Deterrence and Efficiency Considerations Warrant an Expansive Reading of the FTAIA

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David Barth, Sep 17, 2014

The Foreign Trade Antitrust Improvement Act of 1982 is an area of antitrust law in which courts’ rulings have been unpredictable. Consider two recent cases in the Seventh Circuit: Minn-Chem, Inc. v. Agrium, Inc., and Motorola Mobility LLC v. AUO Optronics Corp. In Minn-Chem, the District Court denied defendants’ motion to dismiss on FTAIA–related grounds. Next, a three-judge appellate panel overturned that ruling and granted defendants’ motion. Then, the Seventh Circuit sitting en banc affirmed the District Court’s ruling and denied defendants’ motion.

Similarly, in Motorola, the MDL court in the Ninth Circuit denied defendants’ motion for summary judgment for certain categories of allegedly foreign purchases. When the case was remanded for trial, defendants moved for reconsideration. The District Court granted that motion and granted partial summary judgment for defendants, removing about 99 percent of Motorola’s claimed purchases from the case. An appellate panel affirmed that ruling, but it did so with a decision that, according to the U.S. government, conflicts with the en banc decision in Minn-Chem. After further developments in the case, the panel vacated its decision and accepted the appeal for argument on the merits. So Motorola is once again before an appellate panel.

The vacated Motorola panel decision appears to have been an attempt to rule in a way that would add predictability to future cases involving the FTAIA. The decision set clear boundaries that would benefit defendants in future U.S. cases against international cartels. Now that the decision has been vacated, there are a number of ways the panel could rule. I believe a ruling benefiting defendants and exempting any of Motorola’s purchases from U.S. antitrust law before trial is undesirable as a matter of economic policy: It would increase the incentives foreign firms have to engage in cartel behavior in global markets, and it would create new incentives to change otherwise efficient supply chain behavior.