Motorola Mobility LLC v. AU Optronics Corporation ( 2015 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 14-8003
MOTOROLA MOBILITY LLC,
Plaintiff-Appellant,
v.
AU OPTRONICS CORP., et al.,
Defendants-Appellees.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 9 C 6610 — Joan B. Gottschall, Judge.
____________________
ARGUED NOVEMBER 13, 2014 — DECIDED NOVEMBER 26, 2014
AMENDED—JANUARY 12, 2015 *
____________________
Before POSNER, KANNE, and ROVNER, Circuit Judges.
POSNER, Circuit Judge. Back in March we granted the
plaintiff’s unopposed petition for leave to take an interlocu-
tory appeal pursuant to 28 U.S.C. § 1292(b) from an order
granting partial summary judgment in favor of the defend-
ants (which include Samsung, Sanyo, and several other for-
*This amended opinion replaces the opinion in this case that was issued
by the panel on November 26 and that is reported at 2014 WL 6678622.
2 No. 14-8003
eign companies besides AU Optronics), thereby extinguish-
ing most of the plaintiff’s case. The district judge certified
the order for an immediate appeal. We agreed to hear the
appeal, and without asking for further briefing or oral ar-
gument affirmed the district court’s decision in an opinion,
reported at 746 F.3d 842 (7th Cir. 2014), that we later vacat-
ed, ordering rehearing and directing further briefing and
oral argument, now complete. We have also granted several
requests for permission to file amicus curiae briefs, including
a brief from the Department of Justice and briefs from for-
eign countries worried about the implications of Motorola’s
suit for their own competition policies.
Motorola, the plaintiff-appellant, and its ten foreign sub-
sidiaries, buy liquid-crystal display (LCD) panels and incor-
porate them into cellphones manufactured by Motorola or
the subsidiaries. The suit accuses foreign manufacturers of
the panels of having violated section 1 of the Sherman Act,
15 U.S.C. § 1, by agreeing with each other on the prices they
would charge for the panels. Those manufacturers are the
defendants-appellees.
The appeal does not concern all the allegedly price-fixed
LCD panels. (We’ll drop “allegedly” and “alleged,” for sim-
plicity, and assume that the panels were indeed price-
fixed—a plausible assumption since defendant AU Optron-
ics has been convicted of participating in a criminal conspir-
acy to fix the price of panel components of the cellphones
manufactured by Motorola’s foreign subsidiaries. United
States v. Hsiung, 758 F.3d 1074 (9th Cir. 2014).) About 1 per-
cent of the panels sold by the defendants to Motorola and its
subsidiaries were bought by, and delivered to, Motorola in
the United States for assembly here into cellphones; to the
No. 14-8003 3
extent that the prices of the panels sold to Motorola had been
elevated by collusive pricing by the manufacturers, Motorola
has a solid claim under section 1 of the Sherman Act. The
other 99 percent of the cartelized components, however,
were bought and paid for by, and delivered to, foreign sub-
sidiaries (mainly Chinese and Singaporean) of Motorola.
Forty-two percent of the panels were bought by the subsidi-
aries and incorporated by them into cellphones that the sub-
sidiaries then sold to and shipped to Motorola for resale in
the United States. Motorola did none of the manufacturing
or assembly of these phones. The sale of the panels to these
subsidiaries is the focus of this appeal.
Another 57 percent of the panels, also bought by
Motorola’s foreign subsidiaries, were incorporated into cell-
phones abroad and sold abroad. As neither those cellphones
nor their panel components entered the United States, they
never became a part of domestic U.S. commerce, see 15
U.S.C. § 6a, and so, as we’re about to see, can’t possibly sup-
port a Sherman Act claim.
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. All
but 1 percent of the purchases were made by Motorola’s for-
eign 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 enter-
prise.’” And from this we can begin to see the oddity of this
case. If a firm is injured by unlawful acts of other firms, the
firm may have a cause of action against the injurers but the
firm’s owner does not. The victims of the price fixing of LCD
panels were Motorola’s foreign subsidiaries. Motorola itself,
4 No. 14-8003
along with U.S. purchasers of cellphones incorporating those
panels, were at most derivative victims.
The district judge ruled that Motorola’s suit, insofar as it
relates to the 99 percent of panels purchased by the foreign
subsidiaries, is barred by 15 U.S.C. §§ 6a(1)(A), (2), which are
sections of the Foreign Trade Antitrust Improvements Act,
15 U.S.C. § 6a. That act that has been interpreted, for reasons
of international comity (that is, good relations among na-
tions), to limit the extraterritorial application of U.S. antitrust
law. Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law:
An Analysis of Antitrust Principles and Their Application
¶ 273c2 (3d ed. 2006). Sections 6a(1)(A) and (2) provide that
the Sherman Act “shall not apply to conduct involving trade
or commerce (other than import trade or import commerce)
with foreign nations unless … such conduct has a direct,
substantial, and reasonably foreseeable effect … on trade or
commerce which is not trade or commerce with foreign na-
tions, or on import trade or import commerce with foreign
nations,” and also, in either case, unless the “effect [on im-
port trade or domestic commerce] gives rise to a claim” un-
der federal antitrust law. See, e.g., F. Hoffmann-La Roche Ltd.
v. Empagran S.A., 542 U.S. 155, 161–62 (2004); Minn-Chem,
Inc. v. Agrium, Inc., 683 F.3d 845, 853–54 (7th Cir. 2012) (en
banc).
It is essential to understand that these are two require-
ments. There must be a direct, substantial, and reasonably
foreseeable effect on U.S. domestic commerce—the domestic
American economy, in other words—and the effect must
give rise to a federal antitrust claim. The first requirement, if
proved, establishes that there is an antitrust violation; the
second determines who may bring a suit based on it.
No. 14-8003 5
Had the defendants conspired to sell LCD panels to
Motorola in the United States at inflated prices, they would
be subject to the Sherman Act because of the exception in the
Foreign Trade Antitrust Improvements Act for importing.
That is the 1 percent, which is not involved in the appeal.
Regarding the 42 percent, Motorola is wrong to argue that it
is import commerce. It was Motorola, rather than the de-
fendants, that imported these panels into the United States,
as components of the cellphones that its foreign subsidiaries
manufactured abroad and sold and shipped to it. So it first
must show that the defendants’ price fixing of the panels
that they sold abroad and that became components of cell-
phones also made abroad but imported by Motorola into the
United States had “a direct, substantial, and reasonably fore-
seeable effect” on commerce within the United States. The
panels—57 percent of the total—that never entered the Unit-
ed States neither affected domestic U.S. commerce nor gave
rise to a cause of action under the Sherman Act.
If the prices of the components were indeed fixed, there
would be an effect on domestic U.S. commerce. And that ef-
fect would be foreseeable (because the defendants knew that
Motorola’s foreign subsidiaries intended to incorporate
some of the panels into products that Motorola would resell
in the United States), could be substantial, and might well be
direct rather than “remote,” the word we used in Minn-
Chem, Inc. v. Agrium, Inc., supra, 683 F.3d at 856–57, to denote
effects that the statutory requirement of directness excludes.
The price fixers had, it is true, been selling the panels not
in the United States but abroad, to foreign companies (the
Motorola subsidiaries) that incorporated them into cell-
phones that the foreign companies then exported to the
6 No. 14-8003
United States for resale by the parent company, Motorola.
The effect of fixing the price of a component on the price of
the final product was therefore less direct than the conduct
in Minn-Chem, where “foreign sellers allegedly created a car-
tel, took steps outside the United States to drive the price up
of a product that is wanted in the United States, and then
(after succeeding in doing so) sold that product to U.S. custom-
ers.” Id. at 860 (emphasis added). But at the same time the
facts of this case are not equivalent to what we said in Minn-
Chem would definitely block liability under the Sherman Act:
the “situation in which action in a foreign country filters
through many layers and finally causes a few ripples in the
United States.” Id. In this case components were sold by
their manufacturers to the foreign subsidiaries, which incor-
porated them into the finished product and sold the finished
product to Motorola for resale in the United States. This
doesn’t seem like “many layers,” resulting in just “a few rip-
ples” in the United States cellphone market, though, as we’ll
see, the ripple effect probably was modest. We’ll assume that
the requirement of a direct, substantial, and reasonably fore-
seeable effect on domestic commerce has been satisfied, as in
Minn-Chem and Lotes Co. v. Hon Hai Precision Industry Co.,
753 F.3d 395, 409–13 (2d Cir. 2014).
What trips up Motorola’s suit is the statutory require-
ment that the effect of anticompetitive conduct on domestic
U.S. commerce give rise to an antitrust cause of action. 15
U.S.C. § 6a(2). The conduct increased the cost to Motorola of
the cellphones that it bought from its foreign subsidiaries,
but the cartel-engendered price increase in the components
and in the price of cellphones that incorporated them oc-
curred entirely in foreign commerce.
No. 14-8003 7
We have both direct purchasers—Motorola’s foreign sub-
sidiaries—from the price fixers, and two tiers of indirect
purchasers: Motorola, insofar as the foreign subsidiaries
passed on some or all of the increased cost of components to
Motorola, and Motorola’s cellphone customers, insofar as
Motorola raised the resale price of its cellphones in an at-
tempt to offload the damage to it from the price fixing to its
customers. According to Motorola’s damages expert, B.
Douglas Bernheim, the company raised the price of its cell-
phones in the United States by more than the increased price
charged to it by its foreign subsidiaries. We have no infor-
mation about whether Motorola lost customers as a result—
it may not have, if other cellphone sellers raised their prices
as well. Perhaps because Motorola may actually have profit-
ed from the price fixing of the LCD panels, it has waived any
claim that the price fixing affected the price that Motorola’s
foreign subsidiaries charged, or were told by Motorola to
charge, for the cellphones that they sold their parent. (We’ll
come back to the issue of waiver.)
Whether or not Motorola was harmed indirectly, the
immediate victims of the price fixing were its foreign subsid-
iaries, see F. Hoffmann-La Roche Ltd. v. Empagran S.A., supra,
542 U.S. at 173–75, and as we said in the Minn-Chem case
“U.S. antitrust laws are not to be used for injury to foreign
customers,” 683 F.3d at 858. Motorola’s subsidiaries are gov-
erned by the laws of the countries in which they are incorpo-
rated and operate; and “a corporation is not entitled to estab-
lish and use its affiliates’ separate legal existence for some
purposes, yet have their separate corporate existence disre-
garded for its own benefit against third parties.” Disenos Ar-
tisticos E Industriales, S.A. v. Costco Wholesale Corp., 97 F.3d
377, 380 (9th Cir. 1996). For example, although for antitrust
8 No. 14-8003
purposes Motorola contends that it and its subsidiaries are
one (the “it” we referred to earlier), for tax purposes its sub-
sidiaries are distinct entities paying foreign rather than U.S.
taxes.
Distinct in uno, distinct in omnibus. Having submitted to
foreign law, the subsidiaries must seek relief for restraints of
trade under the law either of the countries in which they are
incorporated or do business or the countries in which their
victimizers are incorporated or do business. The parent has
no right to seek relief on their behalf in the United States.
Motorola wants us to treat it and all of its foreign subsid-
iaries as a single integrated enterprise, as if its subsidiaries
were divisions rather than foreign corporations. But Ameri-
can law does not collapse parents and subsidiaries (or sister
corporations) in that way. Some foreign nations, it is true,
treat multinational enterprises as integrated units. See, e.g.,
Binda Sahni, “The Interpretation of the Corporate Personali-
ty of Transnational Corporations,” 15 Widener L.J. 1 (2005). A
number of countries (mainly in the Third World) persuaded
the U.N. General Assembly in 1974 to issue a resolution enti-
tled “Charter of Economic Rights and Duties of States” that
could be understood to intimate that First World parents
were responsible for the actions of their Third World subsid-
iaries. For chapter 2, Article 2(b), of the Charter provides that
each state has the right “to regulate and supervise the activi-
ties of transnational corporations within its national jurisdic-
tion and take measures to ensure that such activities comply
with its laws, rules and regulations and conform with its
economic and social policies. Transnational corporations
shall not intervene in the internal affairs of a host State. Eve-
ry State should, with full regard for its sovereign rights, co-
No. 14-8003 9
operate with other States in the exercise of the right set forth
in this subparagraph.” But the United States and other de-
veloped countries refused to buy that theory. They insisted,
and continue to insist, that corporate formalities should be
respected unless one of the recognized justifications for
piercing the veil, or otherwise deeming a parent and a sub-
sidiary one, is present. See, e.g., On Command Video Corp. v.
Roti, 705 F.3d 267 (7th Cir. 2013); Sahni, supra, at 13. None is
present in this case.
This is thus a case of derivative injury, and derivative in-
jury rarely gives rise to a claim under antitrust law, for ex-
ample by an owner or employee of, or an investor in, a com-
pany that was the target of, and was injured by, an antitrust
violation. Mid-State Fertilizer Co. v. Exchange National Bank of
Chicago, 877 F.2d 1333, 1335–36 (7th Cir. 1989); see generally
Brunswick Corp. v. Pueblo Bowl-O-Mat, 429 U.S. 477 (1977).
Those derivative victims are said to lack “antitrust stand-
ing.” Often, as in the example just given, their claims would
be redundant, because if the direct victim received full com-
pensation there would be no injury to the owner, employee,
or investor—he or it would probably be as well off as if the
antitrust violation had never occurred. If Motorola’s foreign
subsidiaries have been injured by violations of the antitrust
laws of the countries in which they are domiciled, they have
remedies; if the remedies are inadequate, or if the countries
don’t have or don’t enforce antitrust laws, these are conse-
quences that Motorola committed to accept by deciding to
create subsidiaries that would be governed by the laws of
those countries. (An important, and highly relevant, applica-
tion of the concept of “antitrust standing” is the indirect-
purchaser doctrine of the Illinois Brick case, discussed be-
low.)
10 No. 14-8003
No doubt Motorola thinks U.S. antitrust remedies more
fearsome than those available to its foreign subsidiaries un-
der foreign laws. But that’s just to say that Motorola is as-
serting a right to forum shop. Should some foreign country
in which one of its subsidiaries operates have stronger anti-
trust remedies than the United States does, Motorola would
tell that subsidiary to sue under the antitrust law of that
country.
A related flaw in Motorola’s case is its collision with the
indirect-purchaser doctrine of Illinois Brick Co. v. Illinois, 431
U.S. 720 (1977), which forbids a customer of the purchaser
who paid a cartel price to sue the cartelist, even if his seller—
the direct purchaser from the cartelist—passed on to him
some or even all of the cartel’s elevated price. Motorola’s
subsidiaries were the direct purchasers of the price-fixed
LCD panels, Motorola and its customers indirect purchasers
of the panels. Confusingly, at the oral argument Motorola’s
able counsel stated his approval of the Illinois Brick doctrine,
yet Motorola’s briefs assert, albeit without any basis that we
can see, that the Foreign Trade Antitrust Improvements Act,
because it does not mention Illinois Brick (or the indirect-
purchaser doctrine, announced in that case), is not subject to
it.
Because it is difficult to assess the impact of a price in-
crease at one level of distribution on prices and profits at a
subsequent level, and thus to apportion damages between
direct and indirect (i.e., subsequent) purchasers (here, be-
tween Motorola’s subsidiaries, Motorola the parent, and
Motorola’s cellphone customers), the indirect-purchaser doc-
trine cuts off analysis at the first level. This may result in a
windfall for the direct purchaser, but preserves the deterrent
No. 14-8003 11
effect of antitrust damages liability while eliding complex
issues of apportionment. In this case the first sale was to a
foreign subsidiary of Motorola that could sue the price fixers
under the law of the country of which the subsidiary was a
citizen, or the law of the countries of which the price fixers
were citizens (or a country of which a particular price fixer
that the subsidiary decided to sue was a citizen). Motorola,
the American parent, the harm to which from the price fix-
ing would be so difficult to estimate, could not sue under
federal antitrust law.
Speaking of the difficulty of estimating harm to
Motorola, we point out that although this suit is more than
five years old there is a remarkable dearth of evidence from
which to infer actual harm to Motorola. Its briefs lack the
numbers one would need to infer, let alone to quantify, such
harm. But the report of Motorola’s expert witness on dam-
ages, B. Douglas Bernheim, provides a basis for informed
speculation. Suppose hypothetically that a cellphone costs a
Motorola foreign subsidiary $100 to manufacture, and the
subsidiary sells it to Motorola for $120 to cover the costs of
assembling the components that go to make up the cell-
phone, and of shipment. Motorola in turn resells the cell-
phone to American consumers for $150. One of the compo-
nents costs the subsidiary $10 (10 percent of the total cost of
the cellphone—this appears to be an approximately accurate
estimate for the LCD panels installed in the cellphones). The
manufacturers of that component form a cartel and raise the
price to $12, a 20 percent increase. Now the cost of making
the cellphone is $102, and to reflect this cost increase
Motorola could be expected to direct the subsidiary to raise
its price to Motorola from $120 to, say, $122. What would
Motorola do next? It would like to maintain its profit mar-
12 No. 14-8003
gin, and so we might expect it to raise its resale price—the
price of its cellphones to the American consumer—from $150
to $152. That would be only a 1.33 percent increase. Would
Motorola lose sales and therefore profits? Who knows? The
price increase is tiny, and competitors might think it more
profitable to match it than to undercut it; they might think
their sales would not fall appreciably and that their profit
margins would be slightly higher. This would be an example
of tacit collusion, which is not an antitrust violation.
It is uncertainties like these that confirm the wisdom of
the indirect-purchaser doctrine of Illinois Brick.
Motorola claims that it told the subsidiaries how much
they could pay the cartel sellers for the panels—that its sub-
sidiaries “issued purchase orders at the price and quantity
determined by Motorola in the United States” and that
therefore Motorola was the real buyer of the panels and so
the panels were really imported directly into the United
States rather than being sold abroad to the subsidiaries. In
other words, Motorola is pretending that its foreign subsidi-
aries are divisions rather than subsidiaries. But Motorola
can’t just ignore its corporate structure whenever it’s in its
interests to do so. It can’t pick and choose from the benefits
and burdens of United States corporate citizenship. It isn’t
claiming that its foreign subsidiaries owe taxes to the United
States instead of to the foreign countries in which they are
incorporated, countries that may have lower tax rates, or be
less efficient at tax collection. It isn’t claiming that its foreign
subsidiaries are bound by the workplace safety or labor laws
of the United States. Having chosen to conduct its LCD pur-
chases through legally distinct entities organized under for-
No. 14-8003 13
eign law, it cannot now impute to itself the harm suffered by
them.
Motorola insists that it was the “target” of the price fix-
ers—that they “integrated themselves into the design of
Motorola’s U.S. products, and intentionally manipulated
Motorola’s price negotiations by illegally exchanging
Motorola-specific information.” But this is just inflated rhet-
oric used to describe, what is obvious, that firms engaged in
the price fixing of a component are critically interested in the
market demand for the finished product—knowledge of that
demand is essential to deciding on the optimal price of the
component. If the price fixers are too greedy and fix a very
high price for the component, this may result in so high a
price for the finished product that the sales of that product
will fall and with it the purchases of the component and
quite possibly the profits of the price fixers.
Motorola’s “target” theory of antitrust liability would
nullify the doctrine of Illinois Brick. For we’ve just seen that
in deciding how much to charge the direct purchaser, a car-
tel would always want to estimate the price at which the di-
rect purchaser would resell in order to capture some or all of
the resale profits. There is nothing unusual about firms’ try-
ing to pass on cost increases to their buyers; the buyers are
hurt but as long as Illinois Brick is the law their hurt doesn’t
give them an antitrust case of action. Thus in asking us not
to “ignore the injuries defendants knowingly caused to
Motorola’s U.S. business through their deliveries abroad,”
Motorola ignores the fact that a cartel almost always know-
ingly causes injury to indirect purchasers, yet those purchas-
ers are barred from suit by Illinois Brick and the doctrine of
antitrust standing that the rule of that case instantiates.
14 No. 14-8003
It’s true that the opinion in Illinois Brick states that a “sit-
uation in which market forces have been superseded and the
pass-on defense might be permitted is where the direct pur-
chaser is owned or controlled by its customer.” Id. at 736 n.
16. But “might be” is not “is,” and the distinction is signifi-
cant in this case. Although Motorola, the “customer,” owns
its foreign subsidiaries—the “direct purchasers” of the com-
ponents—they are incorporated under and regulated by for-
eign law. What remedies they may have, if they overpay for
inputs that they buy abroad, are determined not by U.S. anti-
trust law but by the law of the countries in which the subsid-
iaries are incorporated and of which they are therefore citi-
zens of, or the law of the countries in which the price fixers
they bought from operate, or of the countries in which the
purchases were made. And that is quite apart from Illinois
Brick or other sources of U.S. antitrust law
But supposing this is wrong and Motorola is correct that
it and its subsidiaries “are one,” there was no sale by the
subsidiaries to Motorola. Instead the component manufac-
turers (the price fixers) sold components to “the one,” which
assembled them into cellphones, and “the one” sold the cell-
phones to U.S. consumers. The sales to consumers would
therefore have been the first sales in the United States—the
first in domestic commerce, since “the one” bought the
price-fixed components abroad. Remember that the Foreign
Trade Antitrust Improvements Act requires that the effect of
an anticompetitive practice on domestic U.S. commerce
must, to be subject to the Sherman Act, give rise to an anti-
trust cause of action. ”The one” (Motorola and its foreign
subsidiaries conceived of as a single entity) would have been
injured abroad when “it” purchased the price-fixed compo-
nents.
No. 14-8003 15
Motorola makes a last attempt to wiggle out from under
Illinois Brick by arguing that there should be an exception to
the indirect-purchaser doctrine for any case in which apply-
ing the doctrine would prevent any American company
from suing. But Motorola insists that it dictates the price at
which it buys cellphones from its subsidiaries, and it would
be odd to think that Motorola could obtain antitrust damag-
es on the basis of its own pricing decisions.
In any event Motorola waived in the district court any
argument that it could base damages on the effect of the car-
tel’s pricing of components on the cost to Motorola of cell-
phones incorporating those components. It argued only that
its foreign subsidiaries overpaid for the LCD panels. How
the overcharge may have affected Motorola’s cellphone
business because of the component price fixing was a path
that Motorola stepped off of after the pleadings. Its complaint
alleged that it paid more for cellphones that it purchased
from its subsidiaries, but it then dropped the point in favor
of arguing (as it did for example in a brief opposing sum-
mary judgment) that “this ‘effect’—the approval of a single,
artificially-inflated LCD panel price in the United States—
proximately caused all of Motorola’s damages, because that
same artificially-inflated price applied wherever and when-
ever a Motorola facility placed a purchase order and paid for
a panel.” But Motorola’s damages expert, Bernheim, dis-
cussed only the damages that Motorola’s foreign subsidiar-
ies incurred from having to overpay for LCD panels. He
made no attempt to estimate the increase in the price paid by
Motorola for finished cellphones. Motorola even refused to
respond to one of the defendants’ requests for an admission
by saying: “Motorola is not basing its claims on the purchase
of finished LCD Products [i.e., cellphones].”
16 No. 14-8003
There is still more that is wrong with Motorola’s case.
Nothing is more common nowadays than for products im-
ported to the United States to include components that the
producers bought from foreign manufacturers. See Gregory
Tassey, “Competing in Advanced Manufacturing: The Need
for Improved Growth Models and Policies,” Journal of Eco-
nomic Perspectives, vol. 28, no. 1, Winter 2014, p. 27, 31–35;
Dick K. Nanto, “Globalized Supply Chains and U.S. Policy,”
Congressional Research Service (Jan. 27, 2010), http://assets.
opencrs.com/rpts/R40167_20100127.pdf. Even Motorola
acknowledges “that a substantial percentage of U.S. manu-
facturers utilize global supply chains and foreign subsidiar-
ies to effectively compete in the global economy.” Some of
those foreign manufacturers are located in countries that do
not have or, more commonly, do not enforce antitrust laws
consistently or uniformly, or whose antitrust laws are more
lenient than ours, especially when it comes to remedies, no-
tably punitive damages (such as the treble-damages antitrust
remedy authorized by section 4 of the Clayton Act, 15 U.S.C.
§ 15). As a result, the prices of many products exported to
the United States doubtless are elevated to some extent by
price fixing or other anticompetitive acts that would be pun-
ished in proceedings under the Sherman Act if committed in
the United States. Motorola argues that “the district court’s
ruling would allow foreign cartelists to come to the United
States” and “unfairly overcharge U.S. manufacturers.” Not
true; the defendants did not sell in the United States and, if
they were overcharging, they were overcharging other for-
eign manufacturers—the Motorola subsidiaries.
The Supreme Court has warned that rampant extraterri-
torial application of U.S. law “creates a serious risk of inter-
ference with a foreign nation’s ability independently to regu-
No. 14-8003 17
late its own commercial affairs.” F. Hoffmann-La Roche Ltd. v.
Empagran S.A., supra, 542 U.S. at 165. The Foreign Trade An-
titrust Improvements Act has been interpreted to prevent
such “unreasonable interference with the sovereign authori-
ty of other nations.” Id. at 164. The position for which
Motorola contends would if adopted 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,” a primary concern motivating the Foreign
Trade Antitrust Improvements Act. United Phosphorus, Ltd. v.
Angus Chemical Co., 322 F.3d 942, 960–62 (7th Cir. 2003) (en
banc) (dissenting opinion), overruled on other grounds by
Minn-Chem, Inc. v. Agrium, Inc., supra. It is a concern to
which Motorola is—albeit for understandable financial rea-
sons—oblivious.
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 com-
panies 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. The foreign subsid-
iaries can sue under foreign law—are we to presume the in-
adequacy of the antitrust laws of our foreign allies? Would
such a presumption be consistent with international comity,
or more concretely with good relations with allied nations in
a world in turmoil? To quote from the Empagran opinion
again, “Why should American law supplant, for example,
Canada’s or Great Britain’s or Japan’s own determination
about how best to protect Canadian or British or Japanese
customers from anticompetitive conduct engaged in signifi-
18 No. 14-8003
cant part by Canadian or British or Japanese or other foreign
companies?” 542 U.S. at 165.
So Motorola’s suit has no merit, but it remains to note the
amicus curiae brief filed by the Justice Department with en-
dorsements by officials from the FTC, the State Department,
and the Department of Commerce. Although an earlier such
brief had urged us to vacate our original decision (which we
did), and we assumed the Department wanted us to reverse
the district court’s grant of partial summary judgment in fa-
vor of the defendants, there is no such contention in its pre-
sent brief. It asks us only to “hold that the conspiracy to fix
the price of LCD panels had a direct, substantial, and rea-
sonably foreseeable effect on U.S. import and domestic
commerce in cellphones incorporating these panels.” The
brief argues that the criminal and injunctive provisions of
the Sherman Act, which of course are provisions that the Jus-
tice Department enforces, are applicable to the conduct of
the defendants. The brief is less than sanguine on whether
Motorola can obtain damages. The indirect-purchaser doc-
trine is applicable only to damages suits, and the brief dis-
claims taking any position on the applicability of the doc-
trine to this case. It goes so far as to say that “permitting
Motorola to recover on all its claims because it purchased
some panels in import commerce would allow recovery for
independently caused foreign injuries on the basis of hap-
penstance.”
All that the government wants from us is a disclaimer
that a ruling against Motorola would interfere with criminal
and injunctive remedies sought by the government against
antitrust violations by foreign companies. The government’s
concern relates to the requirement of the Foreign Trade Anti-
No. 14-8003 19
trust Improvements Act that foreign anticompetitive con-
duct have a direct, substantial, and reasonably foreseeable
effect on domestic U.S. commerce to be actionable under the
Sherman Act. If price fixing by the component manufactur-
ers had the requisite statutory effect on cellphone prices in
the United States, the Act would not block the Department
of Justice from seeking criminal or injunctive remedies. In-
deed, we noted earlier that the Department successfully
prosecuted AU Optronics for criminal price-fixing of the
LCD panels sold to Motorola’s foreign subsidiaries. But the
Department does not suggest that the defendants’ conduct
gave rise to an antitrust damages remedy for Motorola.
Motorola has lost its best friend.
That’s something of a surprise but a bigger surprise, giv-
en that representatives of the State and Commerce Depart-
ments have signed on to the Justice Department’s brief, is the
absence of any but glancing references to the concerns that
our foreign allies have expressed with rampant extraterrito-
rial enforcement of our antitrust laws. We asked the gov-
ernment’s lawyer at the oral argument about those concerns,
and he replied that the Justice Department has worked out a
modus vivendi with foreign countries regarding the De-
partment’s antitrust proceedings against foreign companies.
We have no reason to doubt this. Again private damages ac-
tions went unmentioned.
The United States has entered into bilateral cooperation
agreements with the European Union, and with Canada and
other countries. See U.S. Dept. of Justice, “Antitrust Cooper-
ation Agreements,” www.justice.gov/atr/public/internatio
nal/int-arrangements.html (visited Jan. 9, 2015). Both the Jus-
tice Department and the Federal Trade Commission now
20 No. 14-8003
work with their foreign counterparts in major antitrust cases.
No longer is the United States “the world's competition po-
liceman,” as it used to be called, because other nations have
stricter antitrust laws, in some respects, than ours.
Motorola’s inability to mount the kind of private antitrust
suit that it is attempting in this case does not foredoom the
use of antitrust law to prevent and punish the kind of for-
eign cartelization harmful to Motorola’s subsidiaries. The
Justice Department, at least, seems confident that effective
governmental remedies remain—and, as mentioned, the De-
partment was successful in its criminal prosecution against
AU Optronics for conduct that Motorola seeks, improperly
as we believe, to recover damages for in this case.
Of course Motorola wants damages for its subsidiaries,
rather than just a cessation of the cartel activities that are
hurting them. And foreign antitrust laws rarely authorize
private damages actions. But as we said earlier, that’s just to
say that Motorola is asserting a right to forum shop; that if
some foreign country in which one of its subsidiaries oper-
ates happened to provide a more generous private damages
remedy than American antitrust law provides, Motorola
would direct that subsidiary to seek that remedy in that
country.
A recent article about Motorola’s suit notes the problems
with private antitrust suits of this kind. It points out that
“virtually every product sold in the United States has some
foreign-made component,” implying an enormous potential
for suits of this character should Motorola prevail, and not-
ing too that “the U.S. government has reason to weigh comi-
ty and sovereignty concerns when bringing international
component cartel case[s],” but “private plaintiffs do not.”
No. 14-8003 21
Robert Connolly, “Motorola Mobility and the FTAIA,” Cartel
Capers (Sept. 30, 2014), http://cartelcapers.com/blog/motorola
blog/motorola-mobility-ftaia (visited Jan. 9, 2015). And
Motorola has “only” 10 foreign subsidiaries. General Motors
has 26. Walmart has 27. Exxon has 122. The mind boggles at
the thought of the number of antitrust suits that major
American corporations could file against the multitudinous
suppliers of their prolific foreign subsidiaries if Motorola
had its way. Given the further complications introduced by
the Illinois Brick doctrine, limited however to damages suits,
there is much to be said for the approach—skeptical of
Motorola’s suit but emphatic in asserting the government’s
power to obtain relief through criminal and injunctive ac-
tions without ruffling our allies’ feathers—argued by Con-
nolly and the government’s amicus curiae brief.
Connolly amplifies his analysis in another recent article,
“Repeal the FTAIA! (Or at Least Consider It as Coextensive
with Hartford Fire),” CPI Antitrust Chronicle (Sept. 2014),
www.competitionpolicyinternational.com/repeal-the-ftaia-
or-at-least-consider-it-as-coextensive-with-hartford-fire/. As
is apparent from the title, the article ranges far beyond the
issues in our case. But the article does discuss the case at
some length, offering (at pp. 3–7) a number of pertinent ob-
servations, particularly concerning the differences between a
private damages suit and a government suit seeking crimi-
nal or injunctive remedies:
As the government notes in its amicus filings, there is a
difference between actions brought by the DOJ and private
class action damages. Motorola Mobility can be decided in
such [a] way as to recognize these differences. The court
can find jurisdiction under the FTAIA for DOJ prosecu-
tions while addressing the concerns raised by China, Ja-
pan, Korea, and Taiwan about an unduly expansive appli-
22 No. 14-8003
cation of U.S. law [that] they claim would undermine prin-
ciples of international comity. … Finding jurisdiction for
the United States to prosecute component price-fixing
need not ignore the international comity concerns of for-
eign governments. No nation has objected to the DOJ’s
successful prosecution of foreign companies and even citi-
zens of that country in the LCD panel investigation. As the
United States notes in its brief, the DOJ seriously considers
the views of foreign nations before bringing cases. … [T]he
comity considerations with private plaintiffs are quite dif-
ferent. “[P]rivate plaintiffs … often are unwilling to exer-
cise the degree of self-restraint and consideration of for-
eign governmental sensibilities generally exercised by the
U.S. Government.” [citing F. Hoffmann-La Roche Ltd. v. Em-
pagran S.A., supra, 542 U.S. at 171, quoting Joseph P. Grif-
fin, “Extraterritoriality in U.S. and EU Antitrust Enforce-
ment,” 67 Antitrust L.J. 159, 194 (1999)] …
It is fair to require foreign subsidiaries of American
companies to seek remedy in the courts of the country in
which they choose to incorporate. Companies operate
overseas facilities to take advantage of many legal provi-
sions of that country: labor law, environmental law, and
tax law. In non-legal terms: “You take the good with the
bad.” By contrast, American consumers have no realistic
choice but to buy finished goods that are assembled from
components sold and assembled around the world. There-
fore, the antitrust laws should be read—where possible—
to allow governmental enforcement against international
cartels that were meant to have, and have had, a substan-
tial effect[] on domestic commerce. … A foreign subsid-
iar[y’s] position is more akin to an American citizen living
overseas who buys price-fixed goods but then must seek
any remedies under the laws [of the] country she has cho-
sen to live in. …
Domestic corporate purchasers are not without reme-
dy when buying component parts from foreign vendors.
First, the U.S. parent could buy directly from the foreign
vendor and preserve the right to sue as a direct purchaser
(while trading off the benefits the company gained from
operating through a foreign subsidiary). Or, if a U.S. par-
ent doesn’t think that antitrust laws are sufficiently, or fair-
ly, enforced in a given country, they certainly don’t have to
set up a subsidiary there. … So, an adverse ruling in
No. 14-8003 23
Motorola would not eliminate every avenue of damage re-
dress for component price-fixing. … The Motorola Mobility
court should reach a decision that preserves the ability of
the DOJ to protect American consumers and continue to
lead the way in prosecuting international cartels—
including appropriate component cartels. The court could
also acknowledge the comity concerns of foreign nations
and find application of Illinois Brick a bar to foreign com-
ponent civil damage cases.
The district court’s grant of partial summary judgment in
favor of the defendants is
AFFIRMED.