Minn-Chem, Incorporated, et al v. Agrium Incorporated, et al

Filing

Filed opinion of the court by Judge Sykes. We VACATE the district court's order denying the defendants' motion to dismiss and REMAND with instructions to dismiss the plaintiffs' Sherman Act claim. Daniel A. Manion, Circuit Judge; Terence T. Evans*, Circuit Judge and Diane S. Sykes, Circuit Judge. (*Circuit Judge Terence T. Evans died on August 10, 2011, and did not participate in the decision of this case, which is being resolved by a quorum of the panel under 28 U.S.C. 46(d).) [6339918-3] [6339918] [10-1712]

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In the

United States Court of Appeals
For the Seventh Circuit
No. 10-1712
M INN-C HEM , INCORPORATED , et al.,
Plaintiffs-Appellees,
v.

A GRIUM INCORPORATED , et al.,
Defendants-Appellants.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 08 C 6910—Ruben Castillo, Judge.

A RGUED JUNE 3, 2010—D ECIDED S EPTEMBER 23, 2011

Before M ANION, E VANSΠ, and S YKES, Circuit Judges.
S YKES, Circuit Judge. This multi-district antitrust class
action alleges a global conspiracy to raise the price of
potash, a mineral used primarily in agricultural fertilizer.

Œ

Circuit Judge Terence T. Evans died on August 10, 2011, and
did not participate in the decision of this case, which is being
resolved by a quorum of the panel under 28 U.S.C. § 46(d).

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Most of the world’s potash reserves are concentrated
in three countries—Canada, Russia, and Belarus—and
the defendants are leading producers whose mining
operations are located in those countries. The plaintiffs
are direct and indirect potash purchasers in the United
States. They allege that the Canadian, Russian, and
Belarusian producers operated a cartel through which
they fixed potash prices in Brazil, China, and India, and
the inflated prices in these overseas markets in turn
influenced the price of potash sold in the United States.
The defendants moved to dismiss under Rules 12(b)(1)
and 12(b)(6) of the Federal Rules of Civil Procedure,
arguing first that the district court lacked subjectmatter jurisdiction under the Foreign Trade Antitrust
Improvements Act (“FTAIA”), 15 U.S.C. § 6a, and alternatively, that the complaint did not satisfy the pleading
requirements of Bell Atlantic Corp. v. Twombly, 550 U.S.
544 (2007), and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009).
The district court denied the motion but certified its
order for immediate review. See 28 U.S.C. § 1292(b).
We accepted review and now reverse.
As relevant here, the FTAIA limits the extraterritorial reach of the Sherman Antitrust Act to foreign
anticompetitive conduct that either involves U.S. import
commerce or has a “direct, substantial, and reasonably
foreseeable effect” on U.S. import or domestic commerce. 15 U.S.C. § 6a. In United Phosphorus, Ltd. v. Angus
Chemical Co., 322 F.3d 942 (7th Cir. 2003), we sat en banc
to address whether the FTAIA’s limitations are jurisdictional or instead are elements of a Sherman Act claim
that implicates offshore anticompetitive conduct. We

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held that the FTAIA’s requirements are jurisdictional.
Id. at 950-52. A substantial minority of the court
disagreed, see id. at 953-54 (Wood, J., dissenting), and
the dissent’s approach has since prevailed in the
Supreme Court, although in decisions involving other
statutes. See Morrison v. Nat’l Austl. Bank, 130 S. Ct. 2869,
2876-77 (2010); Arbaugh v. Y & H Corp., 546 U.S. 500, 51516 (2006). These intervening developments suggest
that United Phosphorus may be ripe for reconsideration,
but we need not undertake that task here. Whether it
blocks jurisdiction or establishes an element of a
Sherman Act claim, the FTAIA applies here to bar this
antitrust suit. The defendants are entitled to dismissal
under either Rule 12(b)(1) or 12(b)(6).

I. Background
Two separate groups of plaintiffs filed nearly identical
antitrust class actions against the world’s leading potash
producers. The first group—Minn-Chem, Inc.; Gage’s
Fertilizer and Grain, Inc.; Kraft Chemical Company;
Shannon D. Flinn; Westside Forestry Services; and
Thomasville Feed & Seed, Inc.—sued on behalf of themselves and all others who purchased potash products in
the United States directly from the defendants. The
second group—Kevin Gillespie, Gordon Tillman, Feyh
Farms Company, William H. Coaker, Jr., and David
Baier—sued on behalf of themselves and all others
who purchased potash products in the United States
indirectly from the defendants.

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The defendants are seven companies whose principal
mining operations are located in Canada, Russia, and
Belarus, where most of the world’s potash reserves are
found: Agrium Inc., Potash Corporation of Saskatchewan
Inc. (“PCS”), The Mosaic Company, JSC Uralkali, JSC
Silvinit, JSC Belarusian Potash Company (“BPC”), and
JSC International Potash Company (“IPC”). Agrium,
PCS, and Mosaic operate potash mines in the Canadian
province of Saskatchewan. These three companies own
Canpotex Ltd., a Canadian corporation that is named as
a coconspirator but not as a defendant. Canpotex is a
joint export marketing and distribution company
tasked with coordinating the offshore sales of the potash
supply of each of its three stakeholders. Canpotex is
specifically structured to exclude the U.S. and Canadian
markets. Export marketing through Canpotex is explicitly
authorized and encouraged by Canadian law. In other
words, Canpotex’s coordination of Canadian potash
exports is lawful under the domestic law of that country.
The remaining defendants conduct their mining operations in Russia and Belarus. Silvinit is a Russian
company, and IPC is the exclusive international distributor of Silvinit’s potash product. BPC is the exclusive
international distributor for Uralkali (a Russian
company headquartered in Moscow) and RUE PA
Belaruskali. Uralkali and Belaruskali jointly own BPC.
Belaruskali was initially named as a defendant, but
because it is owned by the Republic of Belarus, it was
dismissed from the suit under the Foreign Sovereign
Immunities Act. See 28 U.S.C. §§ 1604 et seq.

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We take the facts from the amended consolidated classaction complaint. The class period covered by the complaint is July 1, 2003, to the present. As of 2008 the
named defendants accounted for roughly 71% of the
world’s potash supply. The complaint generally alleges
a conspiracy to restrict output and fix prices of potash at
artificially high levels in violation of Section 1 of the
Sherman Act, 15 U.S.C. § 1.1 From 2003 to 2008, potash
prices in the United States increased by a staggering
amount—roughly 600%. This dramatic increase came
after years of relatively stable pricing. The plaintiffs
contend that the spike in prices cannot be explained by
rising production costs or increased demand; indeed,
they claim that demand was falling for much of this
period. They also contend that the sharp increase in
prices cannot be attributed to production shortages;
the defendants are alleged to have plenty of excess capacity. The plaintiffs allege that the surge in prices was
instead the result of an agreement by the defendants
to jointly restrict output and increase prices as exemplified by parallel business conduct in three foreign
markets—Brazil, China, and India.
The factual section of the complaint begins with a
general description of the characteristics of the potash
market, which the plaintiffs allege are conducive to

1

As we have noted, the direct and indirect purchasers asserted
substantially identical claims under the Sherman Antitrust
Act, 15 U.S.C. § 1. The indirect purchasers also asserted a host
of state-law claims against the defendants; these claims are
not before us on this interlocutory appeal.

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forming a stable cartel. Potash is an element mined from
naturally occurring ore deposits and used primarily as
an ingredient in agricultural fertilizer. It is (for the most
part) a homogeneous product, but only a handful of
countries possess significant quantities of this valuable
resource. Accordingly, the potash industry is an
oligopoly characterized by high market concentration.
The Canadian province of Saskatchewan is the leading
producer, accounting for roughly one-third of global
production. Russia and Belarus are the next biggest
exporters. Since potash accounts for a relatively small
percentage of total crop-production costs and has no
obvious substitutes, demand for the product is relatively
inelastic, although not entirely so because farmers can
opt to reduce the amount of fertilizer they use in a
given season. Also, the majority of production costs
for potash are variable rather than fixed; therefore, producers face less pressure in a given year to hit
any particular output target in order to recoup their
expenses. Finally, there are high barriers to entry into
the potash business. In addition to first finding a
promising source of potash deposits, any potential
entrant would incur approximately $2.5 billion in start-up
costs over a five-to-seven-year development period
before production could commence.
With these background allegations in place, the complaint proceeds to explain that “the potash industry is
marked by a high degree of cooperation” providing
“opportunities to conspire and share information.” In
this regard, the complaint notes that PCS, Agrium, and
Mosaic have access to one another’s sensitive informa-

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tion about production capacity through their joint ownership of Canpotex. Canpotex also offers these three defendants a convenient forum to discuss matters of
pricing and output. Moreover, Canpotex previously had
a joint marketing agreement with Uralkali. The
complaint also alleges that the interests of Uralkali and
Silvinit are aligned because they share a common, influential shareholder, Dmitry Rybolovlev, who is alleged
to own 66% of Uralkali and 20% of Silvinit’s voting
stock. The plaintiffs also allege that the defendants participate in an “exchange program of mutual visits”
and “these visits have provided opportunities to
conspire and exchange highly sensitive competitive
information.” Finally, the defendants meet together at
the annual conference of the International Fertilizer
Industry Association. The complaint alleges that the
“major potash manufacturers” announced price
increases during the Association’s 2007 conference.
Also, a PCS executive is alleged to have publicly complimented BPC (the Belarusian exporter) for showing “tremendous discipline . . . in terms of managing supply in
the marketplace.”
From these allegations about general “opportunities
to conspire” the complaint moves on to allege specific
parallel business conduct consisting of reductions in
output designed to keep prices artificially high and
parallel increases in prices. Some of these allegations
are general and others specific to certain foreign markets. For example, the complaint alleges that as
global demand for potash declined in the second half of
2005, the defendants “jointly restricted” the output of

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potash for the purpose of maintaining an artificially
high price. In the last two months of 2005, PCS, the
world’s leading potash producer, announced the shutdown of three of its mines. These shutdowns resulted
in the removal of 1.34 million tons of potash from the
market. At the same time, Mosaic also announced a
temporary, 200,000-ton reduction in potash production.
Uralkali, Belaruskali, and Silvinit followed suit with
reductions of their own in the first half of 2006. These
production cuts continued through 2008 despite
the fact that the defendants maintained sizeable excess
capacity.
The complaint also points to an event in October of
2007, when Silvinit announced that a sinkhole at one of
its mines might cause a long-term disruption in
production at that location. Within a day of the announcement, PCS, Uralkali, Agrium, and BPC (but apparently
not Mosaic) announced that they would suspend new
sales in the wake of Silvinit’s disclosure. Roughly two
weeks later, Silvinit announced that the sinkhole was
not as severe as initially feared and that the mine in
question would return to business as usual. At this
point the other companies ended their self-imposed
moratorium on new sales. The complaint alleges that
[t]he joint suspension of sales by PCS, Uralkali,
Agrium and BPC during the shutdown by Silvinit, a
supposed competitor, makes no economic sense
absent a cartel. Had the market truly been competitive, defendants would have the incentive to increase,
not suspend, production to take advantage of their

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competitor’s reduced output and thus gain market
share.
The complaint’s other factual allegations of parallel
conduct focus exclusively on three foreign markets—Brazil,
China, and India—giving examples of supply and
pricing activity by the defendants beginning in 2003.
For example, the complaint alleges that in “early 2003,
IPC announced that it would increase its potash prices
by eight dollars per ton. Within a month Canpotex announced that it would seek a nearly identical price
increase for its sales in Brazil.” Then, “[b]y mid-2003 all
suppliers to Brazil were announcing that they had
achieved an increase of eight dollars per ton.” Later, in
2004, “IPC announced a price increase to buyers in India,” and “[s]hortly after these announcements, PCS
announced two five dollar per ton increases within a
five week period.” Other allegations focus on claimed
coordination of supply restrictions in these countries. For
example, the complaint alleges that potash demand
dropped by 20.9% in Brazil during 2005 and the
Russian and Belarusian defendants reduced their combined exports to that country by the same percentage;
Canpotex followed suit and cut its Brazilian exports
“by almost exactly the same percentage.” Plaintiffs also
allege that Canpotex and BPC jointly restricted exports
to China in an effort to boost the price of potash in
that country.
Notably, all of the anticompetitive conduct identified
in the complaint is alleged to have occurred outside
the United States. The only link between the activities

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of this wholly foreign conspiracy and the U.S. potash
market are general allegations that potash prices in
the United States were adversely affected by the coordinated price hikes in Brazil, China, and India. That is, the
complaint alleges that the cartelized prices in these foreign
markets served as a “benchmark” for potash sales in this
country.
The defendants moved to dismiss the Sherman Act
claim pursuant to Rule 12(b)(1) and Rule 12(b)(6) of the
Federal Rules of Civil Procedure for lack of subjectmatter jurisdiction under the FTAIA and alternatively
for failure to state a claim upon which relief can be
granted. In a thorough opinion, the district court denied
the motion but certified its order for immediate
appeal under 28 U.S.C. § 1292(b).

II. Discussion
As they did in the district court, the defendants make
two arguments on appeal, one narrower and the other
more broadly based. First, because the plaintiffs have
alleged an offshore price-fixing conspiracy, the defendants
argue that the FTAIA, 15 U.S.C. § 6a, deprives the court
of subject-matter jurisdiction over this suit, requiring
dismissal under Rule 12(b)(1). Alternatively, they
argue that the complaint does not plausibly state an
antitrust claim under the pleading standards announced
in Twombly and Iqbal and must be dismissed under
Rule 12(b)(6). The plaintiffs’ complaint, they maintain,
alleges at most only innocent parallel business conduct:
“Even ‘conscious parallelism,’ a common reaction of

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‘firms in a concentrated market [that] recogniz[e] their
shared economic interests and their interdependence
with respect to price and output decisions,’ is ‘not in
itself unlawful.’ ” Twombly, 550 U.S. at 553-54 (quoting
Brooke Group Ltd. v. Brown & Williamson Tobacco Corp.,
509 U.S. 209, 227 (1993) (alterations in Twombly)).
There may well be reason to doubt the complaint’s
sufficiency under Twombly.2 The “crucial question” in a
Sherman Act § 1 claim “is whether the challenged
anticompetitive conduct stem[s] from independent decision or from an agreement, tacit or expresss.” Id. at 553
(quotation marks omitted). “Without more, parallel
conduct does not suggest conspiracy, and a conclusory
allegation of agreement at some unidentified point does
not supply facts adequate to show illegality.” Id. at 556-57.
The plaintiffs’ complaint focuses mostly on allegations
of parallel output and pricing conduct in the Brazilian,
Chinese, and Indian potash markets; “when allegations
of parallel conduct are set out in order to make a § 1

2

Indeed, the Eighth Circuit, sitting en banc, rejected a very
similar Sherman Act claim brought against the members of
Canpotex, then comprised of a slightly different mix of principals, alleging a conspiracy to fix potash prices between 1987
and 1994. See Blomkest Fertilizer, Inc. v. Potash Corp., 203 F.3d
1028, 1033-38 (8th Cir. 2000). Although Blomkest was before the
Eighth Circuit in a different procedural posture (the district
court had entered summary judgment in favor of the defendants), the court’s analysis of the adequacy of the plaintiffs’
evidence of parallel conduct and interfirm communications in
the potash industry supports the defendants’ arguments here.

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claim, they must be placed in a context that raises a
suggestion of a preceding agreement, not merely
parallel conduct that could just as well be independent
action.” Id. at 557; see also In re Text Messaging Antitrust
Litig., 630 F.3d 622, 628-29 (7th Cir. 2010) (describing the
“kind of ‘parallel plus’ behavior” an antitrust plaintiff
must allege to survive dismissal post-Twombly).
But the threshold issue in this case concerns application of the FTAIA’s limits on the Sherman Act’s reach.
On this point we agree with the defendants that the
FTAIA requires dismissal; therefore, we need not decide
the question of the broader sufficiency of the complaint
under Twombly and Iqbal.

A. The FTAIA and the Effect of Arbaugh and Morrison
on United Phosphorus
It is well-understood that “American antitrust laws do
not regulate the competitive conditions of other nations’
economies.” Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 582 (1986). “The Sherman Act does
reach conduct outside our borders, but only when the
conduct has an effect on American commerce.” Id. at 583
n.6. Before the FTAIA was enacted, this domesticeffects limiting principle existed as a matter of caselaw.
See United Phosphorus, 322 F.3d at 946-47. The FTAIA,
adopted in 1982, incorporates the principle. More specifically, the FTAIA provides that the Sherman Act:
shall not apply to conduct involving trade or commerce (other than import trade or import commerce)
with foreign nations unless—

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(1) such conduct has a direct, substantial, and reasonably foreseeable effect—
(A) on trade or commerce which is not trade or
commerce with foreign nations, or on import trade
or import commerce with foreign nations; or
(B) on export trade or export commerce with
foreign nations, of a person engaged in such trade or
commerce in the United States; and
(2) such effect gives rise to a claim under [the
Sherman Act].
15 U.S.C. § 6a.
Though awkwardly phrased, “[t]he FTAIA seeks to
make clear to American exporters (and to firms doing
business abroad) that the Sherman Act does not
prevent them from entering into business arrangements
(say, joint-selling arrangements), however anticompetitive,
as long as those arrangements adversely affect only
foreign markets.” F. Hoffmann-La Roche Ltd. v. Empagran
S.A., 542 U.S. 155, 161 (2004). The Act first states a broad
general rule that the Sherman Act “shall not apply” to
conduct involving foreign trade or commerce. It then
carves out several exceptions. As relevant here, the
FTAIA restores the Sherman Act’s applicability to two
categories of foreign anticompetitive conduct: (1) foreign
anticompetitive conduct “involving . . . [U.S.] import
trade or import commerce”; and (2) foreign anticompetitive conduct that “has a direct, substantial, and
reasonably foreseeable effect” on U.S. domestic or import
trade or commerce. 15 U.S.C. §§ 6a & 6a(1)(A).

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In United Phosphorus, this court sat en banc to consider
whether the FTAIA is properly understood to create
a jurisdictional requirement or, rather, an extra element
of a Sherman Act claim when the plaintiff alleges a
foreign antitrust conspiracy. 322 F.3d at 944. The court
was closely divided on the question. Relying primarily
on earlier opinions treating the statute’s requirements
as jurisdictional, the en banc majority held that the
FTAIA has the status of a jurisdictional provision. Id. at
946-48. Judge Wood dissented, joined by three colleagues; her dissent focused on the text of the statute,
which contained no “hint that the Congress was attempting to strip federal courts of their competence to hear
and decide antitrust cases with a foreign element.” Id.
at 954 (Wood, J., dissenting). The dissent argued that
the plain statutory language, which does not speak in
jurisdictional terms, “supports the position that this is
an element of the [Sherman Act] claim, especially when
it is contrasted to true jurisdiction-stripping statutes.” Id.
Subsequent Supreme Court decisions—notably Arbaugh
and Morrison—have taken the dissent’s approach to the
question, although in different statutory contexts.
Arbaugh addressed whether the “numerical qualification
contained in Title VII’s definition of ‘employer’ affects
federal-court subject-matter jurisdiction or, instead,
delineates a substantive ingredient of a Title VII claim
for relief.” 546 U.S. at 503. The Supreme Court concluded that this numerical threshold was not a requirement for subject-matter jurisdiction but, rather, was an
element of a Title VII claim. Id. at 516. The Court explained that a statutory provision prescribing a

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“threshold limitation on a statute’s scope” establishes a
jurisdictional limitation only if the statutory text clearly
says so:
If the Legislature clearly states that a threshold limitation on a statute’s scope shall count as jurisdictional,
then courts and litigants will be duly instructed and
will not be left to wrestle with the issue. But when
Congress does not rank a statutory limitation on
coverage as jurisdictional, courts should treat the
restriction as nonjurisdictional in character.
Applying that readily administrable bright line to
this case, we hold that the threshold number of employees for application of Title VII is an element of a
plaintiff’s claim for relief, not a jurisdictional issue.
Id. at 515-16 (citation omitted).
In Morrison the Court considered the question of the
extraterritorial reach of § 10(b) of the Securities and
Exchange Act of 1934. 130 S. Ct. at 2875. The Second
Circuit had treated this as a dispute over subject-matter
jurisdiction to be decided under Rule 12(b)(1), but the
Court made it clear it was a merits question. Id. at 2877.
Noting that the Second Circuit was “hardly alone” in
mischaracterizing the issue, the Court restated the question: “[T]o ask what conduct § 10(b) reaches is to ask what
conduct § 10(b) prohibits, which is a merits question.
Subject-matter jurisdiction, by contrast, refers to a tribunal’s power to hear a case.” Id. (quotation marks omitted). Even so, because “nothing in the analysis of the
courts below turned on the mistake,” the Court said that
remand was unnecessary; “a remand would only re-

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quire a new Rule 12(b)(6) label for the same Rule 12(b)(1)
conclusion,” so the Court proceeded to the merits
question of whether the plaintiffs’ allegations stated
a claim. Id.
We have recently applied Arbaugh’s “clear statement”
rule outside the Title VII context, see Miller v. Herman,
600 F.3d 726, 732 (7th Cir. 2010), and the plaintiffs
contend that the FTAIA should be subject to the same
analysis. This calls United Phosphorus into question. The
defendants’ response is twofold. They first argue that
United Phosphorus can be distinguished from Arbaugh
based on the FTAIA’s concern for international comity;
this argument is in tension with the Court’s approach
in Morrison, which also concerned a question of the extraterritorial reach of a federal statute. In the alternative,
they argue that because the result is the same either
way, we need not attempt to reconcile United Phosphorus
with Arbaugh and Morrison; dismissal is required whether
the FTAIA states a jurisdictional requirement, as United
Phosphorus held, or an element of the Sherman Act claim.
We agree with the second of these arguments. As we
have noted, in Morrison the Court found it unnecessary
to order a remand to apply “a new Rule 12(b)(6) label [to]
the same Rule 12(b)(1) conclusion.” 130 S. Ct. at 2877.
Here, the defendants moved to dismiss for lack of jurisdiction and failure to state a claim; our substantive
review of the FTAIA is no different whether viewed
through the lens of Rule 12(b)(1) or Rule 12(b)(6). For
reasons we will explain, we conclude that the FTAIA
bars this suit and therefore dismissal is required

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whether the statute is properly construed to state a jurisdictional requirement or an element of the plaintiffs’
Sherman Act claim. Accordingly, we need not decide
whether United Phosphorus survives Arbaugh and Morrison.3
We note the issue and reserve it for another day.

B. Applying the FTAIA’s Requirements to the Plaintiffs’
Complaint
As we have explained, the FTAIA limits the Sherman
Act’s extraterritorial reach by making it generally inapplicable to foreign anticompetitive conduct, subject to
certain enumerated exceptions. 15 U.S.C. § 6a. That is,
the FTAIA “initially lays down a general rule placing
all (nonimport) activity involving foreign commerce
outside the Sherman Act’s reach.” Empagran, 542 U.S.
at 162. “It then brings such conduct back within the
Sherman Act’s reach,” id., if the foreign anticompetitive
conduct is “conduct involving . . . import commerce” or
has “a direct, substantial, and reasonably foreseeable
effect” on domestic or import commerce, 15 U.S.C. § 6a.
To determine whether the plaintiffs have done enough at
the pleadings stage to bring their claim within either of

3

We noted that the Third Circuit has recently applied the
Arbaugh clear-statement rule, overruled circuit precedent, and
held that the FTAIA does not impose a jurisdictional limit but
instead establishes an element of a Sherman Act claim, citing
with approval the United Phosphorus dissent. Animal Sci.
Prods., Inc. v. China Minmetals Corp., No. 10-2288, 2011 WL
3606995 (3d Cir. Aug. 17, 2011).

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these exceptions, we are required to evaluate their complaint in light of the “plausibility” pleading standard
announced in Twombly and further explained in Iqbal:
To survive a motion to dismiss, a complaint must
contain sufficient factual matter, accepted as true, to
state a claim to relief that is plausible on its face. A
claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the
reasonable inference that the defendant is liable for
the misconduct alleged. The plausibility standard is
not akin to a probability requirement, but it asks for
more than a sheer possibility that a defendant has
acted unlawfully. Where a complaint pleads facts
that are merely consistent with a defendant’s
liability, it stops short of the line between possibility
and plausibility of entitlement to relief.
Iqbal, 129 S. Ct. at 1949 (quotation marks and citations
omitted).
Twombly explained that “a plaintiff’s obligation to
provide the ‘grounds’ of his ‘entitlement to relief’ requires
more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” 550
U.S. at 555. Iqbal reiterated this point: “Threadbare
recitals of the elements of a cause of action, supported
by mere conclusory statements, do not suffice.” 129 S. Ct.
at 1949. Rather, “[w]hile legal conclusions can provide
the framework of a complaint, they must be supported
by factual allegations.” Id. at 1950. Accordingly, to
avoid dismissal, the complaint must include sufficient
factual content to support a plausible inference that the

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defendants’ alleged anticompetitive activity—all of
which occurred overseas—either “involv[ed] . . . [U.S.]
import trade or import commerce” or had a “direct,
substantial, and reasonably foreseeable effect” on U.S.
domestic or import commerce.
The district court held that the plaintiffs had alleged
enough to proceed on the basis of the “import commerce” exception and therefore did not address the “direct
effects” exception. The court reasoned that because the
defendants import potash into the United States and
were generally accused of conspiring to fix the price of
potash globally, there was a sufficiently “tight nexus
between the alleged illegal conduct and [d]efendants’
import activities . . . to conclude that the former ‘involved’ the latter.” This was error. “The FTAIA differentiates between conduct that ‘involves’ . . . [import] commerce, and conduct that ‘directly, substantially,
and foreseeably’ affects such commerce. To give the
latter provision meaning, the former must be given a
relatively strict construction.” Carpet Group Int’l v. Oriental
Rug Imps. Ass’n, 227 F.3d 62, 72 (3d Cir. 2000) overruled on
other grounds in Animal Sci. Prods., Inc. v. China Minmetals
Corp., No. 10-2288, 2011 WL 3606995 (3d Cir. Aug. 17,
2011).
The flaw in the district court’s reasoning is that it essentially conflates the “import commerce” exception and the
“direct effects” exception. If foreign anticompetitive
conduct can “involve” U.S. import commerce even if it is
directed entirely at markets overseas, then the “direct
effects” exception is effectively rendered meaningless.
Under the district court’s reading of the statute, a foreign

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company that does any import business in the United
States would violate the Sherman Act whenever it
entered into a joint-selling arrangement overseas
regardless of its impact on the American market. This
would produce the very interference with foreign economic activity that the FTAIA seeks to prevent. See
Empagran, 542 U.S. at 161.
As the Third Circuit has noted, the FTAIA’s “import
commerce” and “direct effects” exceptions are distinct
and capture different kinds of foreign anticompetitive
conduct. See Turicentro, S.A. v. Am. Airlines Inc., 303 F.3d
293, 301-02 (3d Cir. 2002) overruled on other grounds in
Animal Science, 2011 WL 3606995. The import-commerce
exception captures foreign anticompetitive conduct
(thus bringing it back within the Sherman Act’s reach)
if the overseas anticompetitive conduct actually “involves” the U.S. import market. The direct-effects exception captures foreign anticompetitive conduct that has a
“direct, substantial, and reasonably foreseeable effect” on
U.S. domestic or import commerce regardless of whether
the overseas anticompetitive conduct actually “involves” the U.S. import market. Id.
Thus, the relevant inquiry under the import-commerce
exception is “whether the defendants’ alleged anticompetitive behavior ‘was directed at an import market.’ ”
Animal Science, 2011 WL 3606995, at *5 (quoting Turicentro,
303 F.3d at 303). Contrary to what the district court
seemed to think, it is not enough that the defendants are
engaged in the U.S. import market, though that may be
relevant to the analysis. Id. Rather, “the import trade or
commerce exception requires that the defendants’ [foreign

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anticompetitive] conduct target [U.S.] import goods
or services.” Id.
Here, the complaint contains no factual allegations to
support application of the import-commerce exception,
properly understood. It does not, for example, allege
any specific facts to support a plausible inference that the
offshore defendants agreed to an American price or
production quota for potash. Nor does it allege, for
that matter, that the defendants agreed to worldwide
production quotas for all members of the conspiracy or
that a global cartel price was ever set. The complaint’s
specific factual allegations describe anticompetitive
conduct aimed at the potash markets in Brazil, China,
and India—not the U.S. import market. True, the complaint generally alleges that the “defendants conspired
to coordinate potash prices and price increases so as to
fix, raise, maintain, and stabilize the price at which
potash was sold in the United States at artificially
inflated and anticompetitive levels.” But this wholly
conclusory statement is akin to a recitation of the elements of the Sherman Act claim, which is insufficient
under Twombly and Iqbal. We conclude that the complaint cannot survive dismissal based on the
FTAIA’s import-commerce exception and must stand or
fall based on the direct-effects exception alone.
We have not yet had occasion to consider the meaning
of the term “direct” in the FTAIA, 4 but the Ninth Circuit,

4

In Metallgesellschaft AG v. Sumitomo Corp. of America, 325 F.3d
836, 842 (7th Cir. 2003), we concluded that the plaintiffs had
(continued...)

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relying on the Supreme Court’s interpretation of a
nearly identical term in the Foreign Sovereign Immunities Act, 28 U.S.C. § 1605(a)(2), has held that an
effect is “direct” if “it follows as an immediate consequence of the defendant’s activity.” United States v. LSL
Biotechs., 379 F.3d 672, 680 (9th Cir. 2004) (citing Republic of
Argentina v. Weltover, Inc., 504 U.S. 607, 618 (1992)).
“An effect cannot be ‘direct’ where it depends on . . .
uncertain intervening developments.” Id. at 681. We find
this definition compelling.
Despite its length and many specific factual allegations, the complaint offers very little of substance concerning the relationship between the defendants’ alleged
overseas anticompetitive conduct and the American
domestic market for potash. Recall that the complaint
builds its case for conspiracy around the characteristics
of the potash industry that make it particularly
susceptible to collusion. The complaint alleges, moreover,

4

(...continued)
sufficiently alleged that the defendants’ anticompetitive
conduct had a “direct, substantial, and reasonably foreseeable
effect” on domestic commerce, but did not elaborate on the
meaning of the word “direct.” Metallgesellschaft involved
allegations that the defendants had illegally manipulated the
price of copper contracts traded on the London Metals Exchange. This conduct imm ediately and unavoidably
increased the price at which copper was exchanged in the
United States. Indeed, we pointedly observed that “[t]he
plaintiffs before us have alleged more than a global conspiracy
that has significant effects in the United States.” Id.

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that the conspiracy was facilitated by the close working
relationship among the Canadian defendants (via
Canpotex) and among all the defendants through the
International Fertilizer Industry Association and an
“exchange program of mutual visits.” Although the
complaint describes in some detail certain parallel
output and pricing conduct in the Brazilian, Chinese, and
Indian markets, it does little to elaborate on how this
conduct actually impacts the American potash market.
As we have noted, the complaint does not allege that
the defendants agreed to worldwide production quotas
or a global cartel price, nor are there allegations that
the defendants ever imposed a price or supply quota on
the American potash market specifically. In the section
of the complaint entitled “Impact of Defendants’ Conduct on United States Prices,” the plaintiffs allege that
“[t]he vast majority of potash sales in the United States
are made by PCS, Mosaic, Agrium and BPC at prices
that are set according to benchmarks established by
defendants based on sales in India, China and elsewhere.”
This is explained in slightly more detail elsewhere in
this section of the complaint:
Defendants negotiate term contracts for purchases
of potash throughout the world. Agreements with
buyers in Brazil, India and China typically are made
first, and the prices established in those markets
directly influence prices in other major markets. Once
defendants establish these prices, they use them to
determine potash prices in other major markets,
including the United States. The prices for cartelized

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term contracts become benchmarks for spot market
sales [including those in the United States], which
typically are higher than those of term contracts.

The problem with these generalized allegations is the
absence of specific factual content to support the
asserted proposition that prices in China, India, and
Brazil serve as a “benchmark” for prices in the United
States and that this benchmark, if it exists, has a strong
enough relationship with the domestic potash market to
raise a plausible inference that the defendants’ foreign
anticompetitive conduct has a “direct, substantial, and
reasonably foreseeable effect” on domestic or import
commerce. That is, the complaint only generally alludes
to a link between the cartelized prices in these three
foreign markets and American potash prices. Elsewhere
in the complaint the plaintiffs do claim that:
Through much of 2006, price increases were muted
as purchasers awaited the outcome of negotiations
over a proposed increase to customers in China.
After potash producers reached an agreement on
a price increase to customers in China in late
July 2006, and Brazil later in 2006, potash prices in
the United States increased as well, as defendants
knew and intended.
But this general allegation does not add much. Prices of
potash were increasing around the world throughout
most of the class period. This allegation only hints at a
relationship between Chinese and American prices; it
does not suffice to raise a plausible inference that price
increases in China or Brazil “directly” and “substantially”

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affected prices in the United States. Something more
specific is required in order to successfully plead a
“direct effects” case. To satisfy the requirements of
Twombly and the FTAIA, the plaintiffs needed to
provide enough factual content—that is, they needed
to provide some factual description of the way in which
prices in China, Brazil, and India serve as a “benchmark”
for American prices—to permit a plausible inference
that the defendants’ anticompetitive conduct in these
foreign markets has a direct, substantial, and reasonably
foreseeable effect on potash prices in the United States.
The “something more” is not supplied by the complaint’s citation to a remark by one unnamed “analyst”
who is alleged to have stated that “the barriers that we
have seen in the past between domestic and international prices have just fallen down. We’re now participating in a global fertilizer market.” The allegation of a
“global fertilizer market” is of course conclusory
and unhelpful, and the complaint provides no context
whatsoever for this statement that might make it
more meaningful. In the end, the most specific allegation in the section of the complaint describing the impact
of the defendants’ overseas conduct on the American
potash market is this one:
Defendants knew and intended that their global
conspiracy would directly impact prices of potash
on world markets and within the United States. Representatives of Uralkali, in a presentation to analysts
in December 2007, set forth each step in the chain
of events resulting in increased prices throughout

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the world and in the United States: “[1] contract
settlement in the key markets immediately tied up
volumes of potash producers . . . [2] causing demand
competition on SPOT markets followed by increase
in prices . . . [3] conclusion of Indian contract on the
back of the SPOT markets’ growth—even less
volume is available . . . [4] boom on SPOT market
continues stimulating increased Chinese discount
and a stronger reason to bring it down in 2008.”

This chain-of-events allegation is cryptic and relies on too
many intervening variables to suffice as support for
application of the FTAIA’s direct-effects exception. Even
taking into account “the nature of a global market,” the
allegations here amount to “nothing more than what
courts have termed a ‘ripple effect’ on the United States
domestic market, and the FTAIA prevents the Sherman
Act from reaching such ‘ripple effects.’ ” In re Intel Corp.
Microprocessor Antitrust Litig., 452 F. Supp. 2d 555, 561
(D. Del. 2006). Ultimately, the connection asserted in
the complaint between the alleged cartelized prices of
potash overseas and the domestic price of potash is too
speculative and indirect to state an actionable claim
under the FTAIA’s direct-effects exception.
For all the foregoing reasons, we conclude that the
complaint does not contain sufficient factual content to
plead a plausible “direct, substantial, and reasonably
foreseeable” connection between the alleged foreign
anticompetitive activity and the domestic potash market. Because the complaint fails to allege facts
sufficient to satisfy the direct-effects exception of the

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FTAIA, dismissal is required. Accordingly, we vacate
the district court’s order denying the defendants’ motion
to dismiss and remand with instructions to dismiss
the plaintiffs’ Sherman Act claim.
V ACATED AND R EMANDED
WITH INSTRUCTIONS.

9-23-11