An Update on Motorola Mobility LLC v. AU Optronics Corp. et al.: How Far Does The FTAIA Go?

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In Motorola Mobility LLC v. AU Optronics Corp. et al., the Seventh Circuit is currently considering the reach of the Sherman Act beyond United States borders and will join the Second and Ninth Circuits in interpreting some key provisions of the Foreign Trade Antitrust Improvements Act (“FTAIA”). In that case, which will be heard by the Seventh Circuit on a motion for rehearing, the parties have advanced vastly different interpretations of the FTAIA and the extent to which defendants’ conduct abroad has impacted the United States market, if at all.

Defendants, foreign manufacturers of liquid crystal display (“LCD”) panels, have asserted that the transactions at issue took place entirely in foreign countries, without any impact on U.S. commerce – and, therefore, the Sherman Act cannot govern such foreign conduct. This position was accepted by the United States District Court, which dismissed the case, and a three-judge panel of the Seventh Circuit, which affirmed that dismissal in March 2014. The Seventh Circuit agreed to rehear the case in July 2014, however. Antitrust Update’s previous coverage of this case can be found here.

The United States Department of Justice weighed in shortly before the Seventh Circuit agreed to rehear the case, siding with plaintiff Motorola and contending that U.S. antitrust laws may reach entirely foreign conduct, so long as there is a link between the foreign conspiracy and the domestic market. The DOJ emphasized in its amicus brief that the Sherman Act will apply to even wholly foreign commerce so long as that commerce has a “direct, substantial, and reasonably foreseeable effect” on U.S. commerce. Such a rule will not lead to unreasonable interference with foreign commerce, the DOJ argued, because the Sherman Act remains inapplicable to foreign conduct with only a “highly attenuated, insignificant, or unpredictable” impact on the United States.

Defendants have continued to assert their position that allowing Motorola’s case to proceed here would unreasonably expand the reach of the Sherman Act and would violate the limitations on U.S. jurisdiction over foreign conduct imposed by the FTAIA. To that end, defendants argue in their brief filed on October 3, 2014, that “[a]pplying the Sherman Act to these foreign injuries would be an unjustified intrusion on the rights of foreign governments to regulate their own economies.” Notably, the governments of Japan, Korea, and Taiwan have filed amicus briefs. In addition, defendants argue that Motorola’s interpretation “would . . . conflict with abundant precedent and with the U.S. government’s reading of the FTAIA.”

All of the injuries arising from the LCD manufacturers’ alleged conspiracy, they assert, occurred beyond U.S. borders. The LCD manufacturers assert that Motorola’s contention that some cellular phones with LCD screens were ultimately shipped to the United States is insufficient to demonstrate that “defendants’ conduct in foreign markets for panels had direct effects on the U.S. market for cellphones,” as required under the FTAIA.

It is left to the Seventh Circuit to determine whether or not the LCD manufacturers’ extraterritorial conduct had a sufficiently direct impact or caused any direct injury within the United States to bring them with the jurisdiction of the U.S. courts. Oral argument is scheduled for November 13, 2014.

 

 

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