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DOJ and AAI File Briefs in Motorola FTAIA Case

We’ve previously written about Motorola Mobility v. AU Optronics, currently pending in the Seventh Circuit.  As many of you know, the Seventh Circuit vacated its March 2014 decision that the higher prices for mobile phones Motorola sold in the United States did not “give rise” to antitrust claims and that Motorola could not show a “direct” effect on U.S. commerce sufficient to satisfy the Foreign Trade Antitrust Improvements Act (“FTAIA”).  Briefing is currently underway, and the case is scheduled for oral argument on Thursday, November 13.

It is already established that conduct involving wholly foreign commerce can fall within the Sherman Act’s reach when the conduct has a direct, substantial, and reasonably foreseeable effect on American commerce and the activity “gives rise” to an antitrust claim (i.e., has an effect considered harmful under the antitrust laws).  The case before the Seventh Circuit concerns what types of conduct will satisfy these standards.  More specifically, Motorola sought damages for antitrust overcharges based on allegedly price fixed LCD panels that were manufactured and purchased overseas, but later incorporated into goods sold in the United States.

On Friday, September 5, the Department of Justice and Federal Trade Commission submitted an amicus brief.  The government urged the Seventh Circuit to hold that an overseas conspiracy to fix prices on the component of a finished product that is sold in the United States can yield FTAIA liability.  More specifically, the government drew a distinction between private civil actions and government enforcement actions.  As for civil actions, the government argued that the effects of the overseas price fixing of LCD panels did not “give rise” to damages claims brought by Motorola’s foreign affiliates, but could give rise to damages claims brought by the first purchasers in affected U.S. commerce.  The government acknowledged that the “Illinois Brick doctrine would ordinarily bar these purchasers from recovering damages under federal law” but argued that there should be an exception to allow claims “by the first purchaser in affected U.S. commerce” when direct purchasers’ claims are barred.  For enforcement actions, the government noted that the natural consequence of increasing the price of a component is to increase the price of the final good, and that price fixing in the overseas components market therefore has a substantial, foreseeable, and direct effect on U.S. commerce.  It added:  “[a] contrary holding risks constraining the government’s ability to prosecute offshore component price fixing that threatens massive harm to U.S. commerce and consumers.”

The American Antitrust Institute (“AAI”) also sought permission to file an amicus brief.  The Seventh Circuit denied that motion.  AAI had argued that if the Seventh Circuit were to rule that “foreign price fixing of components sold overseas and incorporated into products imported to the United States cannot ‘directly’ harm U.S. commerce,” that it would “re-interpret the statutory text of the FTAIA to equate directness with immediacy” and would “bar direct purchasers and the government . . . from redressing such harm as a matter of law under the FTAIA.”  AAI further argued that a finding that U.S. commerce could not be directly affected would “be a serious error of law with potentially grave consequences for American businesses and consumers.”

You can read the government’s brief here and the AAI’s proposed brief here.