| Randy Stutz, Richard Brunell
Cartels, International
The American Antitrust Institute has filed an amicus brief asking the Seventh Circuit to rehear en banc and reverse a panel decision in Motorola v. AU Optronics that would significantly undermine the deterrence mission of the U.S. antitrust laws against international cartels. In Motorola, a panel led by Judge Richard Posner held that foreign price fixing of component products sold abroad (LCD panels) and incorporated into finished end-products imported into the United States (smart phones) is categorically outside the scope of the Sherman Act even if it significantly raises prices in the U.S. and was intended to have such an effect. Without briefing or oral argument, the panel held that the “domestic effects” exception of the Foreign Trade Antitrust Improvements Act (FTAIA) cannot be satisfied because the domestic effect of foreign component price fixing is “indirect,” much as a consumer who purchases from a cartel through an intermediary, and is thereby barred from bringing a damages claim under Illinois Brick, is “indirect.”
The AAI brief argues that the panel’s “directness” standard departs from the Seventh Circuit’s en banc decision in Minn-Chem, Inc. v. Agrium, Inc., which held that a domestic effect is sufficiently “direct” for purposes of the FTAIA if it is proximately, rather than immediately, caused by foreign conduct. Courts have long recognized that price fixing can proximately cause harm to indirect purchasers.
After reviewing empirical literature showing that international cartels that harm U.S. commerce are already badly under-deterred, including in the intermediate goods sector, AAI shows that the panel’s “directness” standard leads to absurd results, because it focuses a court’s inquiry on the locus of the sale to the first (direct) purchaser rather than the locus of the sale’s effects. Moreover, the panel’s standard serves neither the policies of the FTAIA nor those of Illinois Brick because it categorically eliminates not just U.S. claims by indirect purchasers seeking damages, but all claims against foreign cartels that fix the price of components incorporated into finished products imported into the United States, including criminal prosecution by the government and claims by U.S. or foreign direct purchasers.
The brief was written by AAI Senior Counsel Randy Stutz and AAI General Counsel Rick Brunell.
