Antitrust

S H E A R M A N & S T E R L I N G L L P | 6 7 Writing for the Seventh Circuit, Judge Posner applied the Supreme Court's test to determine whether the FTAIA barred Motorola's claims. To start, he noted that defendants imported relatively few of their LCD panels — only about 1% of the panels sold to Motorola and its subsidiaries — into the United States. Judge Posner found that these panels were clearly 'import commerce.' However, the remainders of defendants' LCD panels — the 99% — were sold to Motorola's foreign subsidiaries abroad. Those subsidiaries then incorporated them into finished cellphones. And while some of these cellphones were sold to Motorola for import into the United States, most were sold abroad. With regard to those LCD panels that made their way into cellphones imported into the United States, Judge Posner found that they were not 'import commerce,' because it was Motorola, not the defendants that imported them into the United States for retail sale to American consumers. 8 Thus, defendants' anti-competitive conduct qualified as 'non-import commerce' falling within the domain of the FTAIA. The inquiry then turned to whether it would fall within an exemption to the FTAIA. Finding that it did not, the court dismissed Motorola's claims. 9 The same year, the Ninth Circuit issued its decision in United States v. Hui Hsiung, 10 an appeal of a criminal price-fixing case brought by the Department of Justice (DOJ) against several of the same LCD panel manufacturers named as defendants in Motorola. The facts of this case are substantially similar to those of Motorola, in that defendants sold most of their LCD panels to foreign intermediaries that incorporated the panels into consumer goods, some of which were ultimately sold to American consumers. 11 The DOJ's criminal indictment specifically charged defendants with fixing prices "in the United States and elsewhere" (emphasis added). Defendants argued that because they sold most of their LCD panels to third parties abroad, their conduct could not be characterized as relating to 'import commerce.' The court acknowledged that defendants "did not manufacture any consumer products for importation into the United States." Nevertheless, it rejected defendants' arguments, finding that any suggestion that defendants were not literal "importer[s]" "misses the point." It explained that defendants' anti-competitive activities indicated a substantial nexus to United States commerce, including: selling some products to customers in the U.S., negotiating the prices at which companies in the U.S. would purchase panels and instructing U.S.-based employees to discuss pricing for U.S. customers. 12 This, coupled with the substantial volume of goods ultimately sold to American consumers containing LCD panels, proved that defendants acted with intent to impact prices within the United States. 13 As such, the court held that defendants' activities were considered 'import commerce' beyond the scope of the FTAIA, and squarely within reach of the Sherman Act. CONTINUED > This divergence between Motorola and Hui Hsuing may be rationalized by several factors: Hui Hsuing was brought as a criminal action by the DOJ, which is sometimes granted more deference than private antitrust plaintiffs, and the volume of commerce represented in Hui Hsuing was substantially greater than that in Motorola. Nevertheless, it is significant to note that the same behavior — price-fixing LCD panels abroad — was characterized as 'import commerce' in one case, but dismissed as 'non-import' in the other. The reasoning of Motorola has been adopted and expanded upon in other circuits, 14 and so too has the holding of Hui Hsiung, deepening the apparent split. 15 The Supreme Court denied requests to clarify the outer bounds of the import commerce standard, so the issue remains unsettled. 16 Foreign manufacturers should be aware that until the divide is mended, antitrust liability remains possible when component parts, having been incorporated into finished goods, are imported into the United States by a third party. 1. The FTAIA exempts from the Sherman Act "conduct involving trade or commerce (other than import trade or import commerce) with foreign nations unless — (1) such conduct has a direct, substantial, and reasonably foreseeable effect — (A) on trade or commerce which is not trade or commerce with foreign nations, or on import trade or import commerce with foreign nations; or (B) on export trade or export commerce with foreign nations, of a person engaged in such trade or commerce in the United States; and (2) such effect gives rise to a claim under the provisions of sections 1 to 7 of this title, other than this section." 2. 15 U.S.C.A. § 6a. 3. F. Hoffmann-La Roche Ltd. v. Empagran S.A., 542 U.S. 155, 156, 174 (2004). 4. United States v. Nippon Paper Indus. Co., 109 F.3d 1, 4 (1st Cir. 1997). 5. United States v. Hui Hsiung, 778 F.3d 738, 751 (9th Cir. 2015). 6. Empagran, 542 U.S. at 158, 162. 7. 775 F.3d 816 (7th Cir. 2015). 8. Id. 9. Motorola Mobility, 775 F.3d at 827. 10. 778 F.3d 738 (9th Cir. 2015). 11. Petition for Writ of Certiorari, 14, Hsiung v. United States of America, 2015 WL 1201366 (U.S.). 12. Id. at 755. 13. Id. at 743.

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