Antitrust Law Daily Wrap Up, ANTITRUST—W.D. Wash.: FTAIA did not bar Costco’s claims in TFT-LCD price-fixing action, (Sep 23, 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, the Foreign Trade Antitrust Improvements Act (FTAIA) did not preclude a retailer from pursuing a damages claim for the increased cost of the finished products it purchased that contained the price-fixed panels, federal district court in Seattle has ruled (Costco Wholesale Corporation v. AU Optronics Corporation, September 22, 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 their LCD panels through its buying of finished products containing the panels from a number of different vendors, including Panasonic, and opted out of participation of a class of direct purchasers.

All of the panels that were incorporated into finished products were manufactured abroad. The defendants shipped the vast majority of their foreign manufactured panels to foreign locations while shipping a small fraction of those panels to Panasonic facilities in the U.S. 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. Subsequently, the defendants moved for summary judgment that Costco could not recover damages on all but a small fraction of its purchases from Panasonic due to the FTAIA.

The FTAIA precludes the application of the Sherman Act to export activities and commercial activities taking place abroad unless those activities adversely affect domestic commerce to the U.S. that is direct, substantial, and reasonably foreseeable.

Import trade. The court found that the defendants waived summary judgment by failing to file a timely motion. The defendants provided no adequate justification for waiting to assert the application of the FTAIA until after the MDL court completed pretrial rulings.

According to the court, although the defendants were not entitled to summary judgment, the FTAIA did not preclude Costco’s damages claims because the defendants’ conduct constituted import trade The court noted that a Ninth Circuit decision, U.S. v. Hsiung, 758 F. 3rd 1074 (2014), examined the applicability of the FTAIA in the context of the current multi-district litigation. In the Hsiung case, the Ninth Circuit ruled that the FTAIA excluded import trade from its scope and that the transactions between foreign TFT-LCD producers and customers in the U.S. fell within the definition of “import trade” as long as the finished product moved from a member of the conspiracy to a U.S. customer. The defendants should not be able to take shelter in the FTAIA by having a conspirator incorporate the price-fixed panels into finished products for sale into the U.S, the court noted.

Domestic-effect exception. Additionally, the court determined that Costco presented sufficient evidence to meet FTAIA’s domestic-effect exception. Although Costco conceded that it could not prove that the defendants fixed the prices of finished products, the retailer could show that the sale of the TFT-LCD panels to finished product manufacturers, such as Panasonic, directly increased the cost of the finished products. Moreover, the defendants did not dispute that the increased cost of the finished products was “substantial” and “reasonably foreseeable.” Finally, if the direct effect of the defendant’s foreign conduct was to raise the price of finished products for import, then Costco’s claim as to its purchases from Panasonic arose from the effect. Thus, Costco could present evidence to the jury as to whether the effect of the panel sales on the price of finished product imports was direct.

The case is No. C13-1207.

Attorneys: Cori Gordon Moore (Perkins Coie) for Costco Wholesale Corp. Carl L. Blumenstein (Nossaman LLP) and Joseph P. Russoniello (Browne George Ross LLP) for Au Optronics Corp. and Au Optronics Corp. America. Brett J. Hartman (Davis Polk & Wardwell) for Chi Mei Optoelectronics Corp. and Chi Mei Optoelectronics U.S.A. Inc. Allison B. Stein (Munger Tolles & Olson) for LG Display Co., Ltd.

Companies: Costco Wholesale Corp.; Au Optronics Corp.; Au Optronics Corp.; Chi Mei Optoelectronics Corp.; Chi Mei Optoelectronics U.S.A. Inc.; LG Display Co., Ltd.

Cases: Antitrust WashingtonNews