The United States Court of Appeals for the Seventh Circuit recently issued a decision that limits the damages available to plaintiffs in antitrust cases based upon foreign commerce. In Motorola Mobility LLC v. AU Optronics Corp., et al., No. 14-8003, 2015 WL 137907, at *5, (7th Cir. Jan. 12, 2015) (Op.), the court affirmed the district court’s grant of partial summary judgment in favor of foreign defendants, and held that purchases of an allegedly price-fixed good by the U.S. plaintiff’s foreign subsidiaries abroad do not qualify as cognizable under the Foreign Trade Antitrust Improvements Act (FTAIA), 15 U.S.C. § 6a.
The Court relied, in part, on arguments made by the Ministry of Economy, Trade and Industry of Japan. The Ministry argued, “[t]he Government of Japan has strongly opposed the argument regarding extraterritorial jurisdiction, which undermines the underlying principles of international law by unreasonably interfering with the sovereignty of each country.” Brief of the Ministry of Economy, Trade and Industry of Japan, 2014 WL 5422011 (Oct. 10, 2014.) The Court agreed, stating, “[w]hy should American law supplant, for example, . . . Japan’s own determination about how to protect . . . Japanese customers.” Op. at *9.
- Factual Background of the LCD Antitrust Litigation
In the In re: TFT-LCD (Flat Panel) Antitrust Litigation, MDL No. 1827,1 the plaintiffs contend that a group of foreign manufacturers conspired to fix the price of liquid-crystal display (LCD) panels, which the plaintiffs purchased, in violation of section 1 of the Sherman Act, 15 U.S.C. § 1. Motorola, the plaintiff- appellant in this case, and its 10 foreign subsidiaries, purchased the LCD panels to incorporate into cell phones they manufactured. The LCD panel manufacturers, which include AU Optronics, Samsung, and Sanyo, are the defendants in the case.
The appeal concerns only some of the allegedly price-fixed LCD panels. “About 1 percent of the panels sold by the defendants to Motorola and its subsidiaries were bought by, and delivered to, Motorola in the United States for assembly” in the United States. Op. at *1. “The other 99 percent of the cartelized components, however, were bought and paid for by, and delivered to, foreign subsidiaries (mainly Chinese and Singaporean) of Motorola.” Id. Fifty-seven percent of the panels were bought by Motorola’s subsidiaries and incorporated into cell phones abroad and sold abroad. These sales never became part of U.S. domestic commerce because neither the components nor the cell phones entered the United States. Id. The final 42 percent of the panels were bought by Motorola’s subsidiaries and incorporated by them into cell phones abroad, and then sold to and shipped to Motorola for resale in the United States. Id. The appeal focuses on this final category.
- The Seventh Circuit’s Motorola Mobility Holding
The Seventh Circuit’s holding analyzes whether the foreign purchases at issue meet the “domestic effect” exception to the FTAIA. The FTAIA provides that the antitrust laws “shall not apply to conduct involving trade or commerce (other than import trade or import commerce) with foreign nations unless (1) such conduct has a direct, substantial, and reasonably foreseeable effect [on domestic commerce] and (2) such effect gives rise to a claim under” the antitrust laws. 15 U.S.C. § 6a. The court assumed that the effect on domestic sales was direct, substantial, and reasonably foreseeable. Op. at *3. The court rested its holding instead on the second prong of the exception, which requires that the “effect of anticompetitive conduct on domestic U.S. commerce give rise to an antitrust case of action.” Id.
The court concluded that Motorola’s foreign purchases did not meet the second prong of the domestic effects test because Motorola’s claim against the defendants constituted an indirect purchaser claims barred by the Illinois Brick doctrine or was otherwise an impermissible derivative claim. The direct victims of the alleged cartel were Motorola’s foreign subsidiaries. Op. at *5. Any claims held by the foreign subsidiaries for their foreign purchases are “governed by the laws of the countries in which are incorporated and operate.” Id. at *4.