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Friday, March 29, 2024 | Back issues
Courthouse News Service Courthouse News Service

7th Cir. Won’t Stretch Antitrust Laws Abroad

CHICAGO (CN) - U.S. courts cannot hear antitrust claims Motorola brought against LCD screen-makers on behalf of its foreign subsidiaries, the 7th Circuit ruled.

Motorola Mobility and its 10 foreign subsidiaries buy liquid-crystal display (LCD) screens for cell phones from defendants AU Optronics, Samsung, Sanyo, and others.

Motorola alleges that these foreign manufacturers conspired together to fix the price LCD panels. Defendant AU Optronics was convicted of participating in a criminal conspiracy to fix the price of panel components earlier this year.

However, only about one percent of the price-fixed panels were sold to Motorola directly - the other 99 percent went to Motorola's subsidiaries. And only 42 percent of the panels bought by subsidiaries were incorporated into cell phones shipped to Motorola for resale in the U.S.

The majority of the panels were incorporated into cell phones made and sold abroad.

Early this year, a federal judge dismissed Motorola's case against Samsung, Sanyo, and several other defendants, extinguishing the majority of its case, because Motorola could not show the alleged price-fixing impacted U.S. commerce.

The 7th Circuit affirmed the dismissal last week, finding that the suit has "no merit."

"Motorola says that it 'purchased over $5 billion worth of LCD panels from cartel members [i.e., the defendants] for use in its mobile devices.' That's a critical misstatement," Judge Richard Posner said, writing for the three-judge panel. (Emphasis in original.) "All but 1 percent of the purchases were made by Motorola's foreign subsidiaries. The subsidiaries are not Motorola; they are owned by Motorola. Motorola and its subsidiaries do not, as it argues in its opening brief, function 'as a 'single enterprise.''"

Therefore, standing to sue defendants rests with the actual victims of the alleged conspiracy - Motorola's subsidiaries, who purchased 99 percent of the panels.

While defendants' cartel activity may have increased the cost of Motorola cell phones sold in the U.S., this price increase occurred solely in foreign commerce, and is not subject to the Sherman Act.

"Motorola's foreign subsidiaries were injured in foreign commerce - in dealings with other foreign companies - and to give Motorola rights to take the place of its foreign companies and sue on their behalf under U.S. antitrust law would be an unjustified interference with the right of foreign nations to regulate their own economies," Posner said. "The foreign subsidiaries can sue under foreign law - are we to presume the inadequacy of the antitrust laws of our foreign allies?" (Emphasis in original.)

The panel made a special effort to respond to the concern of the U.S. Justice Department, which filed in an amicus brief, and indicated that its decision impacted only private antitrust suits seeking damages.

"If price fixing by the component manufacturers had the requisite statutory effect on cellphone prices in the United States, the [Sherman] Act would not block the Department of Justice from seeking criminal or injunctive remedies," the 21-page opinion said.

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