International Law: Subsidies and Cartels

Goliath, Inc., a United States producer of gem quality sapphires, set up a subsidiary holding company in the Cayman Islands (Junior, Ltd.) to control all of Goliath’s non-United States subsidiaries.

Junior then entered into a cartel agreement with producers of sapphires in those countries (other than the US) where sapphires are found. The cartel agreement allocated markets and set prices for all sapphires sold outside of the United States.

The United States government has now brought suit against both Goliath and Junior for violating the US Sherman Antitrust Act. Goliath answers that it was not a party to the cartel agreement and that the agreement does not affect the US market for sapphires. Junior answers that it is not subject to the jurisdiction of the US courts. Are Goliath and Junior correct? I tried to look at this from both perspectives, but I need some more thoughts on this case.

 

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