United States: Motorola Mobility v. AU Optronics: Seventh Circuit Curtails Liability For Foreign Component Sales In International Cartel Cases

Yesterday, the United States Court of Appeals for the Seventh Circuit issued an important opinion in Motorola Mobility LLC v. AU Optronics Corp., No. 14-8003, No. 14-8003, 2014 WL 1243797 (7th Cir. Mar. 28, 2014), part of the LCD flat panel antitrust litigation that has been ongoing since December 2006. The court held that the Sherman Act, 15 U.S.C. § 1, does not reach price fixing of inputs sold outside the United States that are later incorporated into finished products subsequently imported into the United States. This decision may have immediate implications for, among other cases, antitrust actions seeking damages under U.S. antitrust laws for alleged price fixing of component parts in foreign markets.  
Writing for the court, Judge Posner affirmed the district court's entry of summary judgment against Motorola's price-fixing claims based on overseas purchases of LCD panels by Motorola's foreign affiliates. In so doing, the decision eliminated all but about 1% of Motorola's $5.4 billion in claimed damages. The only remaining claims are those involving LCD panels sold directly into the United States—that is, in U.S. import commerce.
The Seventh Circuit held that Motorola's claims were barred by the Foreign Trade Antitrust Improvements Act ("FTAIA"), which limits the application of U.S. antitrust laws to foreign conduct. The FTAIA provides that U.S. antitrust laws do not apply to anticompetitive conduct in foreign, non-import commerce unless (1) the foreign conduct has a "direct, substantial, and reasonably foreseeable effect" on U.S. commerce, and (2) this effect "gives rise to" the plaintiff's claim.
Motorola's complaint against major LCD manufacturers asserted antitrust claims for allegedly fixing the prices of LCD panels used as a component in Motorola's mobile phones. Motorola sought to recover (1) for LCD panels imported into the United States, (2) for LCD panels purchased outside the United States that were used as inputs in finished products that Motorola later imported into the United States, and (3) for LCD panels purchased outside the United States that were used as components in finished products that Motorola's affiliates sold outside the United States.
The case was originally filed in the Northern District of Illinois, but was transferred to Judge Illston of the Northern District of California for coordinated pretrial proceedings as part of the LCD multi-district litigation. The defendants moved for summary judgment under the FTAIA as to claims based on sales made outside the United States. Arguing against the motion, Motorola relied heavily on the role of its U.S. parent in approving purchasing decisions and the activities of the defendants' sales personnel in the United States. Judge Illston denied the defendants' motion, ruling that although the sales took place outside the United States between the defendants and Motorola's foreign subsidiaries (including the issuance of purchase orders, issuance of invoices, payments, and delivery of the products) there was evidence that could allow a jury to find that final decisions regarding pricing of LCD panels took place in the United States, thus satisfying the FTAIA's "domestic effect" exception. See In re TFT–LCD (Flat Panel) Antitrust Litig., No. M 07-1827, 2012 WL 3276932, at *2 (N.D. Cal. Aug. 9, 2012). The case was then remanded to Judge Gottschall of the Northern District of Illinois for a trial set to begin this month. After defendants moved for reconsideration of Judge Illston's ruling, the court granted summary judgment and certified the decision for immediate interlocutory appeal. See Motorola Mobility, Inc., v. AU Optronics, No. 09-C-6610, 2014 WL 258154, at *5–10 (N.D. IL Jan. 23, 2014).
The Seventh Circuit affirmed Judge Gottschall without further briefing or oral argument. The court first held that Motorola's claims based on its foreign subsidiaries' purchases could not satisfy the FTAIA's "direct ... effect" on U.S. commerce exception because the negotiation or approval of prices in the United States is not itself an anticompetitive effect on U.S. commerce when the prices that were actually paid to any of the defendants occurred in a foreign country. Instead, the effect on U.S. commerce from the sales to the foreign subsidiaries was "indirect— or 'remote' . . . the kind of effect that the statutory requirement of directness excludes." Motorola Mobility LLC v. AU Optronics Corp., No. 14-8003, 2014 WL 1243797, at *2 (7th Cir. Mar. 28, 2014) (citation omitted). In particular, "[t]he alleged price fixers are not selling the panels in the United States. They are selling them abroad to foreign companies (the Motorola subsidiaries) that incorporate them into products that are then exported to the United States for resale by the parent." Id.
Judge Posner distinguished the Seventh Circuit's en banc decision in Minn-Chem, Inc. v. Agrium, Inc., 638 F.3d 845 (7th Cir. 2012) (en banc), where the court held that the Sherman Act applies to foreign conduct that has a "reasonably proximate causal nexus" to effects in the United States. Id. at 857. He emphasized that although Minn-Chem involved foreign sellers who "took steps outside the United States" to raise prices, once successful they sold the allegedly price-fixed product to U.S. customers. Motorola, 2014 WL 1243797 at *2 (citing Minn-Chem, 638 F.3d at 860). By contrast, Motorola's claims were similar to Minn-Chem's description of a "situation in which action in a foreign country filters through many layers and finally causes a few ripples in the United States." Minn-Chem, 638 F.3d at 860. In Motorola, those layers were Motorola's foreign subsidiaries and their foreign purchases of the LCD panels.
Judge Posner then turned to the FTAIA's separate requirement that effects on U.S. domestic commerce must "give[] rise" to the plaintiff's antitrust claim. Id. at *3–4. He first observed that "Motorola's claim against the defendants is based ... on the effect of the alleged price fixing on Motorola's foreign subsidiaries." Id. at *3. And any effect on U.S. commerce "is mediated by Motorola's decision on what price to charge U.S. consumers for the cellphones manufactured abroad that are alleged to have contained a price-fixed component." Therefore, "the effect in the United States of the price fixing could not give rise to an antitrust claim" because that effect—potentially higher prices for Motorola's mobile phones in the United States—did not stem from a violation of U.S. antitrust laws. Id. Judge Posner emphasized that "[i]f Motorola's foreign subsidiaries have been injured by violations of the antitrust laws in countries in which they do business; if the remedies are inadequate, of if the countries don't have or don't enforce antitrust laws, th[o]se were risks ... [Motorola] assumed by deciding to do business in [foreign] countries." Id.
Finally, in a concluding portion of the opinion that may have particularly far-reaching implications, Judge Posner wrote that "we don't want to rest our decision on the statutory language . . . without considering the practical stakes in the expansive interpretation urged by Motorola." Id. at *4. "[T]he stakes are large and cut strongly against [Motorola's] position. Nothing is more common nowadays than for products imported into the United States to include components that the producers had bought from foreign manufacturers." Id. After emphasizing that the Supreme Court has warned against "rampant extraterritorial application of U.S. law," Judge Posner observed that Motorola's position would "enormously increase the global reach of the Sherman Act, creating friction with many foreign countries and 'resent[ment at] the apparent effort of the United States to act as the world's competition police officer.'" Id. at *8 (citation omitted).
The Motorola decision could have immediate and far-reaching consequences. In recent years, there have been an increasing number of criminal investigations and civil complaints directed at alleged cartels involving components sold overseas and reaching the United States only after being incorporated into finished goods. In a decision authored by Judge Posner, one of the federal bench's most prominent judges and antitrust scholars, the Seventh Circuit has now issued an opinion holding that the Sherman Act does not reach such claims. The decision, moreover, may have implications going far beyond private litigation by direct purchasers under the Sherman Act. It may be used to challenge claims by indirect purchasers of the imported finished products suing under state antitrust and consumer protection laws. It may also be used to challenge the Department of Justice's authority to prosecute cartel conduct involving price fixing of components in foreign markets that are later incorporated into finished goods imported into the United States, or to limit the fines that the Department may obtain.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Kurt G. Kastorf
Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions