Antitrust and Unfair Competition Law

Competition: Fall 2014, Vol. 23, No. 2


By Craig C. Corbitt1 and Aaron M. Sheanin2


Today’s consumer products — from cutting-edge electronic devices to automobiles, and the components in them — are manufactured largely outside the United States. "Nothing is more common nowadays than for products imported to the United States to include components that the producers had bought from foreign manufacturers."3 But the rise of these globalized supply chains comes with an unexpected cost for American consumers: "As a result, the prices of many products exported to the United States are elevated to some extent by price fixing or other anticompetitive acts that would be forbidden by the Sherman Act if committed in the United States."4

In industries as diverse as computer chips, display technologies (both flat-panel and tube varieties), and auto parts (from ball bearings to wire harnesses), long-running, foreign-based cartels have taken hold in recent years and reaped billions of dollars from American consumers who bought finished products containing price-fixed components.5 As these cartels have been uncovered, often as a result of a cartel member voluntarily confessing to the Antitrust Division of the U.S. Department of Justice under its leniency program, the consequences for foreign-based firms have been severe. The Antitrust Division has obtained, through plea agreements and convictions, record-breaking fines from foreign companies and has secured lengthy prison sentences for foreign nationals. In addition, civil plaintiffs (through class actions, "direct" actions by large intermediate purchasers, and state attorneys general acting pursuant to statutory and common law authority) have sued cartel members for the overcharges caused by the price-fixed component, and in many instances have obtained significant recoveries from the cartel participants.

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Recent government and private litigation has raised the issue of whether price-fixing agreements made by foreign companies in foreign countries, particularly those agreements to fix the prices of component parts rather than the end-products that are eventually sold to American consumers, are subject to federal and state antitrust laws. The statute enacted to address this question under the Sherman Act, the Foreign Trade Antitrust Improvements Act of 1982 ("FTAIA"),6 has proven so inscrutable that it has caused several Courts of Appeals recently to revise (and sometimes reverse) previous pronouncements regarding the application of U.S. antitrust law to foreign conduct. Most colorfully, the Seventh Circuit, after issuing and withdrawing a series of unusual orders, agreed to have a panel including Judge Posner re-hear a recent FTAIA case involving Motorola Mobility LLC, ("Motorola"). With all this upheaval and some inconsistent results, a trip to the Supreme Court — which has not parsed the FTAIA in a decade7 — looks likely in the near future. This article discusses some of these recent and anticipated developments. The authors typically represent plaintiffs, and this article and opinions expressed reflect that point of view.


Congress enacted the FTAIA in 1982 in "respon[se] to concerns regarding the scope of the broad jurisdictional language in the Sherman Act."8 The FTAIA "initially lays down a general rule placing all (nonimport) activity involving foreign commerce outside the Sherman Act’s reach. It then brings such conduct back within the Sherman Act’s reach provided that the conduct both (1) sufficiently affects American commerce, i.e. it has a ‘direct, substantial, and reasonably foreseeable effect’ on American domestic, import, or (certain) export commerce, and (2) has an effect of a kind that the antitrust law considers harmful, i.e., the ‘effect’ must give rise to a [Sherman Act] claim.’"9 As the Supreme Court explained, "the FTAIA seeks to make clear to American exporters (and to firms doing business abroad) that the Sherman Act does not prevent them from entering into business arrangements (say, joint-selling arrangements), however anticompetitive, as long as those arrangements adversely affect only foreign markets."10

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The TFT-LCD litigation, including criminal cases brought by the U.S. Department of Justice and civil cases brought by various private plaintiffs at all levels of the distribution chain, has generated the most opinions and turmoil so far. This massive, multidistrict litigation, first initiated in late 2006 and still ongoing, concerns a cartel among Thin-Film-Transistor Liquid Crystal Display ("TFT-LCD") panel manufacturers located in South Korea, Japan, and Taiwan. Some of the defendants, e.g., Samsung, LG, and Sharp, are vertically integrated, so that some of the panels affected by the cartel were incorporated into televisions, computer monitors, laptops, cell phones and other products sold by their subsidiaries or by third party resellers in the United States and elsewhere in the world. Other defendants, who are located in Taiwan, only made panels and did not incorporate them into their own subsidiaries’ products. Some of those panels were bought by the vertically-integrated defendants, while others were sold to third parties in Asia who assembled the consumer products but were not part of the conspiracy. Some of those products were eventually sold in the United States, while others were sold throughout the world. The distribution channels were multi-layered, non-uniform, and complex, such that the price-fixed panels may have passed through many different levels before reaching the ultimate consumers who bought the finished products.

Complaints for damages and injunctive relief were filed by classes of direct purchasers under federal antitrust law and by indirect purchasers (invoking Class Action Fairness Act diversity jurisdiction)11 under state Illinois Brick repealer laws, including the California Cartwright Act and Unfair Competition Law. Judge Susan Illston, Northern District of California, denied defendants’ FTAIA dispositive motions in the class actions, at both the pleading and summary judgment stages. Especially in the indirect purchaser case, defendants stressed the complex nature of the distribution chain, and argued that the effect therefore was not "direct" as required by the statute. The indirect purchasers emphasized the evidence that the defendants knew that their agreements on LCD panel prices would cause higher prices for products sold in the U.S., and that they tracked those increases to make sure that their agreement was working as intended. The indirect purchasers also pointed to evidence that most defendants had U.S. subsidiaries and employees who facilitated the agreements in some manner, that the defendants dealt directly with original equipment manufacturers (OEMs) in the U.S. who sold products to class members, and that the companies which pleaded guilty to participating in unlawful cartel activity admitted as part of their guilty pleas that commerce in the United States was affected. Finally, the indirect purchasers argued that whatever the FTAIA’s effect on a Sherman Act claim, the FTAIA should not be applied to the Cartwright Act and the other state law claims alleged in the case.12 The court concluded that conduct had a direct effect on U.S. commerce, and on that basis denied the motion. The court did not address the merits of the issue of whether the FTAIA applies to state law claims.13

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A. The Motorola Case in the LCD Multi-District Litigation

A number of companies opted out of one or both of the LCD class actions and filed as direct action plaintiffs. Some direct action plaintiffs, including Motorola, also alleged a conspiracy by the same defendants to fix prices for smaller panels used in cellphones. Motorola’s complaint was originally filed in 2009 in the Northern District of Illinois, where it is headquartered, and its case was transferred by the Judicial Panel on Multi-District Litigation to Judge Illston for pretrial proceedings.

Motorola’s foreign subsidiaries assigned their claims to the parent company. Although these subsidiaries directly purchased and received delivery of the panels from the defendants, the parent Motorola alleged that it directed and approved the prices and quantities of panels purchased by those subsidiaries. Motorola alleged injury for three categories of panel purchases: "(1) LCD Panels delivered by the Defendants to Motorola in the United States; (2) LCD Panels delivered to Motorola manufacturing facilities abroad for inclusion in Motorola devices imported into the U.S. by Motorola and later sold by Motorola to customers in the United States; and (3) LCD Panels delivered to Motorola manufacturing facilities abroad for inclusion in Motorola devices sold to Motorola customers abroad."14The second and third categories were the so-called "foreign injury claims" at issue in the various FTAIA motions.

Defendants moved to dismiss Motorola’s foreign injury claims. In In re TFT-LCD (Flat Panel) Antitrust Litig., 2010 WL 2610641 (N.D. Cal. 2010) [hereinafter Motorola I], Judge Illston granted the defendants’ motion to dismiss to the extent it was based on foreign injury caused by foreign purchases of LCD panels and products (Categories 2 and 3 above). The court first rejected Motorola’s contention that the products that were ultimately imported were not covered by the FTAIA. The court reasoned that the conduct of the defendants at issue for sales to the foreign subsidiaries did not involve importing. The court also agreed with the defendants that "the amended complaint does not allege any facts showing how Motorola’s foreign injuries were proximately caused by any domestic effects of defendants conduct…Motorola’s complaint generally alleges that defendants engaged in a ‘global conspiracy’ that impacted ‘global prices’ and that Motorola’s foreign affiliates ‘suffered injury as a result of defendants’ antitrust violations’…[T]hese allegations fall far short of alleging that the domestic effect of defendants’ conduct gave rise to Motorola’s foreign injuries."15 Two of the cartel participants, Sharp and Epson, not only admitted to unlawful conduct in the Northern District of California (as did every cartel participant except AU Optronics), but specifically identified Motorola in their guilty pleas as one of the customers overcharged for LCD panels. However, this was not enough in the court’s view to show a domestic effect that caused injury to the foreign subsidiaries.16

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Motorola was granted leave to amend and filed a Second Amended Complaint, adding new allegations concerning defendant’s conduct in the United States, how Motorola was specifically targeted, its control over its subsidiaries, and "the method by which global prices were negotiated and set by Motorola’s procurement team in Illinois and the connection to Motorola’s foreign injury."17 These new allegations were sufficient in the court’s view "to establish a concrete link between defendants’ price-setting conduct (the collusion between the defendants to establish an artificially high price for LCD Panels), its domestic effect (the negotiations between Motorola and defendants that resulted in the setting of a global, anticompetitive price for all LCD Panels sold to Motorola) and the foreign injury suffered by Motorola and its affiliates (payment of higher prices abroad)."18

After the close of discovery, Judge Illston denied the defendants’ summary judgment motion directed at the sufficiency of the evidence to support Motorola’s FTAIA foreign injury claims, holding that it was a matter for the jury to decide.19

B. The Motorola Case on Remand to the Northern District of Illinois

Motorola’s case was remanded back to the Northern District of Illinois for trial, and assigned to Judge Joan Gottschall. The defendants moved for reconsideration of Judge Illston’s summary judgment decision, again arguing that the domestic effects requirement was not satisfied. Motorola opposed on the merits and also on the basis that the standards for reconsideration were not met, because the defendants raised no new argument that had not already been considered by the MDL court. Judge Gottschall granted the motion for reconsideration and granted the motion for summary judgment.20 She reasoned that:

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The…fundamental problem with the MDL court’s analysis is that it did not address how the domestic conduct that Motorola argues it can prove constituted a domestic effect that gives rise to a Sherman Act claim. Although this was the only issue raised by Defendants in their motion for reconsideration, Motorola has offered no authority to support the MDL court’s conclusion that because the jury could infer that final decisions regarding pricing of LCD panels took place in the United States, Motorola could prove that this domestic effect gave rise to its Sherman Act claim.21

Judge Gottschall did not address Judge Illston’s view that domestic effects could be established by "the negotiations between Motorola and defendants that resulted in the setting of a global, anticompetitive price for all LCD Panels sold to Motorola"–negotiations which took place in the United States.22 Motorola did not just make "final decisions" in the United States to approve prices negotiated by foreign subsidiaries, implying some rubber stamp; it negotiated those prices directly, and its subsidiaries were bound by them. Simply by carrying out the parent’s instructions, the subsidiaries were not breaking the chain of proximate causation that set in motion the activities that caused their injury. In Motorola’s view, it suffered injury when it was unknowingly induced to agree to buy panels at artificially high prices by the defendants through negotiations in the United States. In contrast, Judge Gottschall stated that, "for Sherman Act purposes, the injury arose when Motorola’s foreign affiliates purchased LCD panels at inflated prices, not when Motorola decided at what price those purchases would be made."23 This seemingly elevates form over substance. The injury that gave rise to Motorola’s antitrust claim occurred when it agreed to pay anticompetitive prices. Simply by carrying out the parent’s instructions to comply with those agreements, the subsidiaries did not break the chain of proximate causation, or incur new and independent injury.

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Judge Gottschall went on to hold that even if there was a sufficient domestic effect, there was not a "substantial" effect on American domestic or import commerce, as required by the FTAIA. She acknowledged that "an increase in domestic prices, or a reduction in domestic supply, can constitute a substantial domestic effect that give[s] rise to a Sherman Act claim," citing the Seventh Circuit’s decision in Minn-Chem,24 but believed that "the economic consequences of Motorola’s domestic approval of LCD prices were not felt in the U.S. economy…"25 That is a difficult rationale in light of the tens of billions of dollars of LCDs that were included in products sold in the United States during the course of the conspiracy. At the very least, it is difficult to understand why that was not an issue that a jury should be allowed to decide as Judge Illston had found.26

C. The Motorola Mobility Case in the Seventh Circuit

Judge Gottschall certified her FTAIA opinion, issued on January 23, 2014, for interlocutory appeal, which was uncontested and accepted by the Seventh Circuit on March 13, 2014. Two weeks later, on March 27, 2014, without receiving any briefing and without oral argument, the Seventh Circuit issued a brief, unanimous opinion affirming the lower court. The opinion was written by Judge Posner, and joined by Judge Kanne and Judge Rovner.27 Although this original panel decision was vacated by a subsequent order, its reasoning and the controversy that it generated warrant discussion.

The Court of Appeals held that all of Motorola’s foreign purchases (99% of the total purchases at issue) were barred by the FTAIA. First, it held that there was no direct effect on U.S. commerce:

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The alleged price fixers are not selling the panels in the United States. They are selling them abroad to foreign companies (the Motorola subsidiaries) that incorporate them into products that are then exported to the United States for resale by the parent. The effect of component price fixing on the price of the product of which it is a component is indirect, compared to the situation in Minn-Chem, where "foreign sellers allegedly created a cartel, took steps outside the United States to drive up the price of a product that is wanted in the United States, and then (after succeeding in doing so) sold that product to U.S. customers."28

Second, the panel held that any effect on domestic commerce did not give rise to Motorola’s antitrust claim:

The effect of the alleged price fixing on [domestic] commerce must ‘give [ ] rise to’ an antitrust claim. The effect of the alleged price fixing on that commerce is mediated by Motorola’s decision on what price to charge U.S. consumers for the cellphones manufactured abroad that are alleged to have contained a price-fixed component……So the effect in the United States of the price fixing could not give rise to an antitrust claim.29
If Motorola’s foreign subsidiaries have been injured by violations of the antitrust laws in the countries in which they do business, they have remedies; if the remedies are inadequate, or if the countries don’t have or won’t enforce antitrust laws, these were risks that the subsidiaries (and hence Motorola) assumed by deciding to do business in those countries. What they didn’t have if they overpaid was a claim under the Sherman Act; no more does their parent.30

Finally, the panel stated that "[t]he position for which Motorola contends would if adopted enormously increase the global reach of the Sherman Act, creating friction with many foreign countries and ‘resent[ment] at the apparent effort of the United States to act as the world’s competition police officer,’ a primary concern motivating the foreign trade act. It is a concern to which Motorola is oblivious."31

The first basis for the panel decision, that a conspiracy to fix the price of a component cannot have a direct effect on domestic commerce in products incorporating that product, was not even raised by the defendants before Judge Gottschall. In construing "direct" in the FTAIA as functionally equivalent to "direct purchaser" standing under Illinois Brick, the panel’s decision cannot be reconciled with the Seventh Circuit’s en banc decision in Minn-Chem, which expressly adopted the DOJ Antitrust Division’s view that "direct" means only a "reasonably proximate causal nexus," and observed that requiring that the effect be "immediate" (as the panel decision essentially required) "comes close to ignoring the fact that straightforward import commerce has already been excluded from the FTAIA."32

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Likewise, the second basis for panel’s decision, that any effect on domestic commerce did not give rise to Motorola’s antitrust claim, failed to acknowledge the specific evidence offered by Motorola of its direct negotiations with the defendants in the U.S. concerning the prices its foreign subsidiaries paid for price-fixed LCD panels delivered outside the U.S. This is inconsistent with Empagran’s holding that the "gives rise to" requirement simply means that the plaintiff suffered "an effect of the kind that antitrust law considers harmful."33

Finally, the foreign policy concerns expressed by the panel were quite the opposite of those expressed by the en banc court in Minn-Chem, which observed that "[t]he host country for the cartel will often have no incentive to prosecute" the cartel, and would be "pleased to reap economic rents from other countries."34

Motorola petitioned for rehearing or rehearing en banc, arguing that the panel’s decision conflicted with Minn-Chem and Empagran, and would eviscerate antitrust enforcement by the government and private plaintiffs. Motorola also argued that it was essentially a single entity with its foreign subsidiaries, had been assigned their claims, and that its corporate structure should have no bearing on the FTAIA analysis. Motorola also criticized the panel for reaching a decision without briefing or oral argument, and without the benefit of the government’s views.35

The American Antitrust Institute (AAI), "an independent and nonprofit education, research, and advocacy organization devoted to advancing the role of competition in the economy, protecting consumers, and sustaining the vitality of the antitrust laws," submitted an amicus brief in support of Motorola. It echoed the policy concerns expressed by Motorola, argued that "the panels’ crabbed reading of the FTAIA domestic effects exception undermines deterrence of foreign cartels that harm U.S. businesses and consumers,"36 and criticized the panel decision for adopting a "super Illinois Brick rule" that would preclude indirect purchasers in the United States from recovering for injury caused by foreign cartels.37

A number of prominent economists submitted an amicus brief in support of Motorola. They argued that as a matter of economic policy, purchases by foreign affiliates of U.S. companies "should be permitted to seek treble damages in U.S. courts to deter the formation of cartels that harm U.S. consumers and businesses."38

The United States Department of Justice and the Federal Trade Commission submitted a joint brief, with the authorization of the Solicitor General, in support of Motorola’s petition for rehearing or rehearing en banc. The government’s brief argued that the panel decision conflicted with Minn-Chem and other precedent, that "injuries to indirect purchasers are not too remote, even when they are several steps removed from the antitrust defendant in the chain of distribution," and that "a natural and probable consequence of increasing the price of a critical and substantial component like LCD panels is an increase in the price of cellphones."39 Thus, "the panel’s narrow view of the statutory term ‘direct’ is likely to constrain the government’s ability to effectively prosecute cartels that substantially and intentionally harm U.S. commerce and consumers, as well as prevent those injured in the United States from redressing that harm."40 The government brief stated that enforcement of U.S. antitrust laws against foreign cartels that harm U.S. consumers was fully consistent with the Congressional purpose in enacting the FTAIA, and consistent with longstanding precedent.

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Apparently not convinced that the DOJ/FTC brief reflected the unified position of the federal government, on May 1, 2014, the Seventh Circuit panel issued an unusual order inviting the State Department and the Commerce Department to submit their own amicus briefs, expressing a "special interest" in their "views on the potential effects on foreign relations resulting from the issues presented by this case."41 The Solicitor General, Donald Verrilli, responded by letter on May 19, thanking the Court for the invitation, but stating that he had authorized the amicus brief "on behalf of the United States after appropriate consultation with interested components of the federal government, and it reflects the views of the United States …."42 The Solicitor General added that the government did not plan to submit any additional briefs. Finally he observed, "Motorola alleges substantially the same unlawful conduct as gave rise to" criminal prosecutions by the DOJ, and that the government was "not aware of any instance in which a foreign government has expressed disapproval of those prosecutions to any official of the United States."43

Refusing to accept at face value the Solicitor General’s representation that he had done "appropriate consultation with interested components of the federal government," on May 22 the panel ordered the Solicitor General to identify by name "the officials that he consulted with, the nature of the consultation," and the meaning of the representation that the Solicitor General’s amicus brief "reflects the views of the United States."44 Apparently cooler heads prevailed at the court before the Solicitor General could respond to this, because the next day the order was withdrawn without explanation, but with a warning that the court still might seek more information.45

The defendants argued against en banc review as not warranted because the decision was fully consistent with Minn-Chem, Empagran, and other precedent. Motorola had contended that its injury stemmed from higher panel prices and had waived the argument that its claims arose from higher cellphone prices, and "higher U.S. cellphone prices at most would give rise to claims by U.S. cellphone purchasers or the U.S. government—not Motorola."46 Thus, the defendants downplayed the potential wider ramifications of the panel decision.

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The defendant’s opposition to the petition for rehearing was supported by amici briefs from the Korea Fair Trade Commission and Japan’s Ministry of Economy, Trade, and Industry; and by a letter from The Republic of China, Taiwan’s Ministry of Economic Affairs. (These are the three countries where the LCD cartel members are headquartered.) These countries expressed opposition to "expansive application of U.S. law" that would conflict with sovereignty of other nations and could interfere with enforcement of their own antitrust laws. The Japanese brief in particular referenced a similar submission in a prior case in which the governments of the U.K., Germany, Switzerland and the Netherlands criticized "overly aggressive" extraterritorial enforcement of U.S. antitrust laws.47

Motorola moved for permission to file a reply brief in support of its petition for rehearing en banc, arguing that it had not been able to fully explain its position to the panel.48 This motion was opposed by the defendants, and denied by an order issued by Judge Posner on May 29.49 Later the same day, Motorola filed a request that its motion to file a reply be distributed to the en banc court.50 That motion was construed by Judge Posner as a motion for reconsideration, which, apparently reconsidering his hastiness, he granted the same day, ordering that Motorola’s reply and the defendants’ opposition to the motion for leave to file the reply be distributed to the full court.51

On June 2, 2014, the panel asked the Solicitor General to submit another brief or letter "concerning the potential impact on U.S. foreign commercial relations, and on U.S. foreign relations more generally" regarding the concerns expressed by the foreign governments in their amici oppositions to the petition for rehearing. The government responded to this more polite request with a supplemental brief filed on June 27. The government reiterated arguments it had previously made, stated that the concerns expressed by the foreign governments were unwarranted, and observed that those countries themselves had asserted the right to enforce and had enforced their own competition laws against foreign conduct that impacted their own commerce, including the imposition of substantial fines. Such enforcement is also consistent with the practice of the European Union and other foreign jurisdictions. However, the government drew a distinction between Motorola’s Category 3 claims, based on purchases of LCD panels that never entered the United States and thus "closely resemble the foreign purchasers’ claims in Empagran," and Category 2 claims, based on panels incorporated into cellphones sold in the United States, which "are quite different." The government thus seemed to invite the Seventh Circuit to narrow its ruling and reject only Motorola’s Category 3 claims for finished products ultimately sold outside of the U.S.

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On July 1, 2014, the Seventh Circuit issued an order stating that "the panel has decided to rehear this appeal" and vacating its March 27 opinion discussed above.52 A separate order the same day set a very quick briefing and hearing schedule—July 9 for Motorola, July 16 for the defendants, and oral argument on July 21.53 By subsequent orders issued July 3 and July 11, the panel stated that it would allow motions to participate by amicus curiae under this schedule, and granted the government’s motion to be allowed ten minutes of oral argument separate from the time allotted to the parties.54

Motorola filed two briefs on July 9, a supplemental brief to the panel and a petition for hearing en banc.55 Since the original panel opinion had been vacated, the case was still in the procedural posture of Motorola’s petition for an interlocutory appeal. The supplemental brief to the panel argued the reasons why the panel should grant the petition for leave to appeal under the standard of 28 U.S.C. §1292(b), which is "a controlling question of law as to which there is a substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation."56 Motorola went on to argue that "the panel should stop with that determination. There is no federal rule, local rule, operating procedure, published guidance, or other provision that allows a motions panel considering a request for permission to appeal under [28 U.S.C.] Section 1292(b) to proceed directly to the merits."57

Motorola’s July 9 petition for hearing en banc was an attempt to prevent the motions panel from considering the merits of the appeal. It argued that the full court should determine "when may a motions panel of this Court considering only a request for permission to appeal pursuant to 28 U.S.C. § 1292(b) decide the merits of the appeal?"58 Motorola critically recounted the unusual series of orders before the panel and argued why the panel’s consideration of the merits was improper.59 Although sharply attacking the panel’s handling of the case to date, Motorola stated that "it is not seeking to disqualify the panel or to prevent its members from being eligible for random assignment to the case in the ordinary course. The problem is process, not personnel."60

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On July 15, without waiting for a determination by the en banc court, the panel issued another order, granting the petition for interlocutory appeal, and vacating the expedited briefing schedule and the oral argument set for July 21.61 The court ordered that the opening brief by filed on August 14, the opposition by September 15, and the reply by September 29.62 The date for oral argument and the time allotments to the parties and the United States were to be set forth in a separate order. The next day, July 16, Motorola withdrew its petition for rehearing en banc.63 Given the speed with which the Seventh Circuit and Judge Posner in particular normally operate, it is likely that oral argument and a new decision will be issued before the end of 2014. Whichever side wins, a petition for rehearing or rehearing en banc and an eventual petition for writ of certiorari seem inevitable.


After the Seventh Circuit issued its Motorola Mobility decision, but before the panel vacated its order, the Second Circuit weighed in on the FTAIA in Lotes Co., Ltd. v. Hon Hai Precision Industry Co.64 Like Motorola Mobility, Lotes involved allegations of anticompetitive practices by Asian manufacturers of electronics components that were incorporated in finished products sold in the United States. The Lotes decision adopted the interpretation of the FTAIA’s "direct, substantial, and reasonably foreseeable effect" requirement that the Seventh Circuit set forth in Minn-Chem, but undertook a different analysis than the panel in Motorola Mobility.

A. Allegations and Decision in Lotes

Lotes is a Taiwanese corporation that designs and manufactures electronics components for notebook computers, including Universal Serial Bus ("USB") connectors, which are used to connect peripheral devices (e.g., printers, keyboards, and the like) to those computers.65 Lotes sued several Taiwanese and Chinese manufacturers for violations of Sections 1 and 2 of the Sherman Act (and state law) by conspiring to monopolize the market for USB 3.0 connectors, the latest industry standard for those components.66 According to the complaint, the defendants refused to issue licenses to allow Lotes to manufacture USB 3.0 connectors in violation of their obligations under an industry standard-setting organization.67 Lotes also alleged that certain defendants had sued its subsidiaries in China for patent infringement, in actions that sought to enjoin two of Lotes’s factories from manufacturing and selling USB 3.0 connectors and to compel the destruction of Lotes’s existing inventory and specialized manufacturing equipment.68 Lotes further claimed that the defendants threatened patent infringement litigation against other firms that manufactured USB 3.0 connectors.69

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In effect, Lotes alleged that the defendants sought to shut it out as a competitor and chill competition from other manufacturers of USB 3.0 connectors. Of particular importance for the FTAIA, Lotes claimed that the defendants’ anticompetitive scheme would have downstream effects globally and in the United States, as price increases resulting from these monopolistic practices would "inevitably" be passed on throughout the production process to consumers of notebook computers.70 The defendants’ conduct fell within the exception to the FTAIA, according to Lotes, because "[a]nything that affects the price, quantity, or competitive nature of the production market for USB 3.0 connectors will … have a direct, substantial, and reasonably foreseeable effect on U.S. commerce."71

The district court dismissed Lotes’s complaint, concluding that Lotes had failed to satisfy an exception to the FTAIA by plausibly alleging a direct, substantial, and reasonably foreseeable effect on U.S. domestic commerce or import commerce.72

On appeal, the Second Circuit affirmed dismissal on alternative grounds. In doing so, the Second Circuit reached two significant conclusions about the FTAIA.73 First, the court interpreted the term "direct … effect" under that statute (15 U.S.C. § 6(a)(1)) as meaning a "reasonably proximate causal nexus."74 This is consistent with the Seventh Circuit’s decision in Minn-Chem, but at odds with the Ninth Circuit’s view that "an effect is ‘direct’ if it follows as an immediate consequence of the defendant’s activity."75 Second, the court explained, in apparent conflict with the Seventh Circuit’s now-vacated order in Motorola Mobility, that foreign anticompetitive practices concerning components which create harmful downstream effects on U.S. domestic commerce are not necessarily "impermissibly remote and indirect" to require dismissal under the FTAIA.76 Nonetheless, the Second Circuit held that the conduct of which Lotes complained failed to "give rise to a claim" under the FTAIA (15 U.S.C. § 6(a)(2)).77 These conclusions are discussed below.

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B. The "Direct Effect" Requirement Under the FTAIA is Satisfied Where There is a Reasonably Proximate Causal Nexus Between the Defendants’ Conduct and the Effect on U.S. Domestic or Import Commerce

The Second Circuit addressed the meaning of the FTAIA’s requirement that the defendants’ conduct must have a "direct, substantial, and reasonably foreseeable effect" on domestic or import commerce to be actionable. The district court in the Lotes case had followed the Ninth Circuit’s ruling in LSL Biotechnologies, which concluded that "an effect is ‘direct’ if it follows as an immediate consequence of the defendant’s activity."78 In adopting the "immediate consequence" standard, the Ninth Circuit had looked to the Supreme Court’s interpretation of the term "direct" under the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. §§ 1602-1611 in Republic of Arg. v. Weltover, Inc., 504 U.S. 607, 618 (1992). The Second Circuit disagreed with the court below and the Ninth Circuit’s approach in LSL Biotechnologies, instead adopting the Seventh Circuit’s formulation of the FTAIA: "the term ‘direct’ means only ‘a reasonably proximate causal nexus.’"79 As the court explained, the "reasonably proximate causal nexus" approach, which had been advocated by the United States and the Federal Trade Commission, was "less stringent" than the "immediate consequence" standard.80

The Second Circuit found multiple reasons for not interpreting the FTAIA and the FSIA consistently. First, the purposes of the statutes differ greatly. Because the FSIA codifies the general rule that foreign nations enjoy sovereign immunity, while creating limited statutory exceptions to allow suit in the United States, the court explained that "the ‘direct effect’ exception construed in Weltover[] must be carefully patrolled to preserve the FSIA’s ‘general rule of immunity.’"81 In contrast, the FTAIA "is a substantive antitrust statute designed ‘to clarify … the Sherman Act’s scope as applied to foreign commerce.’"82 Accordingly, the text of the FTAIA need not be interpreted as restrictively as the FSIA.

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Second, the two statutes differ textually. The FSIA refers to a "direct effect," while the FTAIA contains the phrase "direct, substantial, and reasonably foreseeable effect."83 As the Second Circuit noted, in equating a "direct effect" under the FSIA to an "immediate consequence," the Supreme Court rejected the notion that the FSIA contains a requirement of substantiality or foreseeability.84 In contrast, the FTAIA contains those requirements explicitly. "Reading ‘direct’ as ‘immediate’ would rob the separate ‘reasonabl[e] foreseeab[ility]’ requirement of any meaningful function, since we are hard pressed to imagine any domestic effect that would be both ‘immediate’ and ‘substantial’ but not ‘reasonably foreseeable.’"85 The Second Circuit continued: "To demand that any domestic effect must follow as an immediate consequence of a defendant’s foreign anticompetitive conduct would all but collapse the FTAIA’s domestic effects exception into its separate import exclusion."86

Instead, the Second Circuit adopted the "reasonably proximate causal nexus" standard, which tethers the term "direct" to the concept of proximate causation.87 Under a proximate cause analysis, the Second Circuit explained, courts can determine whether alleged anticompetitive conduct is of a type that should be redressed under the Sherman Act by looking at "whether the injury that resulted was within the scope of the risk created by the defendant’s [wrongful] act; whether the injury was a natural or probable consequence of the [conduct]; whether there was a superseding or intervening cause; whether the [conduct] was anything more than an antecedent event without which the harm would not have occurred."88 The Ninth Circuit’s "immediate consequence" standard in LSL Biotechnologies ignored these concerns in favor of a single factor, "the spatial and temporal separation between the defendant’s conduct and the relevant effect."89 Thus, the Second Circuit’s articulation of the standard for interpreting a "direct . effect" under the FTAIA is consistent with the Seventh Circuit’s holding in Minn-Chem, but opens up a divide from the Ninth Circuit’s view in LSL Biotechnologies.

C. The FTAIA Does Not Exclude Foreign Anticompetitive Practices Concerning Components That Create Harmful Downstream Effects on U.S. Domestic Commerce from the Reach of U.S. Antitrust Law

[Page 16]

The next major conclusion of the Second Circuit is that the FTAIA does not draw a bright line excluding from the reach of the Sherman Act foreign anticompetitive conduct affecting the market for a component, which is later sold in the United States as part of a finished product. To draw such a bright line in effect would be to apply the "immediate consequence" standard that the court had just rejected. Instead, the "reasonably proximate causal nexus" standard requires a case-by-case analysis of the market structures and relationships throughout the chain of commerce to determine whether the effect of foreign anticompetitive conduct on domestic or import commerce is sufficiently direct.90

The Second Circuit determined that the district court in Lotes erred by drawing a bright line. The district court had concluded that the effect on the U.S. market for finished products containing USB 3.0 connectors (e.g., notebooks, desktop computers, and severs) of the defendants’ alleged anticompetitive conduct in attempting to monopolize the market for those components in Asia was simply too attenuated to satisfy a "direct . effect" under the FTAIA.91 But the Second Circuit found that the district court was wrong to place "near dispositive weight on the fact that USB 3.0 connectors are manufactured and assembled into finished computer product ‘in China’ before being sold in the United States."92 To hold that such foreign conduct could not have a direct effect on U.S. domestic or import commerce would be to ignore globalization:

This kind of complex manufacturing process is increasingly common in our modern global economy, and antitrust law has long recognized that anticompetitive injuries can be transmitted through multi-layered supply chains. Indeed the Supreme Court held that claims by indirect purchasers are ‘consistent with the broad purposes of the federal antitrust laws: deterring anticompetitive conduct and ensuring the compensation of victims of that conduct.’93

The Second Circuit continued:

There is nothing inherent in the nature of outsourcing or international supply chains that necessarily prevents the transmission of anticompetitive harms or renders any and all domestic effects impermissibly remote and indirect. Indeed, given the important role that American firms and consumers play in the global economy, we expect that some perpetrators will design foreign anticompetitive schemes for the very purpose of causing harmful downstream effects in the United States. Whether the causal nexus between foreign conduct and a domestic effect is sufficiently "direct" under the FTAIA in a particular case will depend on many factors, including the structure of the market and the nature of the commercial relationships at each link in the causal chain. Courts confronting claims under the FTAIA will have to consider all of the relevant facts, using all of the traditional tools courts have used to analyze questions of proximate causation.94

[Page 17]

This passage of the opinion demonstrates that, while the Second Circuit adopted the same standard of the Seventh Circuit for interpreting the term "direct, substantial, and reasonably foreseeable effect," it is in the application of that standard that the appellate courts diverge. The Second Circuit’s view that courts must analyze the downstream effect on U.S. commerce of foreign anticompetitive practices based on the factors present in each particular case is markedly different than the Seventh Circuit’s conclusion in the now-vacated order in Motorola Mobility that "[t]he effect of [foreign] component price fixing on the price of the product of which it is a component is indirect," as a matter of law.95 It is perhaps this distinction between the appellate courts that prompted the Seventh Circuit to withdraw its prior order and rehear the Motorola Mobility appeal.

D. The Alleged Anticompetitive Conduct Failed to "Give Rise To" Lotes’s Claim Under the Sherman Act and the FTAIA

Despite having identified individual factors for analysis in a foreign antitrust case, the Second Circuit did not analyze those factors in Lotes or remand with directions for the district court to do so, because it determined that the alleged anticompetitive conduct did not "give[] rise to [the plaintiff’s] claim" under the Sherman Act.96 Whether foreign anticompetitive conduct gives rise to the plaintiffs claim under 15 U.S.C. § 6(a)(2) entails a separate causation analysis from whether the foreign conduct has a "direct, substantial, and reasonably foreseeable effect" on U.S. domestic or import commerce under 15 U.S.C. § 6(a)(1).97 The Second Circuit agreed with several other appellate courts that to satisfy the "gives rise to" prong of the FTAIA, "the domestic effect must proximately cause the plaintiff’s injury."98

The court then determined that the defendants’ anticompetitive conduct did not proximately cause Lotes’s injury.99 Lotes had alleged that the defendants’ foreign conduct had the effect of increasing prices of consumer electronics containing USB 3.0 connectors in the United States. The court held that those higher prices—the domestic effect—did not cause Lotes’s injury of being excluded from the USB 3.0 market in Asia; instead, "that injury flowed directly from the defendant’s [sic] exclusionary foreign conduct."100 Because Lotes’s injury preceded any domestic effect in the causal chain, under the FTAIA it was outside the reach of the Sherman Act.101 The Second Circuit also rejected the argument that the defendants’ failure to license their U.S. patents proximately caused Lotes’s injury, because the defendants’ foreign conduct, namely their independent patent infringement lawsuits in China, still would have harmed Lotes, even if it had had access to the defendants’ U.S. patents.102 As a result, the Second Circuit affirmed dismissal of Lotes’s complaint on alternative grounds of failure to satisfy 15 U.S.C. § 6(a)(2).

[Page 18]

E. The Implications of Lotes

The Second Circuit’s interpretation of the FTAIA strikes a balance in complex antitrust cases taking place in the global economy. In adopting the "reasonably proximate causal nexus" standard for determining a "direct … effect," Lotes avoids the overly-formalistic approach of the Ninth Circuit in LSL Biotechnologies of requiring causation to turn on the immediacy of the "spatial and temporal separation between the defendant’s conduct and the relevant effect."103 In doing so, Lotes recognizes that anticompetitive behavior halfway around the world often does have real world effects on U.S. commerce. Simply because components are incorporated into finished products abroad before they are sold to U.S. consumers does not make the effect of the anticompetitive conduct indirect for purposes of the FTAIA. Instead, that merits inquiry can only be determined through a full proximate causation analysis. Should the effect of a defendant’s foreign monopolistic or cartel conduct on domestic or import commerce also be substantial and reasonably foreseeable, there is no reason why it should not be subject to antitrust laws in the United States.

Equally important is the Second Circuit’s holding that component cases like Lotes must be analyzed on a case-by-case basis to determine whether the alleged foreign anticompetitive conduct has a sufficiently direct effect on U.S. domestic or import commerce. The bright line drawn in the Seventh Circuit’s original Motorola Mobility decision would eliminate large swaths of direct purchaser claims under that Sherman Act and indirect purchaser claims under state law (to the extent the FTAIA applies to state law claims), because the Seventh Circuit concluded as a matter of law that the sale of price-fixed components abroad would only "filter[] through many layers and finally cause[] a few ripples in the United States."104 But such a limited view fails to take into account the evidence in many cases that has shown foreign actors engaging in anticompetitive behavior with intent to injure U.S. consumers. Again, if a proximate cause analysis shows, for example, that the injury suffered by U.S. consumers from price-fixing electronics components in Asia was within the scope of risk created by a cartel or was a natural or probable consequence of foreign anticompetitive conduct—as occurred in TFT-LCD for example—the Second Circuit’s approach would bring such conduct within the scope of the Sherman Act.

The Motorola Mobility court now has the opportunity to undertake a proximate cause analysis rather than adopt a bright-line rule. If so, then the court may conclude that the evidence showed there was a disputed issue of material fact as to the existence of a reasonably proximate causal nexus between the cartel’s conduct and Motorola’s category 2 (foreign components incorporated into finished products imported into the U.S.) and possibly category 3 claims (foreign components incorporated into finished products sold outside the U.S.). Such a result would be more in line with Judge Illston’s "pre-remand" decision in Motorola III, which denied summary judgment in favor of allowing the issue to go to a jury.

[Page 19]


Five weeks after the Second Circuit issued the Lotes decision, the Ninth Circuit had the opportunity to address the "direct, substantial, and reasonably foreseeable effect" exception to the FTAIA in the context of the TFT-LCD cartel. The court largely sidestepped those issues, choosing instead to decide the case on the basis of the "import trade or import commerce" exception to the FTAIA.

United States v. Hsiung, ___ F.3d ___, 2014 WL 3361084 (9th Cir. July 10, 2014), involved appeals from the criminal convictions of Taiwanese TFT-LCD manufacturer AU Optronics ("AUO"), its U.S.-based retailer and wholly-owned subsidiary AU Optronics Corporation of America ("AUOA"), and two of AUO’s executives for violating Section 1 of the Sherman Act. Representatives of AUO and five other major TFT-LCD manufacturers met in Taiwan between October 2001 and January 2006 to set target pricing and stabilize the price of TFT-LCD panels. A "substantial volume of goods" were sold to OEMs in the United States for use in consumer electronics. AUOA used reports generated from those meetings to negotiate prices for the sale of TFT-LCD panels to the OEMs. At trial, the government presented evidence that the defendants targeted OEMs in the United States, and that the defendants reaped hundreds of millions of dollars in profits from sales of price-fixed panels in the United States. The defendants were found guilty and appealed their convictions, and AUO also appealed its $500 million fine.105 The Ninth Circuit explained that the appeal raised "complicated issues of first impression regarding the reach of the Sherman Act in a globalized economy," including questions about the scope and applicability of the "import commerce" exclusion and the "domestic effects" exception to the FTAIA.106

With respect to the FTAIA, the trial court instructed the jury that the government was required to prove beyond a reasonable doubt that "the members of the conspiracy engaged in one or both of the following activities:

  1. fixing the price of TFT-LCD panels targeted by the participants to be sold in the United States or for delivery to the United States; or
  2. fixing the price of TFT-LCD panels that were incorporated into finished products such as notebook computers, desktop computer monitors, and televisions, and that this conduct had a direct, substantial, and reasonably foreseeable effect on trade or commerce in those finished products sold in the United States or for delivery to the United States.."107

[Page 20]

The jury convicted. On appeal, the defendants challenged the sufficiency of the indictment and proof as to both import trade and domestic effects.108 The Ninth Circuit rejected these arguments, holding that "the indictment contained the factual allegations necessary to establish that the FTAIA either did not apply or that its requirements were satisfied."109 The court also held that the government had sufficiently proved that the conspirators engaged in import commerce.110 Separately, the court clarified that foreign price fixing is subject to the per se prohibition of the Sherman Act, distinguishing the application of the rule of reason in the Ninth Circuit’s decision in Metro Industries.111

A. Import Trade Analysis

According to the Hsiung court, the FTAIA does not apply to import trade at all. The court examined the statute which provides that "the Sherman Act ‘shall not apply to conduct involving trade or commerce (other than import trade or import commerce).’"112 From this, the court held that "import trade, as referenced in the parenthetical statement, does not fall within the FTAIA at all. It falls within the Sherman Act without further clarification or pleading."113 That view was supported by the legislative history.114 As to what constitutes "import trade" under the FTAIA, the court determined that "the phrase means precisely what it says."115 Thus, direct transactions between foreign cartel members and U.S. purchasers constitute import trade or import commerce.116 As a result, the government did not need to identify the FTAIA in the indictment. Rather, it only needed to plead and prove that "the conspirators engaged in import commerce with the United States and that the price-fixing conspiracy violated § 1 of the Sherman Act."117

The government did exactly that. The court cited several allegations in the indictment supporting the government’s view that the defendants engaged in import trade with respect to TFT-LCDs. These allegations included that: the defendants "’engaged in the business of producing and selling TFT-LCDs to customer in the United States’"; their representatives and competitors reached agreements on prices for TFT-LCDs "’sold to certain customers, including customers located in the United States’"; and they regularly instructed AUOA employees in the United States to discuss TFT-LCD pricing to U.S. customers with their U.S.-based competitors, which those employees did do.118 These allegations supported the sufficiency of the indictment.

[Page 21]

At trial the evidence showed that AUO imported over one-million price-fixed TFT-LCD panels into the United States each month, and that the co-conspirators earned over $600 million from the importation of TFT-LCD panels.119 AUO and AUOA only imported the component panels, not any consumer products containing them. Nonetheless, the court held that "[i]mportation of this critical component of various electronic devises is surely ‘import trade or import commerce.’"120 This evidence was sufficient to allow the jury to convict the defendants for violating the Sherman Act.

The Ninth Circuit’s analysis in this regard is expansive. Because import commerce involves direct transactions between foreign cartel members and purchasers in the United States, a wide variety of conduct is implicated. Thus, evidence of the defendants’ negotiating prices with United States companies in the United States to sell panels at price targets fixed at conspiratorial meetings in Taiwan supported the government’s import trade theory.121

B. Domestic Effects Analysis

In analyzing the domestic effects exception to the FTAIA, the Ninth Circuit explained the distinctions between that provision and the import commerce exclusion: "Unlike import trade, which is exempted from the FTAIA altogether, if the government proceeds on a domestic effects theory, … the government must plead and prove the requirements for the domestic effects exception to the FTAIA, namely that the defendants’ conduct had a ‘direct, substantial, and reasonably foreseeable effect’ on United States commerce."122 The court concluded that the allegations of the indictment were sufficient in this regard.123

As an initial matter, the same allegations in the indictment that the court had considered sufficient with respect to import trade, also supported the domestic effects exception.124 The court noted the indictment’s allegation that "price-fixed TFT-LCDs were used in computers and other monitors that were sold in and substantially affected interstate commerce."125 In fact, according to the indictment, "’the substantial terms’ of the conspiracy were an agreement ‘to fix the prices of TFT-LCDs for use in notebook computers, desktop monitors, and televisions in the United States and elsewhere.’"126 That the indictment did not use the words "direct effects" did not render it defective, because the allegations clearly focused on the effects of foreign sales of TFT-LCD panels on United States commerce.127

[Page 22]

The defendants also challenged the sufficiency of the evidence as to the domestic effects exception. As the Ninth Circuit explained, "The essence of [the defendants’] objection is that the offshore conduct is too attenuated from the United States; that the intervening development, manufacture, and sale of the products worldwide resulted in a diffuse effect; and that the evidence does not support a ‘direct, substantial, and reasonably foreseeable effect’ on United States commerce."128 The court avoided the question, however, choosing instead to affirm the defendants’ convictions on the alternative ground that the government had proved they engaged in import trade.129

By resolving the appeal on an import trade analysis, the Ninth Circuit was able to acknowledge the tension among the circuits concerning the FTAIA but avoid wading into the thick of it. For example, the court recognized that its interpretation of "direct" effects as an "immediate consequence" was at odds with the Second Circuit’s "reasonably proximate causal nexus" standard, but simply sidestepped further discussion.130 Similarly, by resolving the matter on import commerce grounds, the Ninth Circuit did not need to address whether fixing the price of a component sold abroad for incorporation into a consumer good later sold in the United States was too attenuated to cause a "direct" effect on domestic commerce as a matter of law, as the Seventh Circuit originally decided in its now-vacated opinion in Motorola Mobility.131 These hotly-contested issues remain open for further clarification by the circuits and are likely to wind their way to the U.S. Supreme Court.


Except for the vacated opinion of a Seventh Circuit panel, the courts are reading the FTAIA broadly enough to punish international antitrust violators for the consequences of the harm they cause to American businesses and consumers. Recourse by U.S. victims to remedies in U.S. courts is increasingly important as more and more manufacturing shifts overseas. Access to U.S. courts should be facilitated by the Ninth Circuit’s interpretation of the "import trade" exclusion to the FTAIA and the Second Circuit’s Lotes opinion adopting the flexible "reasonably proximate causal nexus" standard for determining a "direct" domestic effect. It is now up to the Seventh Circuit in the pending Motorola Mobility appeal whether it will follow this apparent trend. If, instead, it adheres to its absolutist view that U.S. antitrust law does not reach foreign price fixing of components unless those components are imported into the U.S., then the Supreme Court will have occasion once again in the near future to construe the FTAIA.

[Page 23]



1. Mr. Corbitt is a senior partner at Zelle Hofmann Voelbel & Mason LLP, and represented the Indirect-Purchaser Class in the In re TFT-LCD Antitrust Litig., discussed in this article. He is a former Chair of the Executive Committee of the California State Bar Antitrust and Unfair Competition Law Section. He gratefully acknowledges the assistance of his colleagues, senior associate Patrick B. Clayton and summer associate, Christina S. Tabacco.

2. Mr. Sheanin is of counsel at Pearson, Simon & Warshaw, LLP, and represented the Direct-Purchaser Class in the In re TFT-LCD Antitrust Litig. He is a member of the Executive Committee of the Antitrust and Unfair Competition Law Section.

3. Motorola Mobility LLC v. AU Optronics Corp., 746 F.3d 842, 846 (7th Cir. 2014), vacated, reh’ggranted, No. 14-8003 (7th Cir. July 1, 2014) (citations omitted) (internal quotation marks omitted).

4. Ibid.

5. See e.g., Press Release, The U.S. Dep’t of Justice, Antitrust Div., Elpida Memory Executive Agrees to Plead Guilty for Participating in DRAM Price-Fixing Conspiracy (Nov. 16, 2006), available at; Press Release, The U.S. Dep’t of Justice, Antitrust Div., Taiwan-Based AU Optronics Corporation, its Houston-Based Subsidiary and Former Top Executives Convicted for Role in LCD Price-Fixing Conspiracy (Mar. 13, 2012), available at; Press Release, The U.S. Dep’t of Justice, Antitrust Div., Denso Corp. Executive Agrees to Plead Guilty to Price Fixing On Automobile Parts Installed in U.S. Cars (June 30, 2014), available at

6. 15 U.S.C. § 6(a).

7. F. Hoffmann-La Roche Ltd. v. Empagran S.A., 542 U.S. 155, 159 (2004) [hereinafter Empagran], involved "vitamin sellers around the world that agreed to fix prices, leading to higher vitamin prices in the United States and independently leading to higher vitamin prices in other countries …." The Supreme Court held that, "in this scenario, a purchaser in the United States could bring a Sherman Act claim under the FTAIA based on domestic injury, but a purchaser in [a foreign country] could not bring a Sherman Act claim based on foreign harm." The Court noted, however, that "our courts have long held that application of our antitrust laws to foreign anticompetitive conduct is nonetheless reasonable, and hence consistent with principles of prescriptive comity, insofar as they reflect a legislative effort to redress domestic antitrust injury that foreign anticompetitive conduct has caused." Id. at 165 (citations omitted).

8. In re Dynamic Random Access Memory (DRAM) Antitrust Litig., 546 F.3d 981, 985 (9th Cir. 2008).

9. Empagran, at 162 (emphasis and brackets in original).

10. Id. at 161.

11. 28 U.S.C. § 1332(d).

12. Defendants argued that state laws were preempted by the FTAIA. Plaintiffs responded that the standard for preemption was not met, and that generally California and other states are free to enact antitrust laws that go beyond federal law. This issue was addressed by the San Francisco Superior Court in Rambus v. Micron Technology, where Judge Richard Kramer held that the FTAIA by its terms amends the Sherman Act and says nothing about state laws, and that the standard for preemption was not met. Order Denying Defendants’ Motion for Summary Adjudication of, Or in the Alternative, Motion to Dismiss, Plaintiff’s Claims Based on Foreign Commerce for Lack of Subject Matter Jurisdiction, No. 04-0431105, 2009 WL 6761912 (May 29, 2009). A petition for writ of mandamus or prohibition was denied by the Court of Appeal on August 13, 2009, No. A125267. There has not been a definitive opinion by California appellate courts or by federal courts on this issue.

13. In re TFT-LCD (Flat Panel) Antitrust Litig., 822 F. Supp. 2d 953 (N.D. Cal. 2011).

14. In re TFT-LCD (Flat Panel) Antitrust Litig., 2012 WL 3276932 at n. 1 (N.D. Cal. 2012) [hereinafter Motorola III].

15. Motorola I, at *7.

16. Id.

17. In re TFT-LCD (Flat Panel) Antitrust Litig., 785 F.Supp.2d 835, 844 (N.D. Cal. 2011) [hereinafter Motorola II].

18. Id. at 842-43.

19. See Motorola III.

20. Motorola Mobility LLC v. AU Optronics Corp., 2014 WL 258154 (N.D. Ill. 2014) [hereinafter Motorola Mobility].

21. Id. at *8.

22. Motorola II, at 842.

23. 2014 WL 258154 at *9.

24. Minn-Chem, Inc. v. Agrium, Inc., 683 F.3d at 845, 856-58 (7th Cir. 2012) (en banc) (interpreting a "direct … effect" as having a "reasonably proximate causal nexus" between the foreign conduct and the harm suffered in the United States).

25. Id. (citing Minn-Chem, 683 F.3d at 858-59).

26. Judge Gottschall relied on the Ninth Circuit’s decision in In re Dynamic Random Access Memory (DRAM) Antitrust Litig., 546 F.3d 981 (9th Cir. 2008). In that case, Centerprise, a foreign computer manufacturer, filed a complaint in U.S. district court alleging injury due to overcharges on DRAM that it purchased outside the U.S. Centerprise contended that the requisite domestic effect was that maintaining higher U.S. prices was necessary for the cartel to maintain higher prices globally. The Ninth Circuit held that this arbitrage or "but for" theory was not sufficient to satisfy the domestic effects requirement, and that "Centerprise has not shown that the higher U.S. prices proximately caused its foreign injury of having to pay higher prices abroad. Other actors or forces may have affected the foreign prices." Id. at 988. Similar claims were rejected by the D.C. Circuit, on remand from the Supreme Court, in Empagran S.A. v. F. Hoffmann-LaRoche, Ltd., 417 F.3d 1267 (D.C. Cir. 2005), and the Eighth Circuit in In re Monosodium Glutamate Antitrust Litig., 477 F.3d 535 (8th Cir. 2007). Judge Illston distinguished all these cases on the basis that Motorola was not a foreign purchaser, and that it allegedly negotiated prices and quantities in the United States as to which its foreign affiliates were bound, thereby "setting forth with specificity a direct causal relationship between the anticompetitive conduct, the domestic negotiations and Motorola’s foreign injury." Motorola II, 783 F.Supp.2d at 843. Judge Gottschall seemingly ignored this distinction.

27. See Motorola Mobility, 746 F.3d 842 (7th Cir. 2014).

28. Id. at 844 (quoting Minn-Chem, at 680) (internal quotations omitted).

29. Id. at 845 (quoting 15 U.S.C. §6(a)(1)(A)).

30. Id.

31. Id. at 846.

32. Minn-Chem, at 857.

33. Empagran, at 162.

34. Minn-Chem, at 860.

35. Petition for Rehearing en banc, Motorola Mobility, No. 14-8003 (7th Cir. Apr. 24, 2014) ECF No. 20.

36. Brief for American Antitrust Institute, as Amici Curiae Supporting Petitioners, at 2, Motorola Mobility, No. 14-8003 (7th Cir. Apr. 29, 2014) ECF No. 31.

37. Id. at 5.

38. Brief for Economists and Professors, as Amici Curiae Supporting Respondents, at 1, Motorola Mobility, No. 14-8003 (7th Cir. Apr. 29, 2014) ECF No. 32.

39. Brief for United States Department of Justice, Antitrust Division, as Amici Curiae Supporting Petitioners, at 10, Motorola Mobility, No. 14-8003 (7th Cir. Apr. 29, 2014) ECF No. 30.

40. Id.

41. Order, Motorola Mobility, No. 14-8003 (7th Cir. May 1, 2014) ECF No. 33.

42. Response by Amicus Curiae USA to Court order of 05/01/14, at 1, Motorola Mobility, No. 14-8003 (7th Cir. May 19, 2014) ECF No. 34.

43. Id. at 2.

44. Order Directed to the U.S. Solicitor General, Motorola Mobility, No. 14-8003 (7th Cir. May 22, 2014) ECF No. 35.

45. Order Withdrawing Order of May 22 Directed to the U.S. Solicitor General, Motorola Mobility, No. 14-8003 (7th Cir. May 23, 2014) ECF No. 38.

46. Brief for Respondents, at 5, Motorola Mobility, No. 14-8003 (7th Cir. May 30, 2014) ECF No. 49.

47. Brief for Korean Fair Trade Commission, as Amici Curiae Supporting Respondents, at 2, Motorola Mobility, No. 14-8003 (7th Cir. May 27, 2014) ECF No. 42; see also, Brief for The Ministry of Economy, Trade and Industry of Japan, as Amici Curiae Supporting Respondents, Motorola Mobility, No. 14-8003 (7th Cir. May 27, 2014) ECF No. 42; Letter from The Ministry of Economic Affairs for the Republic of China, Taiwan, as Amici Curiae Supporting Respondents, Motorola Mobility, No. 14-8003 (7th Cir. May 29, 2014) ECF No. 47.

48. Motion Filed by Petitioner to File Reply Brief in Support of Petition for Rehearing en banc, Motorola Mobility, No. 14-8003 (7th Cir. May 28, 2014) ECF No. 41.

49. Response in Opposition by Respondents to Petitioner’s Motion to Leave to File Reply Brief in Support of Petition for Rehearing en banc, Motorola Mobility, No. 14-8003 (7th Cir. May 28, 2014) ECF No. 43; Order re: Motion to File Reply Brief in Support of Petition for Rehearing en banc, Motorola Mobility, No. 14-8003 (7th Cir. May 29, 2014) ECF No. 44.

50. Petitioner’s Motion for Referral of Motion to en banc Court, Motorola Mobility, No. 14-8003 (7th Cir. May 29, 2014) ECF No. 48.

51. Order re: Appellant’s Request for Referral to en banc Court, Motorola Mobility, No. 14-8003 (7th Cir. May 30, 2014) ECF No. 49.

52. Order: The Panel has Decided to Rehear this Appeal, Motorola Mobility, No. 14-8003 (7th Cir. July 1, 2014) ECF No. 58.

53. Order: Supplemental Briefing, Motorola Mobility, No. 14-8003 (7th Cir. July 1, 2014) ECF No. 59.

54. Order re: Appellant’s Motion for Clarification, Motorola Mobility, No. 14-8003 (7th Cir. July 3, 2014) ECF No. 63; Order: The Motion [for the United States] to participate in argument, Motorola Mobility, No. 14-8003 (7th Cir. July 11, 2014) ECF No. 70.

55. Supplemental Brief of Petitioner, Motorola Mobility, No. 14-8003 (7th Cir. July 9, 2014) ECF No. 66; Motorola’s Petition for Hearing en banc, Motorola Mobility, No. 14-8003 (7th Cir. July 9, 2014) ECF No. 76.

56. Supplemental Brief of Petitioner, at 9.

57. Id. at 7.

58. Appellant’s Petition for Hearing en banc, at 1.

59. Id. at 4-7.

60. Id. at 15.

61. Order re: Petition for Interlocutory Appeal, Motorola Mobility, No. 14-8003 (7th Cir. July 15, 2014) ECF No. 74.

62. Id.

63. Withdrawal of Motorola’s Petition for Rehearing en banc, Motorola Mobility, No. 14-8003 (7th Cir. July 16, 2014) ECF No. 75.

64. 2014 WL 2487188, ___ F.3d ___ (2d Cir. June 4, 2014).

65. Lotes, 2014 WL 2487188, at *2.

66. See id. at *1,*4.

67. See id. at *4.

68. Id. at *5.

69. See id. at *4-5.

70. See id. at *6.

71. Id.

72. See id.

73. The Second Circuit also held that the FTAIA’s requirements are not jurisdictional, but rather an element of a Sherman Act claim. See id. at *7-10. Numerous appellate courts, including the Second, Third, Seventh, and Ninth Circuits, had long held that the FTAIA’s requirements were jurisdictional, such that they were necessary to invoke a federal court’s adjudicative power. See, e.g., Filetech S.A. v. France Telecom S.A., 157 F.3d 922 (2d Cir. 1998); United Phosphorus, Ltd. v. Angus Chemical Co., 322 F.3d 942, 952 (7th Cir. 2003), overruled by Minn-Chem, 683 F.3d at 852; United States v. LSL Biotechnologies, 379 F.3d 672, 683 (9th Cir. 2004); Tus., Inc. v. China Minmricentro, S.A. v. Am. Airlines Inc., 303 F.3d 293, 300-02 (3d Cir. 2002), overruled by Animal Sci. Prodetals Corp., 654 F.3d 462, 467-68 (3d Cir. 2011). The Third and Seventh Circuits had overruled those precedents in Animal Science Product and Minn-Chem, respectively, determining that the those decisions had been undermined by a line of U.S. Supreme Court cases beginning with Arbaugh v. Y & H Corp. , 546 U.S. 500 (2006). In Lotes, the Second Circuit followed suit, overruling its own precedent. The Ninth Circuit reached the same conclusion in United States v. Hsiung, ___ F.3d ___ , 2014 WL 3361084, at *10 (9th Cir. July 10, 2014) ("We hold that the FTAIA is not a subject matter jurisdiction limitation on the power of the federal courts but a component of the merits of a Sherman Act claim involving nonimport trade or commerce with foreign nations."). The conclusion that the FTAIA is a statutory element led the Ninth Circuit later to hold that the FTAIA does not operate as an affirmative defense to the Sherman Act. See id. at *16.

74. See id. at *12-15.

75. LSL Biotechnologies, 379 F.3d at 680. See also United States v. Hsiung, ___ F.3d ___ , 2014 WL 3361084, at *18 & n.8 (9th Cir. July 10, 2014) (recognizing that the Ninth Circuit’s view differs from the Second Circuit’s view in Lotes, but finding it unnecessary to resolve the conflict because it affirmed the convictions on a different basis).

76. Lotes, 2014 WL 2487188, at *15.

77. Id. at *16-18.

78. 379 F.3d at 680.

79. Lotes, 2014 WL 2487188, at *13 (quoting Minn-Chem, 683 F.3d at 857 (quoting Makan Delrahim, Drawing the Boundaries of the Sherman Act: Recent Developments in the Application of the Antitrust Laws to Foreign Conduct, 61 N.Y.U. Ann. Surv. Am. L. 41, 430 (2005))).

80. See id.

81. Id. (quoting In re Terrorist Attacks on Sept. 11, 2001, 714 F.3d 109, 114 (2d Cir. 2013)).

82. Id. (quoting Empagran, 542 U.S. at 169).

83. See id. at *14.

84. See id. (citing Weltover, 504 U.S. at 617).

85. Id.

86. Id.

87. See id.

88. Id. at *15 (quoting CSX Transp. Inc. v. McBride, ___ U.S. ___, ___, 131 S. Ct. 2630, 2652 (2013) (Roberts, C.J., dissenting).

89. Id.

90. See id. at *15.

91. See id. at *12.

92. Id. at *15.

93. Id. (quoting California v. ARC Am. Corp., 490 U.S. 93, 102 (1989)).

94. Id. at *15.

95. 746 F.3d at 844.

96. See id. at *16 (citing Empagran, 542 U.S. at 173).

97. See id.

98. Id. (citing In re Dynamic Random Access Memory (DRAM) Antitrust Litig., 546 F.3d 981, 987 (9th Cir. 2008); In re Monosodium Glutamate Antitrust Litig. , 477 F.3d 535, 538 (8th Cir. 2007); Empagran S.A. v. F. Hoffmann-LaRoche, Ltd., 417 F.3d 1267, 1271 (D.C. Cir. 2005)). The Ninth Circuit recently agreed with Lotes and affirmed its prior holding in In re DRAM that a proximate cause standard applies to the "gives rise to" prong of the FTAIA. See Hsiung, 2014 WL 3361084, at *18.

99. See id. at *17.

100. Id.

101. See id.

102. See id. at *18.

103. Lotes, 2014 WL 2487188, at *15. As discussed below, in Hsiung the Ninth Circuit recognized that Lotes disagreed with the definition of "direct" articulated by the LSL Biotechnologies court, but declined to address the disagreement, having resolved the appeal on grounds other than the domestic effects exception to the FTAIA. See 2014 WL 3361084, at *18 n.8.

104. Motorola Mobility, 746 F.3d at 844.

105. Hsiung, 2014 WL 3361084, at *1-4.

106. Id. at *1.

107. Id. at *12.

108. Id.

109. Id.

110. See id. at *15.

111. See id. at *7-9 (citing Metro Industries v. Sammi Corp., 92 F.3d 839, 844-45 (9th Cir. 1996)).

112. 15 U.S.C. § 6(a).

113. Hsiung, 2014 WL 3361084, at *13.

114. See id. at *14.

115. Id.

116. See id. citing Minn-Chem, 683 F.3d at 855 ("transactions that are directly between the [U.S.] plaintiff purchasers and the defendant cartel members are the import commerce of the United States…."); Carrier Corp. v. Outokumpu Oyj, 673 F.3d 430, 438 n.3, 440 (6th Cir. 2012) (labeling goods manufactured abroad and sold in the United States "import commerce").

117. Id. at *15.

118. Id. at *14.

119. See id. at *15.

120. Id.

121. See id. The court noted, however, "We need not determine the outer bounds of import trade by considering whether com merce directed at, but not consummated with in, an import market is also outside the scope of the FTAIA’s import provisions because at least a portion of the transactions here involves the heartland situation of the direct importation of foreign goods into the United States." Id. at *14 n.7 (citing Animal Sci Prods., 654 F.3d at 471 & n.11 (holding that the import trade exclusion to the FTAIA applies to importers and to defendants whose "conduct is directed at a U.S. import market," even if the defendants did not themselves import the products into the United States).

122. Id. (quoting 15 U.S.C. § 6(a)).

123. See id.

124. See id. at *16.

125. Id.

126. Id.

127. See id. at *17.

128. Id.

129. See id. at *18 ("In any event, we need not resolve whether the evidence of the defendants’ conduct was sufficiently ‘direct,’ or whether it ‘give[s] rise to an antitrust claim,’ because, as we noted earlier, ‘any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt,’ with respect to import trade.") (footnote omitted; quoting Jackson v. Virginia, 443 U.S. 307, 339 (1979)).

130. See id. at *18 (citing LSL Biotechnologies, 379 F.3d at 680-81 ("An effect cannot be ‘direct’ where it depends on such uncertain intervening developments.") & n.8 (citing Lotes, 2014 WL 2487188, at *13-16).

131. See id. at *18 n.9 (Because "the Seventh Circuit vacated the [Motorola Mobility] opinion and set the case for rehearing … , we do not address the substance of the original opinion.").

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