Antitrust Law Daily Wrap Up, ANTITRUST—W.D. Wash.: Costco may proceed with umbrella theory damages claims in TFT-LCD price fixing action, (Sep 25, 2014)

By Linda O’Brien, J.D., LL.M.

In a class action against manufacturers of thin-film transistor liquid crystal display panels for conspiring to fix prices, a retailer could pursue a damages claim at trial under the “umbrella theory” for the increased cost of the finished products it purchased that contained the price-fixed panels, the federal district court in Seattle has ruled. However, the retailer could not recover damages for purchases of finished products containing panels manufactured by non-conspirators (Costco Wholesale Corporation v. AU Optronics Corporation, September 23, 2014, Jones, R.).

A series of class action suits were filed against manufacturer AU Optronics Corporation, its subsidiary AU Optronics Corporation America, and other manufacturers for allegedly engaging in a conspiracy to fix the prices of thin-film transistor liquid crystal display panels (TFT-LCDs) that were incorporated into LCD products sold throughout the United States. Retailer Costco indirectly purchased LCD panels through its buying of finished products containing the panels from a number of different vendors and opted out of participation of a class of direct purchasers.

The cases were consolidated in the U.S. District Court for the Northern District of California for coordinated pretrial proceedings. After the case was returned to the originating district for trial, the defendants moved for summary judgment on Costco’s antitrust claims and the motion was denied. The defendants’ motion for summary judgment that the Foreign Trade Antitrust Improvements Act precluded Costco’s damages claim was also denied. Subsequently, the defendants filed a motion in limine to exclude Costco’s expert testimony on “umbrella theory” damages.

Costco contended that its expert would present evidence at trial that a small percentage of its damages were based on finished product purchases for which the price-fixed panels were manufactured by small manufacturers that may not have been part of the alleged conspiracy. To the extent the small manufacturers were not part of the conspiracy, they charged supra-competitive prices for the panels under the umbrella of the conspiracy.

The court noted the U.S. Supreme Court decision, Illinois Brick Co. v. Illinois (1977-1 Trade Cases ¶61,460), generally limited standing to pursue antitrust claims for price fixing to the initial purchaser of the price-fixed good. According to the court, Costco’s allegations that some or all of the panels at issues were sold to conspirators or entities in control of conspirators could come within the control exception of the Illinois Brick decision. Although Costco would have to show at trial that the higher prices it paid were actually the result of the conspiracy, its allegations were sufficient for Costco to pursue its umbrella theory of damages at trial.

However, Costco could not recover damages for panels manufactured by entities that were neither co-conspirators or in a control relationship with conspirators. At trial, Costco’s expert could specify how his damages calculations would change if Costco could not recover for those purchases and the finder of fact would be able to segregate any damages traceable to the non-conspirator manufacturers. Cross-examination at trial was a better remedy than exclusion to address evidence relevant to Costco’s umbrella theory, the court concluded.

The case is No. C13-1207.

Attorneys: Cori Gordon Moore (Perkins Coie) for Costco Wholesale Corp. Carl L. Blumenstein (Nossaman LLP) for AU Optronics Corp. Allison B. Stein (Munger Tolles & Olson) for LG Display Company, Ltd., and LG Display America Inc.

Companies: Costco Wholesale Corp.; AU Optronics Corp.; LG Display Company, Ltd.; LG Display America Inc.

Cases: Antitrust WashingtonNews