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From Antitrust Law Daily, December 1, 2014

Motorola could not recover for foreign subsidiaries’ LCD panel purchases in price fixing suit

By Jeffrey May, J.D.

The Foreign Trade Antitrust Improvements Act (FTAIA) precludes U.S.-based cellphone maker Motorola Mobility from recovering overcharges paid by its foreign subsidiaries as a result of an alleged conspiracy to fix the price of liquid-crystal display (LCD) panels, the U.S. Court of Appeals in Chicago has decided. After vacating an earlier panel decision in order to hear argument and to consider the views of the Department of Justice on the FTAIA issue, the appellate court has once again affirmed a district court order granting partial summary judgment in favor of the defendants, including Samsung, Sanyo, and several other foreign companies. The court noted that its decision extinguishes most of Motorola’s case (Motorola Mobility LLC v. AU Optronics Corp., November 26, 2014, Posner, R.).

The FTAIA limits the extraterritorial application of U.S. antitrust law. In order for the Sherman Act to apply to conduct involving trade or commerce with foreign nations, two requirements must be met: (1) there must be a direct, substantial, and reasonably foreseeable effect on U.S. domestic commerce; and (2) the effect must give rise to a federal antitrust claim.

The court explained that the second requirement “trips up” Motorola's suit. It assumed that the requirement of a direct, substantial, and reasonably foreseeable effect on domestic commerce was satisfied.

The immediate victims of the purported price fixing were Motorola's foreign subsidiaries that purchased the price-fixed LCD panels to use in the manufacture of cell phones. The foreign subsidiaries were free “to sue the price fixers under the law of the country of which the subsidiary was a citizen, or the law of the countries of which the price fixers were citizens (or a country of which a particular price fixer that the subsidiary decided to sue was a citizen),” the court explained. Their U.S. parent could not sue on their behalf.

“Motorola’s foreign subsidiaries were injured in foreign commerce—in dealings with other foreign companies—and to give Motorola rights to take the place of its foreign companies and sue on their behalf under U.S. antitrust law would be an unjustified interference with the right of foreign nations to regulate their own economies,” the court explained.

The indirect-purchaser doctrine of Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) barred the federal antitrust damages claims of the American parent, the court held. Even if the court accepted Motorola's argument that it and its subsidiaries were “one,” the claims would still be barred under the FTAIA. The injury to “the one” would have occurred abroad, where the price-fixed components were purchased.

Import commerce. There is an exception to the FTAIA for import commerce, and the alleged conspiracy to sell fixed-price LCD panels to Motorola in the United States at inflated prices would fall under that exception. However, that was only a small percentage of the challenged sales and was not involved in the appeal. The court rejected Motorola’s arguments that other challenged conduct involved import commerce.

Department of Justice brief. With the merits determined, the court explained that the friend-of-the-court brief filed by the Department of Justice did not suggest that the defendants’ conduct gave rise to an antitrust damages remedy for Motorola. The Justice Department did not recommend that the appellate court reverse the district court’s grant of partial summary judgment in favor of the defendants.

“All that the government wants from us is a disclaimer that a ruling against Motorola would interfere with criminal and injunctive remedies sought by the government against antitrust violations by foreign companies,” the court explained. “The government’s concern relates to the requirement of the Foreign Trade Antitrust Improvements Act that foreign anticompetitive conduct have a direct, substantial, and reasonably foreseeable effect on domestic U.S. commerce to be actionable under the Sherman Act. If price fixing by the component manufacturers had the requisite statutory effect on cellphone prices in the United States, the Act would not block the Department of Justice from seeking criminal or injunctive remedies.”

The case is No. 14-8003.

Attorneys: Thomas C. Goldstein (Goldstein & Russell, PC) for Motorola Mobility LLC. Carl L. Blumenstein (Nossaman LLP), and Kirk Christopher Jenkins (Sedgwick LLP) for AU Optronics Corp. Terence H. Campbell (Cotsirilos, Tighe & Streicker, Poulos & Campbell), and William Farmer (Farmer Brownstein Jaeger, LLP) for Chunghwa Picture Tubes Ltd. Eugene E. Murphy, Jr. (Murphy & Hourihane LLC) for HannStar Display Corp. Nathan P. Eimer (Eimer Stahl LLP) for LG Display Company, Ltd. Robert D. Wick (Covington & Burling LLP) for Samsung Electronics Company, Ltd. Gary Halling (Sheppard, Mullin, Richter & Hampton) for Samsung SDI America, Inc. Kenneth A. Gallo (Paul, Weiss, Rifkind, Wharton & Garrison LLP), and James A. Morsch (Butler, Rubin, Saltarelli & Boyd) for Sharp Electronics Corp. Daniel Cummings (Rothschild, Barry & Myers) and Christopher M. Curran (White & Case LLP) for Toshiba Corp. Allison Ann Davis (Davis Wright Tremaine LLP) and William Yu (Lewis Brisbois Bisgaard & Smith LLP) for Sanyo Consumer Electronics Company, Ltd.

Companies: Motorola Mobility LLC; AU Optronics Corp.; Samsung Electronics Company, Ltd.; Samsung SDI America, Inc.; Sanyo Consumer Electronics Company, Ltd.

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