Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Ill.: Sherman Act did not apply to purchases made by foreign affiliates of a domestic company, (Jan 24, 2014)

By Jody Coultas, J.D.

AU Optronics Corp. was granted reconsideration of a multidistrict litigation court’s denial of its motion for partial summary judgment with respect to Motorola’s Sherman Act claim based on purchases of LCD panels by its foreign affiliates, the federal district court in Chicago has ruled (Motorola Mobility, Inc. v. AU Optronics Corp., January 23, 2014, Gottschall, J.).

Motorola alleged that AU and other manufacturers of liquid crystal display (LCD) panels, which Motorola and its foreign affiliates used in cell phones, engaged in a conspiracy to raise the price of LCD panels. At issue were purchases of LCD panels by Motorola’s foreign affiliates that were delivered to the foreign affiliates’ manufacturing facilities abroad, where they were incorporated into mobile phones that were later sold in the United States, and purchases by Motorola’s foreign affiliates that were delivered to the foreign affiliates’ manufacturing facilities abroad and were later incorporated into mobile phones sold outside the United States. The issue of whether Motorola could bring Sherman Act claims based on these two types of purchasers was litigated three times before the MDL court.

AU moved for reconsideration of the MDL court’s third ruling that Motorola had presented admissible evidence from which a jury could find that final decisions regarding pricing of LCD panels took place in the United States, arguing that there was no domestic effect that gave rise to Motorola’s foreign affiliates’ Sherman Act claims.

In 1982, Congress amended the Sherman Act by passing the Foreign Trade Antitrust Improvements Act of 1982 (FTAIA). The FTAIA states that all (nonimport) activity involving foreign commerce falls outside the Sherman Act. Such conduct can be covered by the Sherman Act if the conduct at issue (1) sufficiently affects American commerce and (2) has an effect of a kind that antitrust law considers harmful. Whether domestic effects “give rise to” a Sherman Act claim, courts look at whether there is proximate causation.

Domestic injury exception. Motorola was unable to establish that a domestic effect gave rise to a Sherman Act claim, according to the court. The MDL court found that Motorola satisfied the “gives rise to” prong because a jury could infer that final decisions regarding pricing of LCD panels took place in the United States based on the evidence presented, and that Motorola sufficiently supported its claim that foreign affiliates issued purchase orders at the price and quantity determined by Motorola in the United States. The fact that Motorola was a domestic company was irrelevant to whether any domestic effect gave rise to Motorola’s Sherman Act claim. Also, Motorola’s injury arose when the foreign affiliates purchased LCD panels at inflated prices, not when Motorola decided at what price those purchases would be made. The economic consequences of Motorola’s domestic approval of LCD prices were not felt in the U.S. economy.

The overall price-fixing conspiracy proximately caused Motorola’s foreign affiliates to purchase LCD panels at inflated prices, not Motorola’s purchasing decisions. AU’s alleged targeting of Motorola in the United States was also irrelevant to the proximate cause analysis.

Import exclusion. The MDL’s holding that the foreign-purchased products were not “imports” within the meaning of the FTAIA was supported by precedent, according to the court. Sherman Act claims based on “imports” are not barred by the FTAIA. Motorola argued that injuries arising from AU’s sales to Motorola’s foreign manufacturing facilities that AU knew would be incorporated into Motorola devices sold in the United States fell under the import exclusion of the FTAIA. Whether a product is an “import” is based on “whether the conduct of the defendants, not plaintiffs, involves ‘import trade or commerce.’” Here, the foreign-purchased products were brought to the United States by Motorola affiliates. Thus, the products at issue were not “imports.” Motorola’s argument relied too greatly on intent and would be difficult to apply.

The case is No. 09 C 6610.

Attorneys: Astor Henry Lloyd Heaven (Crowell and Moring LLP) and Michael D. Sher (Neal, Gerber & Eisenberg) for Motorola, Inc. Carl Lawrence Blumenstein (Nossaman LLP), John D Cline (Law Office of John D. Cline), and Joseph Pascal Russoniello (Browne George Ross LLP) for AU Optronics Corp.

Companies: Motorola Mobility, Inc.; AU Optronics Corp.

Cases: Antitrust IllinoisNews