The World in U.S. Courts: Summer and Fall 2016 - Antitrust/Competition/Foreign Trade Antitrust Improvements Act (FTAIA) | June.29.2016
Plaintiff Costco prevailed at trial on antitrust claims that it paid too much for products containing thin-film transistor liquid crystal display panels (“TFT-LCD panels”), whose prices had been inflated as a result of conspiracy. Two defendants brought various post-trial motions, all directed to the argument that they should not be liable as a matter of law. As relevant here, the defendants argued that a reasonable jury could only have found that the plaintiffs’ claims were blocked by the FTAIA. That statute prevents private litigation based on conduct outside the U.S. unless that conduct has a “direct, substantial, and reasonably foreseeable effect” on U.S. commerce. It does not apply, however, to U.S. “import commerce,” and the Court concluded that exception was applicable in the case at bar.
The facts showed that the conspiring defendants sold to U.S. customers only indirectly, through middlemen that sold finished products containing TFT-LCD panels to U.S. customers. The Court had instructed the jury that claims could proceed if products containing TFT-LCD panels “were sold in a transaction between a member of the conspiracy and a customer in the United States,” thus establishing that they were U.S. “import commerce” and not barred by the FTAIA. The defendants argued that the presence of the middlemen made this test impossible to satisfy. The Court disagreed, concluding that the “import commerce” exception could be triggered through indirect sales where there was evidence that sales to the U.S. were targeted by the component manufacturers.
Even if the “import commerce” exception was inapplicable, the Court found that the evidence supported a finding that the necessary effect on U.S. commerce had been shown. In so doing the Court found that a plaintiff need only prove that the allegedly price-fixed products were a “substantial” cost component of finished products sold in the U.S., that prices for the finished products reflected the inflated component costs, that “substantial numbers” of finished products were destined for the U.S., and that the result was that U.S. consumers paid higher prices. The Court also distinguished an appellate decision (the Motorola Mobility case, discussed in the Winter 2015 issue of The World in U.S. Courts) as holding that similar claims could not be brought where the “middlemen” were actually foreign subsidiaries of the plaintiffs.