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From Antitrust Law Daily, June 15, 2015

High Court avoids FTAIA questions in LCD cartel cases

By Jeffrey May, J.D.

The U.S. Supreme Court has decided not to consider a purported split between the Seventh Circuit and the Ninth Circuit on the application of federal antitrust laws to a conspiracy to fix prices of thin-film transistor-liquid crystal display (TFT-LCD) panels. Today, the Court denied review of two petitions in cases involving the application of the Foreign Trade Antitrust Improvements Act (FTAIA) to the TFT-LCD cartel (Hsiung v. U.S., Dkt. 14-1121; Motorola Mobility LLC v. AU Optronics Corp., Dkt. 14-1122).

As a result, a $500 million fine imposed on Taiwanese electronics manufacturer AU Optronics Corporation and its U.S. subsidiary will stand. The companies and some high-level executives had sought review of a decision of the U.S. Court of Appeals in San Francisco, upholding their convictions for their role in the TFT-LCD conspiracy.

In another petition, U.S.-based cellphone maker Motorola Mobility had asked the Court to review a decision of the U.S. Court of Appeals in Chicago, rejecting some of its claims for overcharges flowing from the alleged conspiracy that were paid by foreign subsidiaries.

Justice Department’s views. In May, the Department of Justice filed its opposition brief in the criminal matter, asking the Court to deny certiorari. According to the government, there was no circuit split. The Seventh Circuit correctly held that the conspiracy involved “import trade or import commerce” within the meaning of Section 6a of the Sherman Act. In addition, the appellate court’s alternative holding that the conspiracy had “a direct, substantial, and reasonably foreseeable effect” on U.S. domestic or import commerce within the meaning of Section 6a(1) of the Sherman Act was correct, in the government’s view. Moreover, these determinations did not conflict with Supreme Court precedent or with decisions of any other court of appeals.

The government specifically addressed the criminal defendants’ contention that the Ninth Circuit’s decision conflicted with the Seventh Circuit’s decision in the Motorola case. In the government’s view, “no reason exists to think that the outcome of this criminal prosecution would be any different in the Seventh Circuit.”

The Justice Department explained that Motorola’s claims were divided into three categories: (1) Category One claims based on panels sold and delivered to Motorola in the United States; (2) Category Two claims based on panels sold and delivered to Motorola’s foreign subsidiaries and incorporated into cellphones bound for the United States; and (3) Category Three claims based on panels sold and delivered to Motorola’s foreign subsidiaries and incorporated into cellphones sold abroad. The government’s case involved price-fixed panels sold and delivered to customers in the United States, like Motorola’s Category One, which were not at issue in the appeal before the Seventh Circuit.

“The Seventh and Ninth Circuits agree that conspiring to fix the price of TFT-LCD panels sold for delivery to the United States falls within Section 6a’s import commerce exclusion, and thus that petitioners’ conspiracy is subject to the Sherman Act,” the government argued. The government also noted that the Hsiung case “would be an unsuitable vehicle to consider the effects exception because petitioners’ convictions can be affirmed solely on the basis of the import-commerce exclusion.”

Civil claims. Motorola’s petition questioned the Seventh Circuit’s holding that the FTAIA foreclosed the company’s efforts to recover under the Sherman Act overcharges paid by wholly-owned foreign subsidiaries to the foreign LCD panel makers. The appellate court ruled that these claims were barred by the FTAIA because they did not involve “import trade or import commerce,” and the effect on domestic commerce did not “give[] rise to a claim” under the Sherman Act. Both the American Antitrust Institute (AAI) and National Association of Manufacturers (NAM) supported Motorola’s petition.

AAI suggested that the Seventh Circuit took too narrow a view of the import-commerce exclusion in requiring that the defendant be the actual importer. This holding was inconsistent with decisions of the Third and Ninth Circuits, as well as the language and intent of the FTAIA, according to AAI.

NAM asked the Court to clarify when the U.S. antitrust laws apply to transactions for goods intended for import into the United States. “U.S. manufacturers and their suppliers and affiliates, would be best served by this Court imposing clarity and consistency on the currently uncertain state of the law,” NAM stated.

Attorneys: Neal Kumar Katyal (Hogan Lovells US LLP) for Hui Hsiung. Michael A. Attanasio (Cooley LLP) for Hsuan Bin Chen. Dennis P. Riordan (Riordan & Horgan) for AU Optronics Corp. Donald B. Verrilli Jr. for U.S. Department of Justice. Thomas C. Goldstein (Goldstein & Russell, P.C.) and Jerome A. Murphy (Crowell & Moring LLP) for Motorola Mobility LLC.

Companies: AU Optronics Corp.; Motorola Mobility LLC

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