United States: Seventh Circuit Hears Oral Argument On Motorola Mobility v. AU Optronics

Last Updated: November 20 2014
Article by Jennifer A. Dixon and Deirdre A. McEvoy

On November 12, 2014, the parties in Motorola Mobility v. AU Optronics reargued their case to a three judge panel of the Seventh Circuit – the same panel that ruled on the case earlier this year. The United States Department of Justice ("DOJ") also had the opportunity to argue its position in this closely-watched Foreign Trade Antitrust Improvements Act ("FTAIA") case.

This case has received ample coverage on this blog (click here, here and here to read more). In March 2014, the Seventh Circuit rejected Motorola's antitrust arguments seeking billions of dollars in damages from a group of liquid crystal display ("LCD") panel manufacturers. The Court held that the alleged wrongdoing was "too remote" under the FTAIA to have a direct effect on United States commerce. Less than four months later, this decision was vacated after Motorola petitioned for an en banc rehearing, and the parties were given an opportunity to submit briefs.

A Seventh Circuit panel consisting of judges Richard A. Posner, Ilana Diamond Rovner, and Michael S. Kanne heard the November 12 arguments, which lasted less than one hour.

Motorola primarily argued that the defendants' sale of LCD panels to Motorola's foreign subsidiaries satisfies the FTAIA "direct effects" exception. Motorola claimed that its U.S. parent company's import of phones containing the price-fixed LCD panels [into the United States] and subsequent sale of those phones to U.S. consumers had a direct effect on U.S. commerce. Counsel asserted that the "direct effect is the increased price the parent paid for importing the phones" from its foreign subsidiaries.

The panel asked numerous questions regarding the fact that the transactions at issue in this litigation occurred abroad. For example, in response to Judge Rovner's query regarding the "limiting principal" that could be applied to this type of price fixing case, counsel for Motorola emphasized that even though the actual purchases from LCD manufacturers were made by Motorola's foreign subsidiaries, the parent company in the United States negotiated pricing directly with defendants. Consequently, when subsidiaries made their purchases, they did so at the parent company's direction and at prices negotiated by the parent.

There was considerable questioning, early on, about whether or not Motorola is attempting to "have it both ways," by taking advantage of the tax advantages of foreign subsidiaries, yet downplaying the foreign nature of those entities when trying to avail itself of the protections afforded by United States antitrust law. In response, counsel for Motorola stated that profits from foreign subsidiaries are repatriated to the United States, where the parent company pays taxes on them. It was not apparent from the oral argument that the panel was convinced by this argument.

The panel also expressed concern that Motorola managed to recoup the defendants' overcharges by increasing the prices to United States consumers. Motorola's counsel received numerous questions about whether consumers, who paid higher prices, would be the proper plaintiffs. Counsel responded that the pass-through was not decisive and that, as the first domestic purchaser of the price-inflated items, the Motorola parent company remained the correct party to bring this lawsuit.

Counsel for the Antitrust Division of the DOJ also argued on behalf of the DOJ and FTC.  The DOJ and FTC had previously weighed in on the FTAIA issues — at the same time that Motorola asked for a rehearing of the Seventh Circuit's initial decision — by filing an amicus brief arguing that the panel's original opinion would "threaten[] the ability of government law enforcement and private actions to prevent and redress massive harm to U.S. consumers." The Seventh Circuit and the Justice Department also exchanged letters, and DOJ filed an additional brief in late June 2014, urging the Court to reconsider its position.

Although counsel made it clear that DOJ/FTC was not taking the side of either party, counsel argued that the price fixing of components of a product can have a direct effect on U.S. commerce. The government's argument focused on the application of the term "direct" with an emphasis on whether there is a natural and probable chain of events from the defendants' conduct to the United States. The panel expressed surprise that the government's argument was "negative" toward Motorola's position and did not concur with the plaintiff's argument that Motorola, as the "first purchaser" affected in U.S. commerce, was the proper plaintiff to bring this case. In response, counsel cited problems with Motorola's case, and stated that the alleged cartel conduct did not necessarily "give rise to" antitrust injury under the FTAIA. DOJ asked the Court, however, not to render a narrow reading of antitrust law that would hinder the government's enforcement abilities.

The panel also noted that they had received amicus briefs from regulators in other countries, such as Belgium and Japan, arguing that this type of lawsuit interferes with foreign antitrust enforcement. When asked to weigh in on this point, counsel for the government stated that the issues raised by the foreign governments pertained to situations where a foreign party is harmed abroad, but the harm is not directly felt in the United States. In such situations, he suggested, redressing this harm in a United States court could cause friction with foreign governments.

Perhaps not surprisingly, counsel for the defendant LCD manufacturers focused on the fact that the alleged price fixing concerned overseas transactions for items manufactured overseas, involving foreign funds and foreign-issued purchase orders that incorporated foreign law. Counsel emphasized that the alleged anticompetitive effects touched foreign commerce, and that the U.S. parent company did not suffer injury. He said that "we don't use U.S. antitrust law to police harm that flows from effects on foreign economies."

Counsel for defendants also contended that Motorola's argument that injury occurred when it purchased overpriced phones containing defendants' components from its foreign subsidiaries, was waived because it was not raised in the district court or in written discovery requests. Motorola did not address this in its brief rebuttal argument and the panel did not pursue it with questioning. Further, counsel for defendants argued that this "new" theory should fail because there is no case in which a court has said that an internal transaction between a parent and a subsidiary gives rise to an antitrust injury.

Although the outcome of this case remains to be seen, the panel appeared particularly concerned with the fact that Motorola's foreign subsidiaries purchased the LCD component parts from defendants, and with the possibility that Motorola is "foreign shopping" by bringing suit under United States antitrust laws rather than utilizing foreign remedies. The questioning at oral argument revealed some skepticism as to whether or not the U.S.-based Motorola parent company, as opposed to the foreign subsidiaries, actually suffered antitrust injury. Antitrust practitioners will have to wait and see whether or not the panel will accept Motorola's position or issue some revised version of its earlier ruling dismissing Motorola's claims.

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.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.