Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Acer’s U.S. subsidiaries avoid dismissal of optical disk drive price fixing claims, (Jul 11, 2014)

By Linda O’Brien, J.D., LL.M.

U.S. subsidiaries of Taiwan-based Acer, Inc. can proceed with claims that manufacturers of optical disk drives conspired to fix prices, the federal district court in San Francisco has ruled. However, claims against one defending manufacturer were dismissed for failure to show that the manufacturer participated in any conspiracy (In re Optical Disk Drive Antitrust Litigation, July 10, 2014, Seeborg, R.).

Direct and indirect purchasers of electronic products filed class action complaints against Pioneer Corporation and other electronic product manufacturers, alleging that the manufacturers engaged in a conspiracy to rig bids and fix prices for optical disk drives (ODDs) that are included in various electronic devices. The U.S. subsidiaries of computer maker Acer elected to proceed separately. Pioneer and the other defendant manufacturers moved for dismissal on various grounds.

FTAIA. Under the Foreign Trade Antitrust Improvements Act (FTAIA), the federal antitrust laws generally do not apply to foreign trade or commerce, unless the so-called “domestic effect” exception applies. In rejecting the defendant manufacturers’ argument that the plaintiffs’ parent company was a foreign entity that only made ODD purchases overseas, the court noted that the plaintiff subsidiaries were domestic entities doing business in the United States.

The plaintiffs alleged that they made ODD purchases pursuant to negotiations, had purchase orders issued, and took delivery of the ODDs in the United States. The allegations were consistent with facts in which the defendants were importers or sufficiently involved in importation for the domestic effect exception to apply. Moreover, the defendants did not dispute that the FTAIA did not apply to some of the plaintiffs’ purchases since the transactions took place domestically. While the plaintiffs must ultimately prove that all non-domestic transactions constituted import trade, the defendants did not show how the complaint failed to state a claim. Thus, the court could not determine at the pleading stage that the plaintiffs would be unable to prove the applicability of the domestic effect exception.

Statute of limitations. The defendants contended that the statute of limitations began to run in October 2009 when one defendant, Sony, filed a disclosure with the Securities and Exchange Commission stating the U.S. Department of Justice was investigating competition in ODDs. The court determined that the plaintiffs’ allegation that they did not have actual or constructive notice of the claims until the Justice Department made a public announcement about its investigation was sufficient to preclude dismissal at the pleading stage of the litigation.

Defendant Pioneer. However, the complaint lacked sufficient facts that Pioneer and its subsidiaries participated in any conspiracy, according to the court. Although the plaintiffs were not required to plead each defendant’s involvement in the alleged conspiracy with elaborate detail, they were required to allege specific facts regarding Pioneer’s role and set forth allegations that plausibly suggest the manufacturer participated in the conspiracy. The Acer plaintiffs’ sparse and conclusory allegations were insufficient to meet that standard, the court concluded.

The case is No. 3:13-cv-04991-RS.

Attorneys: Hsiang James H. Lin (TechKnowledge Law Group LLP) for Acer America Corp., Gateway, Inc., and Gateway U.S. Retail, Inc. Jeffrey Alan LeVee (Jones Day) for Pioneer Corp., Pioneer Digital Design & Manufacturing Co., Pioneer Electronics (USA) Inc., Pioneer High Fidelity Taiwan Co., Ltd., and Pioneer North America, Inc.

Companies: Acer America Corp.; Gateway, Inc.; Gateway U.S. Retail, Inc.; Pioneer Corp.; Pioneer Digital Design & Manufacturing Co.; Pioneer Electronics USA Inc.; Pioneer High Fidelity Taiwan Co., Ltd.; Pioneer North America, Inc.

Cases: Antitrust CaliforniaNews