On November 13, 2014, the Seventh Circuit will hear oral arguments on a motion for rehearing in Motorola Mobility LLC v. AU Optronics Corp. et al., to consider the reach of the Sherman Act1 outside of the United States borders and to possibly interpret some key provisions of the Foreign Trade Antitrust Improvements Act (“FTAIA”).2
In Motorola Mobility, Motorola accused several LCD manufacturers of conspiring to fix the prices of the liquid-crystal display (“LCD”) panels it purchased for assembly into finished mobile phones. However, Motorola only purchased 1 percent of the LCD panels at issue in the United States. The remainder of the purchases that were subject to the alleged price fixing were made by Motorola’s foreign manufacturing subsidiaries, primarily located in China and Singapore.
Defendants, foreign manufacturers of LCD panels, asserted that the transactions at issue took place entirely in foreign countries, without any impact on U.S. commerce, and that by allowing Motorola’s case to proceed would unreasonably expand the reach of the Sherman Act and would violate the limitations on U.S. jurisdiction over foreign conduct imposed by the FTAIA.
On January 23, 2013, the United States District Court dismissed the case, holding that Motorola’s claims based on LCD purchases by its foreign affiliates—purchases that were allegedly negotiated and approved in the United States but otherwise “overwhelmingly foreign in nature”—did not satisfy the FTAIA exception3 because the mere negotiation or approval of prices does not have an anticompetitive effect on U.S. commerce, where the prices are actually paid in a foreign country.4
On March 27, the Seventh Circuit affirmed the Dismissal, largely agreeing with the lower court’s analysis and holding that neither prong of the FTAIA exception was satisfied.5
Just days following the Seventh Circuit opinion, Motorola asked for a rehearing. After multiple letters back and forth between the Court, the parties, and the Solicitor General’s Office, the Seventh Circuit vacated its prior opinion and agreed to rehear the case.
Of note, several third parties have filed amicus briefs, including the governments of Japan, Korea, and Taiwan, expressing concerns about allowing recoverable damages for the purchase of end-products made with price-fixed products sold abroad.
Conversely, the United States Department of Justice sided with Motorola in their amicus brief, contending that U.S. antitrust laws may reach entirely foreign conduct, so long as there is a link between the foreign conspiracy and the domestic market, and that the Sherman Act will apply to foreign commerce so long as that commerce has a “direct, substantial, and reasonably foreseeable effect” on U.S. commerce.
While the full reach of the FTAIA beyond the borders of the United States remains to be seen, it is left to the Seventh Circuit to determine whether the LCD manufacturers’ extraterritorial conduct directly impacted or injured U.S. Commerce, sufficient to bring them within United States jurisdiction.