The argument, in a case filed by Mountain Crest, a craft brewer in Wisconsin, against Anheuser-Busch InBev and Molson Coors Brewing Co., is somewhat surprising because it’s generally recognized the U.S. courts won’t intervene in actions taken by a sovereign foreign government within its own territory.
This is known as the “Act of State” doctrine and Justice Department’s amicus brief in a case before the 7th Circuit Court of Appeals, says the district court was correct in refusing to hear that part of the matter. When courts deem invalid the acts of the foreign sovereign in its own jurisdiction, that decision runs the risk of complicating the Executive Branch’s foreign relations actions and inviting reprisals from foreign governments, the department said…
However, the Justice Department also said that “contrary to the district court’s understanding, plaintiff’s antitrust claims are not limited to the six-pack restrictions. The plaintiff also alleged a conspiracy by defendants to restrict competition in Ontario from U.S. beer exporters like the plaintiff in violation of both Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, which includes other anticompetitive conduct by defendants. The act of state doctrine does not prevent the plaintiff from pursuing its conspiracy claims based on other allegations of anticompetitive conduct by the private corporation defendants that are separate from their agreement with the Ontario government.”
ABI and Molson Coors successfully attempted to get the Ontario Government to restrict sale of beer at some Liquor Control Board of Ontario stores in formats larger than a six-pack.
Molson and Labatt feared widespread sales of 12- and 24-packs in LCBO stores would enable independent U.S. breweries to compete more vigorously in Ontario by exporting more beer at lower price points.
Once the directive became known, Ontario consumers, bars, and restaurants filed a class action in Ontario alleging that the pack-size restrictions violated Canada’s Competition Act and the Liquor Control Act, and was tortious.
A-B and Molson Coors “threatened the Government of Canada with NAFTA expropriation litigation from the offices in St. Louis and Denver if the government undid the six-pack restrictions,” the Justice brief says.
The “Act of State” doctrine says a foreign court can’t sit in judgment on the official actions of another sovereign foreign government. It doesn’t apply, however, to judging actions of people within the jurisdiction of the court.
When private defendants, as part of their antitrust conspiracy, have merely influenced a foreign government, however, the act of state doctrine would not necessarily bar the suit,” the 7th Circuit’s decision explains.
It wasn’t just in LCBO stores that ABI and Molson Coors sought to restrict competition. They also acted in The Beer Store. “An antitrust claim based on private actions by defendants is not barred by the act of state doctrine,” the appeals court said. Indeed, it’s settled law that a court can “adjudicate the government’s antitrust case against private defendants for “their own deliberate acts [that] brought about forbidden results within the United States,” notwithstanding the fact that the conspiracy was “aided by discriminating legislation.”