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March 22, 2013

Indirect Purchaser Doctrine, FTAIA Require Dismissal of Antitrust Claims Asserted by Television/Computer Monitor Seller, Foreign Affiliates

By Jeffrey May, J.D.

In multidistrict antitrust litigation against manufacturers of thin-film transistor liquid crystal display (TFT-LCD) panels for conspiring to fix prices, the federal district court in San Francisco has dismissed the federal and state antitrust claims of Proview Technology Inc. (PTI)—a company that sells TFT-LCD products such as computer monitors and televisions to retailers in the United States (In Re: TFT-LCD (Flat Panel) Antitrust Litigation, March 20, 2013, Illston, S.). The court also dismissed the claims of three of PTI's "affiliated Original Equipment Manufacturers (OEMs)" in Taiwan and China. The plaintiffs were, however, permitted to amend their complaint.

PTI lacked standing to pursue its federal antitrust claim to recover damages because it indirectly purchased LCD products. The claim was barred by the Illinois Brick "direct purchaser" rule, the court ruled. The court rejected PTI's argument that the ownership and control exception to the Illinois Brick bar against standing for indirect purchasers applied.

PTI contended that it received the LCD products from its affiliated OEMS through a process by which PTI instructed the Proview OEMs to purchase LCD panels for delivery in Asia and to manufacture them into LCD products, which PTI purchased and imported into the United States. According to PTI, the OEMs acted as agents for PTI and PTI had "control of" them. However, the fact that PTI "instructed its affiliated OEMs … to purchase LCD panels" did not, by itself, demonstrate that PTI controlled the Proview OEMs.

The court also dismissed the claims of the Proview OEMs based on the Foreign Trade Antitrust Improvements Act (FTAIA). Generally, the FTAIA bars Sherman Act claims based on anticompetitive conduct that causes solely foreign injury. Although the Proview OEMs alleged that the relevant purchases were "based on contract terms and pricing negotiated by PTI specifically for U.S. bound LCD products," they did not allege enough facts to adequately plead a domestic effect to qualify for the domestic injury exception to the FTAIA. According to the court, at most, they alleged that "[t]he prices Plaintiffs used in purchase orders placed with Defendants were based on price and quantity determinations based on U.S. Negotiations."

Due Process. Lastly, but perhaps most interestingly, the court dismissed PTI's California Cartwright Act claims on Due Process grounds. The court considered the Ninth Circuit's February 14 decision in AT&T Mobility LLC v. AU Optronics Corp. (2013-1 Trade Cases ¶78,262). In that case, involving a challenge to the same alleged TFT-LCD price fixing conduct, the appellate court reversed dismissal of California law claims on the ground that the Due Process Clause of the Fourteenth Amendment forbids the application of California law to AT&T's price fixing claims based on out-of-state purchases. The appellate court remanded to the district court, however, to assess whether AT&T alleged sufficient conspiratorial conduct within California, such that the application of California law to each defendant was "neither arbitrary nor fundamentally unfair."

The defendants in this case argued that PTI failed to make sufficiently individualized allegations of each defendant's alleged conspiratorial activity, in light of AT&T Mobility LLC v. AU Optronics Corp. The court agreed. The plaintiff was granted leave to amend its complaint to allege conspiratorial conduct on the part of each defendant in California.

The litigation is No. M 07-1827 SI (MDL. No. 1827). The order relates to case C 12-3802 SI.

Attorneys: Mark D. Baute (Baute Crochetiere & Wang LLP) for Proview Group Limited. John C. McGuire (Sedgwick, Detert, Moran & Arnold) for AU Optronics Corp.

Companies: AU Optronics Corp.; Proview Technology Inc.

MainStory: TopStory Antitrust CaliforniaNews

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