## Facts

- A federal grand jury in Massachusetts indicted Nippon Paper Industries Co., Ltd. (a Japanese manufacturer of thermal facsimile paper) for conspiring to fix prices of thermal fax paper sold into the United States, in violation of Sherman Act § 1.
- The indictment alleged that in 1990 NPI and other Japanese manufacturers met in Japan and agreed to fix thermal fax paper prices across North America.
- The alleged scheme used unaffiliated Japanese trading houses as intermediaries: NPI sold paper in Japan on the condition that the trading houses resell into North America at specified inflated prices.
- Trading houses allegedly sold to U.S. subsidiaries, which sold to U.S. customers at higher prices.
- The indictment alleged NPI sold approximately $6.1 million in thermal fax paper for eventual U.S. import in 1990 and monitored distribution to ensure the arranged end-user prices were charged.
- The district court dismissed the indictment on the ground that Sherman Act criminal provisions do not apply where no overt acts occurred in the United States, treating the matter as subject-matter jurisdiction.
- The United States appealed.

## Issues

1. Whether Sherman Act § 1 supports a criminal prosecution for a price-fixing conspiracy formed and implemented entirely abroad when the conduct was intended to, and did, substantially affect U.S. commerce.
2. Whether the limitation on applying the Sherman Act to foreign conduct is a subject-matter jurisdiction defect or a merits question about the statute’s substantive reach and the indictment’s sufficiency.
3. Whether statutory interpretation and recognized principles of international law permit applying the Sherman Act’s criminal provisions to the alleged foreign conduct.

## Decision

- The First Circuit reversed the dismissal and remanded.
- The court held that Sherman Act criminal enforcement may reach wholly foreign conduct meant to produce, and that in fact produced, a substantial effect in the United States.
- The court rejected a categorical civil–criminal divide for extraterritorial application, finding no textual, structural, or historical basis to limit the criminal provisions to domestic conduct.
- The court ruled that extraterritorial coverage concerns the statute’s substantive scope and the indictment’s ability to state an offense, not the federal courts’ subject-matter jurisdiction.
- Accepting the indictment’s allegations as true at the pleading stage, the court concluded the alleged substantial U.S. effects sufficed to state a prosecutable Sherman Act offense.

## Legal Principles

- Sherman Act § 1 can apply in criminal cases to foreign conspiracies formed and carried out abroad when the conduct is directed at U.S. commerce and is intended to, and does, cause substantial domestic effects.
- The Sherman Act’s extraterritorial scope does not turn on whether the government seeks civil or criminal remedies; the same effects-based standard governs.
- Whether a federal statute reaches particular foreign conduct is ordinarily a merits question (statutory coverage), not a subject-matter jurisdiction question, where federal question jurisdiction is otherwise present.
- International law principles recognizing regulation of foreign conduct producing substantial domestic effects support applying U.S. antitrust law to such conduct.

## Conclusion

The First Circuit held that a foreign corporation may be criminally prosecuted under the Sherman Act for a price-fixing conspiracy executed entirely abroad when the conspiracy was aimed at, and actually had, substantial effects on U.S. commerce, and it treated the extraterritoriality question as one of statutory reach rather than subject-matter jurisdiction.


United States v. Nippon Paper Indus. Co., 109 F.3d 1 (1st Cir. 1997)