District Court holds that FTAIA Does Not Bar Antitrust Claim of U.S. Purchaser of Televisions That Incorporate Price-Fixed Screens

The World in U.S. Courts: Fall 2014 - Sherman Act/Antitrust/Foreign Trade Antitrust Improvements Act (FTAIA)

Costco Wholesale Corp. v. AU Optronics Corp., U.S. District Court for the Western District of Washington, September 22, 2014

Plaintiff Costco is a retailer in this long-running antitrust case that bought televisions from the manufacturer Panasonic at a cost of $77 million during the relevant period. The televisions were made with TFT-LCD panel screens that were the subject of price-fixing. This decision involved an effort by the defendants, including Panasonic and the manufacturers of the TFT-LCD screens, to eliminate from the case claims related to televisions purchased by Costco from entities outside the U.S. that had themselves purchased the TFT-LCD screens ex-U.S. Among other rulings, the District Court in Washington State addressed the question whether the FTAIA barred a U.S. antitrust suit based on these sales.

The convoluted FTAIA generally permits U.S. antitrust cases involving actions outside the U.S. implicating U.S. "import trade" as well as claims that such actions caused an impact on other U.S. commerce that was "direct, substantial, and reasonably foreseeable."  The Court first considered whether Costco's purchases of televisions from Panasonic (assumed for purposes of the opinion to be from Panasonic Corp. in Japan) would constitute "import trade," despite the fact that the purchases were of televisions, not the price-fixed screens themselves. The Court concluded that, if Panasonic were found to be a co-conspirator with the TFT-LCD panel manufacturers, its direct sales to U.S. customers would embrace all aspects of the conspiracy and so would be deemed to implicate U.S. import commerce, with the result that the FTAIA would not be a bar to suit. It did not matter that, in some cases, Panasonic had sub-contracted assembly of the televisions to companies not alleged to be part of the conspiracy. The Court did not directly address the question whether Panasonic's potential status as a co-conspirator would allow Costco to avoid the rule that federal antitrust claims are only available to direct purchasers, but this seems to be an implication of its decision.

The Court next considered the defendants' potential liability if Panasonic were not found to be a co-conspirator. It noted that a case could only proceed if Panasonic were in a "control relationship" with a co-conspirator, which apparently was intended to be a shorthand basis for concluding that the "indirect purchaser" exception would not apply. It is not clear whether the District Court intended also to mean that Costco's purchases in such case (unlike the case if Panasonic were a co-conspirator) would not be "import trade." At one point the Court characterizes purchases made if Panasonic were in a "control relationship" as implicating U.S. "import commerce," but if that were true the "direct, substantial, and reasonably foreseeable" test would not apply in the first place because the FTAIA would not apply. Regardless, the Court found that the required impact in the U.S. could be satisfied through evidence that the price of televisions sold to Costco had been inflated as a result of the price-fixing that had occurred with respect to the TFT-LCD panels.

In an earlier decision, a panel of the U.S. Court of Appeals for the Seventh Circuit had determined that, as a categorical matter, the sale into the U.S. of a product that merely incorporated a price-fixed component could never satisfy the requirement that an effect in the U.S. be "direct."  That controversial decision was vacated pending further review by the entire Seventh Circuit sitting en banc, and the District Court here did not address the panel's ruling, which was contrary to its own.

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