Ubiquiti Networks, Inc. v. Kozumi USA Corp. (US District Court, N.D. Cal., Jan. 29, 2013)

A US District Court in San Francisco rules that defendant’s anticompetitive conduct in the US and elsewhere, which allegedly prohibited the plaintiff from selling products in Argentina, could not give rise to an antitrust claim in US court because the defendant’s conduct did not affect competition or pricing in a US market.

Facts

Plaintiff manufacturer of wireless communications devices contracted with defendant to distribute its products in Latin America. After the manufacturer terminated that contract, the distributor purchased the devices from alternative sources so that it could continue its distribution activities. The manufacturer then allegedly took actions in the US and elsewhere to close off this alternative source of supply. The manufacturer alleges that the distributor began selling counterfeit versions of the devices as genuine, and the manufacturer began a communications campaign to advise potential purchasers of the distributor’s alleged counterfeiting. The manufacturer sued the distributor for counterfeiting and related violations of law. The distributor counterclaimed, among other things alleging that the manufacturer had violated US antitrust laws by organizing a boycott and communications campaign effectively to end its distribution activities in Latin America, principally in Argentina.

Analysis

When deciding the distributor’s counterclaim, the court considered whether the manufacturer’s allegedly anticompetitive conduct in the US and elsewhere that may have affected the distributor’s business in Argentina could be a violation of the US antitrust laws. In doing so it applied the US Foreign Trade Antitrust Improvement Act (“FTAIA”), which, as pertinent here, requires that the manufacturer allege that the distributor’s conduct have had a “direct, substantial, and reasonably foreseeable effect” on a US market. The court found that the alleged injury to potential competition on Argentina did not satisfy that standard. It acknowledged that the distributor had alleged that many of the illegal acts had occurred in the US, but concluded that the only question that was relevant was where the effects of the conduct were felt. Because the effects of the manufacturer’s allegedly anticompetitive acts were felt in Argentina but not in the US, the court dismissed the distributor’s antitrust counterclaim.