In October, we wrote about the Seventh Circuit’s reconsideration of Motorola Mobility LLC v. AU Optronics Corp., 746 F.3d 842 (7th Cir. 2014) and the reach of the Sherman Act and the Foreign Trade Antitrust Improvements Act (“FTAIA”) outside of the United States borders. In this case, 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. The Seventh Circuit had determined that the sale of a product into the United States that merely incorporated a price-fixed component could never satisfy the requirement that an effect in the U.S. be "direct." The Seventh Circuit vacated that opinion and agreed to rehear the case.
On November 13, 2014, the parties in Motorola reargued their case to a three judge panel of the Seventh Circuit – the same panel that ruled on the case earlier this year. Less than two weeks later, on November 26, 2014, the court issued its decision, generally reaffirming its prior (now vacated) decision, and holding that purchases by a U.S. parent company's foreign affiliate of price-fixed goods that were incorporated into products subsequently shipped to the U.S. parent did not give rise to damages claims under Section 1 of the Sherman Act. See --- F.3d ----, 2014 WL 6678622 (7th Cir. 2014).
The provision of the FTAIA at issue concerns the reach of U.S. antitrust statutes as to non-import foreign commerce. It provides that U.S. antitrust laws do not apply to non-import foreign commerce unless the overseas conduct at issue has: (1) a “direct, substantial, and reasonably foreseeable effect” on U.S. commerce and (2) an effect that “gives rise” to the U.S. claim. The first prong, if proved, establishes that there is an antitrust violation; the second prong determines who may bring a suit based on it.
Ultimately, the court concluded that Motorola's claims failed to satisfy the FTAIA's second prong -- that the plaintiffs' antitrust claims must arise from the same domestic injury that satisfied the FTAIA's first prong. In other words, the court found that the effect in the U.S., (increased price of cell phones in the U.S.), is not the same as the basis for Motorola’s claims (overcharges for LCD panels in Asia).
Notably, Costco Wholesale Corp. v. AU Optronics Corp., a case related to the LCD price-fixing conspiracy, reached a decision contrary to the Seventh Circuit’s opinion in Motorola.
Following a 19-day trial in Seattle, Washington, a federal jury found that retailer Costco Wholesale Corp., had sustained antitrust damages (sub req’d) arising from purchases of LCD products from some of the world’s largest LCD makers. Costco’s claims were similar to those of Motorola, that AU Optronics Corp., and several other electronics manufactures of thin-film transistor liquid crystal display panels (“TFT-LCD”), had conspired to fix the price of TFT-LCD panels.
Additionally, as the Seventh Circuit did in Motorola, the court addressed the question of whether the FTAIA barred a United States antitrust suit based on these sales. Ultimately, the Court found that the required impact in the United States could be satisfied through evidence that the price of televisions sold to Costco had been inflated as a result of the price-fixing that had occurred with respect to the TFT-LCD panels.
The Motorola and Costco cases are just two in a handful of related cases that are testing the full reach of the FTAIA beyond the borders of the United States. These issues remain open at the moment, pending further judicial clarification. Until then, the most recent decision in Motorola means that civil defendants have a stronger FTAIA defense than before.