Appellate Court Tightens the Reins on Foreign Antitrust Enforcement

    8 April 2014

    The development of case law regarding jurisdictional limits on U.S. antitrust law continued last week when the Seventh Circuit Court of Appeals recognized limits on a private litigant’s ability to hold a foreign corporation responsible for Sherman Act violations. The Foreign Trade Antitrust Improvements Act (“FTAIA”) dictates how the primary U.S. antitrust law, the Sherman Act, can apply to foreign commerce. Overseas commerce is only subject to U.S. antitrust restraints if it has a “direct, substantial, and reasonably foreseeable effect” on commerce in the United States – and if the conduct raises a claim under the Sherman Act for price-fixing, market allocation, or other prohibited conduct.

    In Motorola v. AU Optronics Corp., Motorola claimed that LCD manufacturers fixed the price of LCD screens sold to Motorola for cellular phones. The overwhelming majority of those LCD screens were purchased overseas, in Asia, and manufactured in Asia as well, but more than 40 percent of the mobile devices were ultimately sold into the U.S. market. The Court observed that any impact of price-fixing in Asia, for devices manufactured in Asia, on Motorola’s U.S. sales were indirect and remote, and therefore outside the Sherman Act’s jurisdiction. 

    Court decisions regarding the application of the FTAIA have varied greatly over the past few years; Chinese manufacturer Foxconn avoided an antitrust suit in 2013 by successfully asserting this defense. The FTAIA should remain an important component of the defense of any non-U.S. corporation that faces antitrust civil or criminal allegations in the United States.