did not injure the U.S. economy from the Sherman Act — thereby relieving exporters from a competitive disadvantage in foreign trade. Joyner said courts had interpreted the law to mean that “the Sherman Act does not apply to domestic or foreign conduct affecting foreign markets, consumers, or producers unless there is a direct, substantial, and reasonably foreseeable effect on the domestic market or on opportunities to export from the United States.” Those decisions, he said, were consistent with existing Sherman Act jurisprudence that allowed the law to regulate foreign conduct “only if the conduct was intended to have, or had, significant effects within the United States.” Joyner found that a foreign plaintiff has a nearly impossible burden under the law since it must show not only that the illegal conduct had an effect on American export trade, but also that it is within the class of injured U.S. exporters. “It is not the situs of the defendant’s conduct which is controlling, but rather where the effects of that conduct is felt,” Joyner wrote. “In this way, the plain language of the FTAIA precludes subject matter jurisdiction over claims by foreign plaintiffs against defendants where the situs of the injury is overseas and that injury arises from effects in a non-domestic market.” Although the Latin American and Caribbean travel agents claim they have been devastated — either that they have been forced out of business or are on the verge of going out of business — Joyner found that “nowhere in their complaint do they aver that these effects have been felt on American soil.” American Airlines was represented by attorneys Jennifer R. Clarke and Carolyn H. Feeney of Dechert; Delta was represented by attorney Francis P. Newell of Montgomery McCracken Walker & Rhoads; United was represented by attorney Richard J. Favretto of Mayer Brown & Platt; and the IATA was represented by Sherry A. Swirsky of Schnader Harrison Segal & Lewis.

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