Belgium has joined the ranks of foreign countries asking the Seventh Circuit to uphold its original ruling in Motorola Mobility v. AU Optronics. The Seventh Circuit originally ruled that the purchase by Motorola Mobility’s foreign subsidiaries of LCD panels could not meet the FTAIA requirements that the defendants’ price fixing had a “direct, substantial and reasonably foreseeable effect” on U.S. commerce and the “effects gave rise to a claim” under the federal antitrust laws. The court found that “the effect of component price fixing on the price of the product of which it is a component is indirect….” The court was concerned with overzealous extraterritorial application of the Sherman Act. “The 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 officer…”
The apparent bright line ruling that component price fixing could not satisfy the FTAIA alarmed the Antitrust Division, which had successfully prosecuted the LCD cartel (although the government’s prosecutions also rested on LCD panels directly imported into the U.S.). At the request of the government, the court vacated the Motorola Mobility opinion and will rehear the case. The United States has filed several amicus brief urging that the court find that the FTAIA requirements can be met by component price fixing. Belgium joins numerous nations, including Korea, Japan and others, in urging the Court to again find the FTAIA bars Motorola’s civil suit.
The Belgian brief relies heavily on F. Hoffman-La Roche Ld. v. Empagran S.A. 542 U.S. 155 (2004). In Empagran, the Supreme Court acknowledged that the FTAIA should be interpreted “to avoid unreasonable interference with the sovereign authority of other nations,” which “helps the potentially conflicting laws of different nations work together in harmony—a harmony particularly needed in today’s highly interdependent commercial world.” The Empagran opinion acknowledged the foreign government’s concern that “a decision permitting independently injured foreign plaintiffs to pursue private treble damages remedies would undermine foreign nations’ own antitrust enforcement policies by diminishing foreign firms’ incentive to cooperate with antitrust authorities in return for prosecutorial amnesty.” Empagran, 542 U.S. at 142. The Belgian brief points out that Belgium now has a leniency program and states that it would be a serious disincentive to seeking leniency in Belgium if purchases made in Belgium could be the basis for a treble damage suit in the United States. In other words, suppose a seller of cocoa to Belgium chocolate producers sought leniency in Belgium, but the chocolates made from the cocoa were imported into the United States. Would the cocoa seller be subject to treble damages in the United States instead of the scheme of collective redress available in Belgium? This is just one example of the issues that could arise in the FTAIA context.
Japan had already filed an amicus brief in the case. But another was filed by the Ministry of Economy, Trade and Industry (MITI) urging a limited extraterritorial application of the U.S. antitrust laws. The brief noted that Japanese law and the laws of many (if not all) countries other than the U.S. do not provide for treble damage awards in antitrust claims. In Japan, treble damages would be viewed as punitive damages, mixing civil and criminal liability. The Supreme Court of Japan has ruled that foreign judgments may not be enforced in Japanese courts beyond the level of actual compensatory damages. MITI took pains to be clear that its position was not intended to affect the Antitrust Division’s ability to enforce U.S. competition law and prosecute enforcement actions with respect to anticompetitive conduct that has a direct, substantial, and foreseeable effect on US domestic or import commerce. The brief noted, however, that it was quite concerned that private US attorneys, who do not bear responsibility in international diplomacy and cooperation, not be given rights that would interfere with Japanese governmental regulation of the Japanese market.
The question then is how can Motorola Mobility be decided to give weight to the comity concerns of foreign nations, but at the same time not hamstring the DOJ in enforcing the antitrust laws against foreign cartels. The problem is that products sold in the U.S. that contain some foreign made components are ubiquitous. Without a hard and fast rule like that in the Seventh Circuit’s original opinion that component price fixing is not “direct” under the FTAIA, it could take years of private class action litigation to determine whether the price fixing in question had a “direct, substantial and reasonably foreseeable effect” on US commerce. This is especially true now that appellate courts are unanimous that the FTAIA imposes substantive, not jurisdictional requirements. But the Seventh Circuit’s position, that the effect of component price fixing is indirect, seemingly reads “direct, substantial and reasonably foreseeable effect” out of the FTAIA since the import commerce exception to the FTAIA already applies to direct imports. See Minn-Chem, 683 F.3d 845, 854-55 (7th Cir. 2012)(the import commerce exclusion applies to goods ‘being sent directly into the United States,’ i.e., ‘pure import commerce.’ Limiting the effects exception to direct sales to U.S. customers would render the exception ‘superfluous . . . or insignificant,’ violating a ‘cardinal principle’ of statutory interpretation.”). Such a ruling is also strongly opposed by the DOJ, which believes it will seriously hamper cartel prosecution and open a wide door for foreign price fixers to structure/manipulate sales in such as way as to immunize themselves from U.S. prosecution.
A possible solution to this perceived comity problem would be to find that the FTAIA requirements of “direct, substantial and reasonably foreseeable effect” on U.S. commerce were met on the facts in Motorola Mobility. This would allow the Antitrust Division to prosecute foreign component cartels as it did in the LCD panel matter. The executive branch has a strong incentive to weigh the comity concerns of foreign nations before proceeding. The Antitrust Division has “skin in the game” of fostering international cooperation, and in fact no foreign government has objected to the Division’s criminal prosecution of both foreign companies and foreign executives in the LCD panel investigation.
The direct purchaser rule of Illinois Brick and related cases, however, should apply to civil damage actions brought by U.S consumers. The purchases at issue on the case were made by Motorola’s foreign subsidiary. Empagran bars Motorola’s foreign subsidiaries from bringing suit in U.S. courts. And since Motorola Mobility elected to make purchases overseas to take advantage of various favorable circumstances and/or laws, it is not unreasonable to require that they pursue damage actions in the jurisdiction where they elected to make the purchase. This holding would also be consistent with the spirit of Empagran. If foreign purchasers cannot avail themselves of U.S. courts to take advantage of our private treble damage causes of action, why should the parent be allowed to bring a suit that would be barred by the actual purchaser?
The issues raised in Motorola Mobility are fascinating and important. I have written about it before (here) I also had a more developed article published by Competition Policy International that is available here. I don’t believe a date has been set for argument but I will be following this case closely. Another FTAIA related case in the Ninth Circuit is U.S. v. AU Optronics. Eventually the Supreme Court will likely address the issues involved.
Thanks for reading.
 Another solution, of course, would be for the court to reverse its previous position and to allow the Motorola Mobility suit to proceed over the comity objections of the foreign governments.