Back in September I wrote an article for Competition Policy International (CPI) on the FTAIA and the now vacated Motorola Mobility I decision. That article can be read here. I was honored to have that article quoted at length by Judge Posner in the subsequent decision: Motorola Mobility v. AU Optronics Corp, 2015 WL 137907 (7th Cir., decided Nov 26, 2015, amended January 12, 2015). In this decision, the Seventh Circuit held that purchases made by Motorola Mobility’s foreign subsidiaries of LCD panels, which the subsidiary then incorporated into products sold to the parent for sale in the U.S., did not give rise to a damage claim under the FTAIA. The Court found that the cartel victims were Motorola Mobility’s foreign subsidiaries. The key fact was Motorola Mobility’s claim that it purchased more than $5 billion worth of LCD panels from cartel members. The Court responded: “That’s a critical misstatement. All but 1 percent of the purchases were made by Motorola’s foreign subsidiaries.”
Since there is little doubt that the defendants did fix prices, the dismissal of 99% of Motorola’s claims seemed like a windfall for the cartelists, and a decision that could lead to under deterrence of global cartel enforcement. Motorola Mobility has expressed its intent to seek review in the United States Supreme Court. Because of the ambiguity of the FTAIA and the myriad fact patterns that can arise, policy consideration will play a large role in ultimately deciding the scope of the FTAIA. I thought Motorola Mobility was rightly decided and that the decision is actually pro-cartel enforcement. I explained why I thought that was so in a recent article CPI published as part of an “Motorola Mobility Redux” issue. My paper is titled: “Why the Motorola Mobility Decision Was Good For Cartel Enforcement and Deterrence” can be found here without charge. (There are other excellent articles in the CPI issue but they require a subscription to view.). Below are excerpts of my thoughts on why I thought the Motorola Mobility decision was good for cartel enforcement.
The initial Seventh Circuit Motorola Mobility, holding that the conduct in question did not “have a direct, substantial and reasonably foreseeable effect” on U.S. commerce, could have seriously jeopardized the Antitrust Division’s international cartel enforcement efforts. Another possible ruling would have allowed Motorola Mobility to seek damages in U.S. courts for purchases made overseas by a foreign subsidiary, but that decision could have created resentment of foreign governments, including those that filed amicus briefs, for having their companies taken into U.S. court to face treble damage actions for sales made overseas. The actual decision to hold only that Motorola Mobility’s claim did not meet the FTAIA’s “gives rise to” requirement was a wise compromise from a policy perspective.
The basic premise of my argument is that international governmental prosecutions are the essential component of global cartel enforcement. Governmental cartel enforcement relies to a great degree on cooperation between U.S and global enforcement agencies. This cooperation takes many forms, both seen (coordinated dawn raids, MLAT treaties, extradition) and unseen (sharing of information). In this context the amicus briefs filed by foreign governments in the Motorola Mobility case were not to be taken lightly. The foreign governments did not object the Antitrust Division’s prosecution of LCD cartel members. In fact, many foreign governments cooperated in that investigation and also imposed their own penalties. But, the amicus briefs expressed concern that their native businesses could be hauled into U.S. court to face treble damage actions for sales that were not made in the United States. In Motorola Mobility, the Seventh Circuit ruled that the LCD cartel had a “direct, substantial and reasonably foreseeable effect” on U.S. commerce; a decision the Antitrust Division sought to support its cartel program. But the Court also held that if a foreign subsidiary of an American company makes purchases in a foreign country, that country is the place for the purchaser to seek its remedy; a decision foreign governments sought to protect the effectiveness of their own competition regimes. [Read more…]