International Cartel Price Fixing Case Opinion Raises U.S. Antitrust Issues

In a widely awaited opinion, the Seventh U.S. Circuit Court of Appeals in Chicago has issued an opinion which affects the scope of government enforcement actions and which purchasers may pursue private civil treble damage actions under the U.S. Sherman Act when alleging price fixing on parts and products sold to global supply chains. Motorola Mobility LLC v. AU Optronics Corp, Case No. 14-8003 (7th Cir. November 26, 2014). The Court received briefs not only from the parties but also amicus briefs from the governments of the United States, Korea, Taiwan, Japan and Belgium as well as other private groups.

The United States was seeking to have the Court to clarify that it could pursue not only cartel members who price fix component parts and ship them into the United States, but also cartel members who price fix component parts which are incorporated into and raise the price of finished products manufactured or assembled abroad and shipped into the United States. There was no dispute that price fixed component parts shipped into the United States are within the import commerce exception under the Foreign Trade Antitrust Improvements Act (FTAIA) 15 U.S.C. Section 6a(1) and are covered by the Sherman Act.

In its opinion, the Court stated that it would assume that where the cartel members sold their components to foreign subsidiaries, which incorporated them into finished products and sold the finished products to Motorola for resale into the United States, the FTAIA requirement of a direct, substantial, and reasonably foreseeable effect on domestic commerce has been satisfied, and the conduct is covered by the Sherman Act. That brought the Seventh Circuit into alignment with the Second Circuit, which reached a similar result in Lotes Co. v. Hon Hai Precision Industry Co., 753 F.3d 395, 409-13 (2d Cir. 2014) (USB connectors incorporated into computers). Similarly, the Ninth Circuit, in the related criminal prosecution involving the same components, United States v. Hsiung, 758 F.3d 1074 (9th Cir. 2014) had held that a government prosecution could be based either on direct sales of price fixed components into the United States (import commerce theory) or upon sales of price fixed components into finished products that were sold in the United States or for delivery in the United States (domestic effects theory).

For private treble damages actions brought by purchasers, the FTAIA requires a second element: that the effects of anticompetitive conduct...