The Seventh Circuit issued its opinion in Motorola Mobility on November 26. Motorola Mobility LLC v. AU Optronics Corp., 14-8003. In the opinion, written by Judge Posner, the Seventh Circuit panel ruled that the Foreign Trade Antitrust Improvements Act, (FTAIA) barred Motorola’s lawsuit because the harm was incurred by its foreign subsidiaries and not the parent company itself. The most critical fact in the case was this: “Motorola says that it “purchased over $5 billion worth of LCD panels from cartel members [i.e., the defendants] for use in its mobile devices.” That’s a critical misstatement. All but 1 percent of the purchases were made by Motorola’s foreign subsidiaries.” This key fact led to Motorola’s downfall:
What trips up Motorola’s suit is the statutory requirement that the effect of anticompetitive conduct on domestic U.S. commerce give rise to an antitrust cause of action. 15 U.S.C. § 6a(2). The conduct increased the cost to Motorola of the cellphones that it bought from its foreign subsidiaries, but the cartel-engendered price increase in the components and in the price of cellphones that incorporated them occurred entirely in foreign commerce.
Judge Posner added: “Motorola’s foreign subsidiaries were injured in foreign commerce — in dealings with other foreign companies.” Noting F. Hoffmann‐La Roche Ltd. v. Empagran S.A., 542 U.S. 155 (2004) the court noted: “To give Motorola rights to take the place of its foreign companies and sue on their behalf under U.S. antitrust law would be an unjustified interference with the right of foreign nations to regulate their own economies.” The bottom line:
Having submitted to foreign law, the subsidiaries must seek relief for restraints of trade under the law either of the countries in which they are incorporated or do business or the countries in which their victimizers are incorporated or do business. The parent has no right to seek relief on their behalf in the United States.
I was quite surprised and happy that Judge Posner quoted from two articles I had written on the FTAIA and the Motorola Mobility case:
A recent article about Motorola’s suit notes the problems with private antitrust suits of this kind. It points out that ‘virtually every product sold in the United States has some foreign‐made component,’ implying an enormous potential for suits of this character should Motorola prevail, and noting too that “the U.S. government has reason to weigh comity and sovereignty concerns when bringing international component cartel case[s],” but “private plaintiffs do not.” Robert Connolly, “Motorola Mobility and the FTAIA,” Cartel Capers (Sept. 30, 2014), http://cartel capers.com/blog/motorola‐mobility‐ftaia.
Judge Posner continued:
Connolly amplifies his analysis in another recent article, “Repeal the FTAIA! (Or at Least Consider It as Coextensive with Hartford Fire),” CPI Antitrust Chronicle (Sept. 2014), www.competitionpolicyinternational.com/repeal‐the‐ftaia‐ or‐at‐least‐consider‐it‐as‐coextensive‐with‐hartford‐fire/. As is apparent from the title, the article ranges far beyond the issues in our case. But the article does discuss the case at some length, offering (at pp. 3–7) a number of pertinent observations, particularly concerning the differences between a private damages suit and a government suit seeking criminal or injunctive remedies: ….
I won’t cite the entire quote, but it comports with the panel’s view that “you can’t have it both ways”, i.e, set up a foreign subsidiary for tax, environment, labor and other purposes, but seek to stand in the shoes of the foreign subsidiary to sue in the United States for an antitrust violation because the remedies here are more favorable.
By deciding the case on the second prong of the FTAIA, that the effect of anticompetitive conduct on domestic U.S. commerce give rise to an antitrust cause of action, the Court did not reach the question of whether the conduct had a “direct, substantial and reasonably foreseeable” effect on US commerce. The Antitrust Division was pleased that its ability to reach foreign cartels was not curtailed. Needless to say, as an antitrust lawyer it was a special thrill to be cited by Judge Posner.
Thanks for reading.