The Comity-Deterrence Trade-off and the FTAIA: Motorola Mobility Revisited

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Joseph Harrington, Jan 29, 2015

The Foreign Trade Antitrust Improvements Act, 15 U.S.C. §6a states that the Sherman Act “shall not apply to conduct involving trade or commerce … with foreign nations.” but provides some exceptions to that rule. The exception of relevance in Motorola Mobility is that foreign companies are liable under the Sherman Act when their conduct has a “direct, substantial, and reasonably foreseeable effect” on U.S. commerce and “such effect gives rise to a claim under [the Sherman Act].”

The case at hand involves a cartel of foreign manufacturers of liquid crystal display panels used in mobile phones. In the initial decision written by Judge Richard Posner, the LCD manufacturers were found not liable partly because their conduct did not have a “direct” effect and thus did not fall into the above-stated exception to the FTAIA. After vacating the decision and retrying the case, the Seventh Court expanded their view of what it means for an effect to be “direct,” concluded the effect was probably direct, but again ruled against Motorola on the grounds that they lacked antitrust standing. Thus, the Court’s decision supports the government’s prosecution—as its legitimacy only requires the presence of a “direct, substantial, and reasonably foreseeable effect”—but not Motorola’s litigation, which also requires that it be entitled to relief.

In my earlier paper, the focus was on providing criteria with which to judge whether conduct has a “direct, substantial, and reasonably foreseeable effect” on U.S. commerce, and left untouched the issue of standing. I turn to that issue here.