Horizons Intern., Inc. v. Baldridge

Citation624 F. Supp. 1560
Decision Date03 January 1986
Docket NumberNo. 85-0955.,85-0955.
PartiesHORIZONS INTERNATIONAL, INC. and Kenchem, Inc. v. Malcolm BALDRIDGE, Secretary, United States Department of Commerce; William French Smith, Attorney General of the United States; and United States Department of Justice.
CourtU.S. District Court — Eastern District of Pennsylvania

M. Norman Goldberger, Seymour Kurland, Wolf, Block, Schorr & Solis-Cohen, Philadelphia, Pa., Daniel R. Shulman, Minneapolis, Minn., Joseph M. Alioto, San Francisco, Cal., for plaintiffs.

Margaret L. Hutchinson, Asst. U.S. Atty., Philadelphia, Pa., Vincent Alventosa, Rosemary T. Rakas, J. Stephen Simms, Antitrust Div., U.S. Dept. of Justice, Washington, D.C., for defendants.

MEMORANDUM

KATZ, District Judge.

This is the first case to seek judicial review of a grant of immunity from antitrust law, by the Secretary of Commerce and the Attorney General, under The Export Trading Company Act of 1982, 15 U.S. C.A. §§ 4001-4021 (West Supp. 1985) ("The Act"). The Act is designed to increase United States exports through efficient export trade cooperation, without anticompetitive conduct in the domestic market. To accomplish these goals, Congress gave the Secretary of Commerce the difficult task of certifying, with the concurrence of the Attorney General, that proposed export activities will not have anticompetitive effects in the domestic market. The purpose of certification is to give export trade associations and companies the comfort of certainty by providing an advance ruling of their immunity under the antitrust laws for the certified conduct. Congress gave the Secretary and the Attorney General ninety days to grant or deny requests for such certificates of review.1

This case involves a challenge to the grant of a certificate of review to a joint venture called Chlor/Alkali Producers International ("Chlor/Alkali"). This joint venture is composed of four major producers of two industrial chemicals, chlorine and alkali. PlaintiffsHorizons International, Inc. and Kenchem, Inc. — have presented evidence relevant to their claim that Chlor/Alkali is not eligible for a certificate of review. They point to the rather checkered past of antitrust violations in the chlor-alkali industry. In fact, outstanding consent decrees generated by past antitrust litigations may bar the very conduct permitted by the certificate. Moreover, an extensive F.T.C. proceeding regarding possible anticompetitive practices in the market for products that may be related to chlorine and alkali is presently pending against a member of the certified joint venture. The fact that exports of chlorine are minimal arguably evidences its inclusion in the certificate as a cover for domestic anticompetitive collusion. Finally, plaintiffs have offered evidence that the historical anticompetitive conduct of the chlor-alkali industry is continuing to this day. The plaintiffs therefore urge that issuance of the certificate, and the consequent grant of antitrust immunity, was improper because Chlor/Alkali cannot meet the Act's certification standards. Plaintiffs contend that the certificate will facilitate domestic anticompetitive practices, and that these practices will harm plaintiffs.

The defendants — the Secretary of Commerce, the Attorney General, and the Department of Justice — have filed a Motion for Summary Judgment. They contend that there are no genuine issues of material fact and that they are entitled to summary judgment as a matter of law. Defendants have also filed a Motion to Dismiss. They contend that this Court lacks subject matter jurisdiction over the Department of Justice and the Attorney General and that those parties should be dismissed from this case.

I find that the grant of a certificate of antitrust immunity to the Chlor/Alkali joint venture without the agencies' reasoned analysis of the issues identified in my order is arbitrary, capricious, and an abuse of discretion. I also find that the present administrative record is inadequate because it fails sufficiently to address important aspects of the problem. Therefore, I vacate the agencies' grant of a certificate to the joint venture and remand these proceedings to the Secretary and the Attorney General to consider the issues I have identified.

The Export Trading Company Act of 1982 is designed to "increase United States exports of products and services by encouraging more efficient provision of export trade services to United States producers and suppliers...." See 15 U.S.C.A. § 4001(b) (statement of purpose). These purposes are furthered by several measures, including establishment of "an office within the Department of Commerce to promote the formation of export trade associations and export trading companies, ... and by modifying the application of antitrust laws to certain export trade."2 See id.

Sections 4012 and 4013 of the Act provide for application for, and issuance of, certificates of review. See id. at §§ 4012-13. These certificates confer significant benefits upon their holders, including immunization from antitrust liability for certified conduct. Specifically, no criminal or civil action may be brought

under the antitrust laws against a person to whom a certificate of review is issued which is based on conduct which is specified in, and complies with the terms of, a certificate issued under Section 4013 ... which certificate was in effect when the conduct occurred.

See id. at § 4016. Such benefits are meant to minimize uncertainty regarding antitrust liability for joint export activities, and thereby promote such activities. See H.R. Rep. No. 637(II), 97th Cong., 2d Sess. 7, reprinted in 1982 U.S.Code Cong. & Ad. News 2431, 2444, 2444.

Commerce Department Guidelines provide an extensive description of the benefits of a certificate of review. According to the guidelines,

the two most significant benefits of a certificate of review are virtual immunity from government antitrust suits and procedural advantages in private suits. The certificate holder and the members identified in the certificate, have virtual immunity from federal and state government civil and criminal antitrust or unfair competition suits.... This virtual immunity extends to the export conduct specified in the certificate and carried out during the effective period of the certificate in compliance with its terms and conditions. The procedural advantages that a certificate of review provides to the certificate holder and its members in private actions by persons who claim to have been injured by the certified conduct are: (1) a reduction in liability from treble to single damages, (2) a shorter statute of limitations for bringing an action, (3) a rebuttable presumption that the certified conduct is permissible, and (4) the recovery by a prevailing certificate holder of the costs of defending the suit, including a reasonable attorney's fee.
This virtual immunity and the procedural advantages ... can reduce antitrust risks and uncertainty by deterring lawsuits of dubious merit. Moreover, a certificate of review can remove the uncertainty and risks associated with "gray-area" conduct by giving an exporter an opportunity to confirm the often qualified conclusions of counsel that particular export conduct is not likely to violate the antitrust laws.... Protections can apply not only to the actual operation of an export entity but also to its planning activities.

See Revised Guidelines, 50 Fed.Reg. 1786, 1787 (1985).3

Certificates are obtained by written application to the Secretary of Commerce. Applications must specify the export trade conduct to be certified, and must also supply information about the applicant and its proposed conduct. See 15 U.S.C.A. § 4012; 15 C.F.R. § 325.3 (1985). Within ten days after an application is submitted, the Secretary must publish in the Federal Register an announcement of the application. See 15 U.S.C.A. § 4012(b). The announcement must identify the applicant and describe the conduct to be certified. Id. These publication procedures are intended to provide opportunities for notice and comment by parties interested in, or affected by, the proposed certification. See 15 C.F.R. § 325.6 (1985). Because issuance of a certificate requires the concurrence of the Attorney General, the Secretary must provide the Attorney General with a copy of the application, any information submitted to the Secretary in connection with the application, and any other information the Secretary deems relevant, including information regarding the applicant's market share in the line of commerce embraced by the proposed export conduct. See 15 U.S.C.A. § 4012(b)(2). This information must be provided to the Attorney General within seven days after the application is submitted. See id. The Secretary must also pass along any comments received through the notice and comment procedures. See 15 C.F.R. § 325.6 (1985).

No certificate may be issued less than thirty days after notice of the application is published in the Federal Register. See 15 C.F.R. § 325.5 (1985). A certificate normally is granted or denied within ninety days after the application is received. See 15 U.S.C.A. § 4013(b). This time period may be shortened if an applicant requests expedited review due to "a special need for prompt disposition." See id. at § 4013(c). Grants of expedited review are within the discretion of the Secretary and the Attorney General. See 15 C.F.R. at § 325.8 (1985). The determination period may also be extended beyond the normal ninety day period. Extensions may be deemed necessary by the Secretary and Attorney General; in such cases, "if the ... applicant agrees, the Secretary may take up to an additional thirty days to determine whether to issue a certificate." See id. at § 325.5. Extensions may also result if the Secretary requests supplemental information from the applicant. In such cases, the clock is stopped from the time the request is made until the supplemental information has...

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3 cases
  • Horizons Intern., Inc. v. Baldrige
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • January 28, 1987
    ...fact concerning whether the grant of a certificate of review to Chlor/Alkali was arbitrary, capricious, and an abuse of discretion. 624 F.Supp. at 1582-83. The order then listed 5 questions, all of which appear to be predicated upon materials obtained during Appellate Jurisdiction The plain......
  • In re Sharon Steel Corp.
    • United States
    • United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Western District of Pennsylvania
    • June 7, 1989
    ...Cir.1969) (absence of hearing provision in the Federal Trade Commission Act renders APA inapplicable); cf., Horizons Int'l., Inc. v. Baldridge, 624 F.Supp. 1560, 1574 (E.D.Pa.1986) (because statute was silent on its face, the court looked to legislative history to determine that Congress ex......
  • In re Zaidi
    • United States
    • United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania
    • September 28, 1987
    ...review under this standard is narrow. A court may not substitute its judgment for that of an agency." Horizons International, Inc. v. Baldridge, 624 F.Supp. 1560, 1573 (E.D.Pa.1986). Additionally, since courts generally may not conduct a de novo review of the agency's decision, the focal po......

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