The FTAIA in Flux: Foreign Component-Goods Cases Have Tripped, But Have They Fallen?

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Randy Stutz, Jan 29, 2015

The epic saga of the Great Motorola Case of 2014 continues. In the latest chapter, a Seventh Circuit panel has issued its third and final opinion explaining why Motorola must lose. The case sets the stage for an evolving conversation about how antitrust law can meet the challenges of globalized supply chains in light of a thorny statute called the Foreign Trade Antitrust Improvements Act of 1982.

Motorola v. AU Optronics Corp. involves a claim for price-fixing against an international component-goods cartel. Component-goods are goods created to serve as component parts of other, finished products. A prime example is the LCD panels at issue in this case, which are manufactured to serve as the touch-screen component of Motorola smartphones. In the modern era, the various components for a single, finished product—particularly a complex electronic product with many different parts—can be manufactured in a multitude of different countries. Manufacturers of the finished product will source the components globally, and often they will then assemble the finished end-product overseas before importing it into the United States. When foreign component-goods manufacturers artificially inflate the price of component goods in these circumstances, including by fixing their prices, U.S. consumers invariably are injured, often severely, with harm frequently in the billions of dollars. Importantly for purposes of interpreting the FTAIA in these circumstances, economic injury will inevitably occur first overseas before then making its way to the United States.

In Motorola, economic injury first occurred in several foreign countries when ten of Motorola’s wholly owned foreign subsidiaries paid inflated prices for the cartelized panels. The injury then migrated to the United States when smartphones containing the cartelized panels were sold by Motorola to U.S. consumers at higher prices. The Seventh Circuit held that Motorola is prohibited from recovering in U.S. court under the FTAIA, raising the question of whether anyone can recover under U.S. antitrust laws when price-fixed components are first sold abroad before they are imported into the United States as part of a finished product.