Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Antitrust Division supports Motorola’s Sherman Act claims over LCD panels sold overseas, (Jun 30, 2014)

By Greg Hammond, J.D.

The United States has determined that Motorola Mobility LLC could bring Sherman Act claims against manufacturers of liquid crystal display (LCD) panels sold in foreign countries, according to its supplemental amicusbrief. Specifically, the Antitrust Division and the Solicitor General posited that if Motorola could establish a link between its injuries and an alleged price-fixing conspiracy’s effect on U.S. commerce in cellphones, some of the company’s claims would support Congress’ intent to preserve effective antitrust enforcement under the Foreign Trade Antitrust Improvements Act of 1982 (FTAIA), while avoiding the unreasonable interference of other countries’ regulations of foreign markets (Motorola Mobility LLC v AU Optronics Corp., June 27, 2014).

The underlying action. Motorola filed suit against AU Optronics Corp. and other LCD panel manufacturers, alleging that the manufacturers engaged in a conspiracy to raise the price of LCD panels. Although the LCD panels were not directly sold in the U.S., Motorola’s and its foreign affiliates’ cellphones—which contained the panels—were. The federal district court in Chicago determined that FTAIA applied to Motorola’s foreign injury claims, but found that the claims did not fall under FTAIA’s domestic injury exception because they did not arise from any domestic effect. Consequently, the court dismissed Motorola’s claims based on overseas purchases by its foreign affiliates (Category II and III claims). Motorola filed an interlocutory appeal with the U.S. Court of Appeals in Chicago, and the court requested that the U.S. file amicus curiae brief “concerning the potential impact on U.S. foreign commercial relations and on U.S. foreign relations more generally, of deciding the present appeal one way or another” and regarding “the concerns expressed by foreign governments.”

Direct effect requirement. The “direct effect requirement” under FTAIA was established to make sure the Sherman Act is not used to police anticompetitive conduct limited to foreign markets and best addressed in foreign nations. The Antitrust Division noted that there could be a “close, significant, and predictable causal connection between fixing the price of a major component made and sold outside the United States and U.S. commerce in finished products incorporating that component.” Further, it stated that laws in various foreign jurisdictions supported that notion and that a decision holding that AU’s LCD price-fixing conspiracy had a direct effect on U.S. commerce should not adversely impact U.S. foreign relations.

Gives rise to requirement. The “gives rise to requirement” under FTAIA requires a plaintiff to demonstrate that the effect on U.S. commerce “gives rise to” the claim at issue. The Antitrust Division asserted that Motorola’s claims based on purchases of LCD panels that never entered the U.S.—the Category III claims—would likely not have an effect on U.S. commerce, and could consequently fail. However, Motorola’s claims regarding the purchases of LCD panels that were incorporated into cellphones imported to and sold in the U.S.—the Category II claims—would likely have an effect on U.S. commerce. Consequently, the Antitrust Division concluded that as long as Motorola could demonstrate the necessary link between its injuries and the price-fixing conspiracy’s effect on U.S. commerce, a decision by the Court of Appeals allowing Motorola to pursue its Category II claims in the U.S. would preserve Congress’ intent to preserve effective antitrust enforcement and would avoid unreasonable interference of other countries’ regulations of foreign markets.

Attorneys: Mary C. McLeod, Principal Deputy Legal Adviser. Kelly R. Welsh, General Counsel, U.S. Department of Commerce. David C. Shonka, Acting General Counsel Office of the General Counsel, Federal Trade Commission. William J. Baer, Assistant Attorney General, U.S. Department of Justice.

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

News: Antitrust AntitrustDivisionNews