| Randy Stutz, Richard Brunell
Cartels, International, Private Enforcement, Section 1 of the Sherman Act
The AAI has filed an amicus brief asking the Seventh Circuit to grant en banc rehearing to reverse a panel decision holding that the Foreign Trade Antitrust Improvements Act (FTAIA) bars a Sherman Act claim by Motorola to recover overcharges on cartelized LCD panels purchased from conspiring foreign manufacturers. The AAI’s brief focuses on panels purchased overseas for inclusion in smart phones assembled at foreign manufacturing plants before the phones were shipped to the United States and sold to American consumers at artificially inflated prices.
The AAI’s brief argues that the panel’s decision, by barring any private damages claim with respect to imported price-fixed products first sold abroad, creates a significant loophole in the Sherman Act which undermines already inadequate deterrence of international cartels that harm American consumers. The panel recognized that price fixing of components abroad frequently raises the prices of finished products imported into the United States, but viewed that as a reason to rein in private damages actions because of comity concerns. The AAI’s brief argued that comity is not an issue when the relief redresses harm to American consumers.
The case has an unusual procedural history. After the district court dismissed the complaint, a Seventh Circuit panel granted Motorola’s request for interlocutory review, but simultaneously affirmed on the merits, without briefing or oral argument. The panel held that the defendants’ conduct did not satisfy the requirements of the FTAIA because it did not have a “direct” effect on domestic commerce, and also that the effect “did not give rise to a claim” under the Sherman Act.
The AAI, along with the Solicitor General and other amici, joined with Motorola in asking for en banc rehearing. While the petition was pending, the motions panel withdrew its opinion sua sponte, and it set a schedule for briefing and oral argument. In a revised opinion, the same panel re-affirmed, this time allowing, as the AAI and the government had argued, that the domestic effect was sufficiently “direct.” However, the panel persisted in holding that the domestic effect did not “give rise to a claim” because it interpreted “a claim” to mean Motorola’s particular claim at issue, and Motorola was injured abroad. It declined to adopt the government’s suggestion to create an exception to the Illinois Brick rule that would allow the first domestic indirect purchaser to recover damages if the direct purchasers’ claims were barred by the FTAIA. It also held that Motorola’s claims do not fall within the “import commerce exclusion” provision of the FTAIA because Motorola, rather than the defendants, physically imported the panels.
Motorola has now petitioned for en banc rehearing a second time, again with the AAI’s support. Besides arguing that the panel’s ruling will significantly undermine deterrence of international cartels, the AAI brief argues that the court’s import commerce holding was clear error and contrary to the authority in other circuits. The brief also argues that the Supreme Court’s reading of “a claim” to mean “the plaintiff’s claim” in F. Hoffman-LaRoche v. Empagran need not and should not apply where the foreign conduct at issue causes domestic harm by virtue of the foreign injury to the plaintiff.
The brief was written by AAI General Counsel Rick Brunell and Senior Counsel Randy Stutz, with assistance from Research Fellow Geoff Kozen.
The AAI’s first amicus brief in support of en banc rehearing is available here.
The AAI’s amicus brief on the merits, which the Court rejected without explanation, is available here.
