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Supreme Court Surprises the Antitrust World with Denial of Cert in Motorola and AU Optronics

Today the United States Supreme Court denied certiorari in two cases, Motorola Mobility LLC v. AU Optronics et al. and Hsiung and AU Optronics Corp. America Inc. v. United States, declining to resolve a closely watched circuit split on the applicability of the Foreign Trade Antitrust Improvements Act (“FTAIA”) in regulating foreign conduct.

We have covered these two cases, which involve protracted criminal and civil litigation relating to an alleged worldwide scheme to fix prices in liquid crystal display (“LCD”) panels, extensively over the past year.  The cases raise important questions about the scope of the FTAIA’s requirement that the anticompetitive conduct must have a “direct, substantial, and reasonably foreseeable effect” on U.S. commerce to fall within the reach of the Sherman Act.

The denial of certiorari is remarkable because, as the petitioners emphasized in their filings to the Court, the conflict between the circuit courts’ interpretations of the FTAIA “could not be sharper.”  The two cases dealt with the same products, the same conspiracy, and the same FTAIA provisions—and yet the circuit courts arrived at diametrically opposite conclusions.

In March, Motorola filed its cert petition seeking review of a Seventh Circuit decision that interpreted the FTAIA to preclude civil Sherman Act claims arising out of foreign conduct by an alleged LCD panel cartel.  Motorola sued AU Optronics in federal district court in Illinois alleging that AU Optronics had conspired to fix prices on more than $5 billion of LCD panels it sold to Motorola, including through its foreign subsidiaries.  Motorola contended that AU Optronics carried out the conspiracy through express agreements with would-be competitors to fix prices and limit output.  The Seventh Circuit concluded that AU Optronics’s alleged conduct was not “import commerce” because Motorola, not AU Optronics, had imported the LCD panels into the United States through its foreign subsidiaries. The court went on to interpret the FTAIA’s “direct and substantial effect” provision as requiring that the alleged injury arose from the effect on domestic commerce. Here, the Seventh Circuit said, any injury to Motorola took place exclusively in foreign commerce.

By contrast, AU Optronics filed a cert petition asking the Court to reconsider the Ninth Circuit's conclusion that the FTAIA did not block the DOJ’s criminal case against it.  The DOJ’s Antitrust Division brought criminal charges in California against AU Optronics and its former executives for a conspiracy to fix prices on LCD panels that were eventually sold in the United States—the same conduct complained of in the Motorola case. The Ninth Circuit held that the conduct constituted “import trade” because the LCD panels were eventually sold to customers in the United States.

In denying review of these cases, the Supreme Court has passed up an opportunity to bring clarity to the FTAIA’s vexing statutory requirement of a “direct and substantial effect” on U.S. commerce.  As these two cases demonstrate, this circuit split is destined to wreak havoc and produce inconsistent outcomes, particularly for businesses with overseas operations.

Antitrust practitioners should continue to watch the developments in this area closely.  While the circuit split survives today, it likely will prove unworkable in the long term—necessitating Supreme Court intervention down the line.