9th And 7th Circuits Issue Amended Opinions Suggesting Narrowing Of Differences In Application Of The 'Domestic Effects' Test Under The FTAIA

The past year has seen somewhat conflicting decisions from 7th Circuit (Motorola Mobility) and 9th Circuit (Hsuing) regarding the scope and application of the U.S. Foreign Trade Antitrust Improvements Act, 15 U.S.C. § 6a to preclude Sherman Act liability for conduct that takes place outside the United States. Specifically, the 7th and 9th Circuits have disagreed regarding the meaning of the statutory "domestic effects" test used to determine whether Sherman Act claims would be blocked by the FTAIA. However, in January 2015, both Circuits issued amended opinions in cases stemming from the TFT-LCD price-fixing case—after reviewing each other's original opinion and a lot of commentary and criticism by outsiders—suggesting that they be moving closer in how their different formulations of the test apply to foreign anticompetitive conduct that has an effect in the United States.

The United States adopted the FTAIA in 1982 to limit the circumstances in which the Sherman Act can be applied to foreign conduct. In its seminal FTAIA decision, F. Hoffman-LaRoche Ltd. v. Empagran, S.A., 542 U.S. 155, 161-62 (2004), the U.S. Supreme Court explained that for conduct that does not involve U.S. import trade or commerce, the Sherman Act does not apply unless the conduct satisfies both parts of what is known as the FTAIA's "domestic effects exception": 1) the foreign conduct must have a "direct, substantial and reasonably foreseeable effect" on U.S. domestic or import commerce, and 2) that effect must "give rise to a [Sherman Act] claim."

In other words, a claim is subject to the Sherman Act if, among other things, it leads to a "direct" effect on U.S. commerce. In United States v. LSL Biotechnologies, 379 F.3d 672, 680 (9th Cir. 2004), the 9th Circuit established a strict test for the application of the "domestic effects" exception: "an effect is 'direct' if it follows as an immediate consequence of the defendant's activity," proceeding "without deviation or interruption." But in Minn-Chem, Inc. v. Agrium Inc., 683 F.3d 845 (7th Cir. 2012), the 7th Circuit parted company with the 9th Circuit's test, holding that "the term 'direct' means only that 'a reasonably proximate causal nexus'" exists between the conduct and the injury in the U.S., whether or not the effect is "immediate." In its original March 2014 decision in Motorola Mobility LLC v. AU Optronics Corporation, 746 F.3d 842 (7th Cir. 2014), the 7th Circuit affirmed its Minn-Chem test, but declined to...