On Mar. 17, 2015, the U.S. Supreme Court was provided an opportunity to review two decisions involving different applications of the Foreign Trade Antitrust Improvements Act ("FTAIA") to Sherman Act claims based on a price-fixing conspiracy involving TFT-LCD panels. In a petition for certiorari filed that day, Motorola Mobility urged the U.S. Supreme Court to review a 7th Circuit ruling that the FTAIA blocked the majority of Motorola's civil price-fixing claims against multiple manufacturers of TFT-LCD panels. At the same time, AU Optronics (a manufacturer of TFT-LCD panels) and two of its executives filed a certiorari petition requesting review of a 9th Circuit ruling that arguably diverged from the 7th Circuit opinion, holding that the FTAIA did not bar criminal antitrust claims against them. The Supreme Court now has an opportunity to clarify the meaning of the FTAIA and to resolve the arguably inconsistent circuit interpretations.
The FTAIA limits the extraterritorial reach of the Sherman Act. In F. Hoffman-LaRoche Ltd. v. Empagran SA, 542 U.S. 155 (2004), the U.S. Supreme Court explained that under the FTAIA, with the exception of conduct involving U.S. import trade or import commerce (the "import commerce exclusion"), the Sherman Act does not apply to foreign conduct unless both: (1) the conduct has a "direct, substantial and reasonably foreseeable effect" on U.S. domestic or import commerce or (certain) export commerce, and (2) "such effect gives rise to a [Sherman Act] claim" (the "domestic effects exception"). The TFT-LCD price-fixing conspiracy involved price-fixing agreements reached outside of the United States that affected prices for TFT-LCD panels that were shipped to, among other countries, the United States.
In Motorola Mobility LLC v. AU Optronics Corp., 746 F.3d 842 (7th Cir. 2014), amended by, 775 F.3d 816 (7th Cir. 2015), the 7th Circuit held that Motorola had no Sherman Act claim for 99% of its purchases because they did not meet any of the FTAIA's exceptions. Motorola had purchased a substantial number of its panels through its foreign subsidiaries, and the court found that because the price-fixed panels first were shipped to Motorola's subsidiaries outside the United States, the FTAIA's import commerce exclusion did not apply. The court then considered the domestic effects exception, and while it noted that the impact on U.S. commerce had been sufficiently direct, it held that the purchases could not "give rise to a claim" under the Sherman Act because the original purchases took place outside the United States. Id. at 846.
In contrast, in United States v. Hsiung, 758 F.3d 1074 (9th Cir. 2014), amended by, 778 F.3d 738 (9th Cir. 2015), the 9th Circuit upheld the convictions of AUO and two of its executives for their participation in TFT-LCD price-fixing conspiracy, ruling that the conduct at issue satisfied both the import commerce exclusion and the domestic effects exception. The court found that the import commerce exclusion was satisfied because some of the price-fixed panels had been imported into the United States. The court held that the domestic effects exception was satisfied because (1) the conspiracy led to negotiations with U.S. companies both in the United States and overseas, (2) some panels were imported directly into the United States, and (3) other panels were incorporated into finished products that were sold to foreign subsidiaries of U.S. companies or to other companies that assembled finished products and sold them into the United States.
Motorola's petition maintains that Motorola's case is "an ideal vehicle" to resolve the possible circuit split because "the 7th Circuit's decision presents an opportunity to resolve the pervasive uncertainty that surrounds the FTAIA's application to international cartels that deliver products abroad for importation into the United States." Motorola's petition also includes a request that the Supreme Court reprimand the 7th Circuit over an alleged practice of allowing judges sitting on motions panels to assign themselves to decide the merits of the case. AUO's petition argues that its case is an appropriate vehicle because unless the Supreme Court resolves the possible circuit split, two foreign executives will go to prison for behavior that might be legal in other federal courts.
Motorola's petition can be found here.
AUO's petition can be found here.
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