Asia Case Snarls U.S. Antitrust Law ; Price-Fixing Investigation Reveals Challenges with Far-Flung Supply Chains

By Lohr, Steve | International New York Times, June 1, 2015 | Go to article overview

Asia Case Snarls U.S. Antitrust Law ; Price-Fixing Investigation Reveals Challenges with Far-Flung Supply Chains


Lohr, Steve, International New York Times


The case has brought to light the challenge of applying decades- old antitrust laws to today's global corporations and their far- flung supply chains.

CORRECTION APPENDED

The evidence is compelling. The cartel of Asian electronics makers worked for more than five years to set the prices of liquid- crystal display screens used in computers and cellphones. They gathered for monthly meetings in private conference rooms at luxury hotels.

They kept notes at these price-rigging meetings. A typical heading: "Extremely confidential. Must not distribute." A telling summary: "Must act together with the Korean makers in order to reap success."

The details surfaced in a United States Justice Department criminal antitrust investigation in which first Samsung and then Toshiba, LG, Sharp and other companies cooperated, pleaded guilty and paid hundreds of millions of dollars in fines.

A large Taiwan producer, AU Optronics, did not settle, and three years ago the company was convicted in a federal court in San Francisco and ordered to pay $500 million. Two of its executives were sentenced to three years in prison.

Pointing to the same evidence, Motorola Mobility, one of the corporate victims of the price-fixing scheme, filed a civil antitrust suit, seeking damages from AU Optronics and other members of the cartel. But last November, a federal appeals court in Chicago tossed out Motorola's civil suit, saying the company's overseas subsidiaries could not reap the benefits of America's antitrust laws.

The Supreme Court is to say this month whether it will take up the issue. But already, the case has brought to light the challenge of applying decades-old antitrust laws to today's global corporations and their often complex and far-flung supply chains.

"To a degree that didn't exist before, things are made everywhere," said William E. Kovacic, an antitrust expert at the George Washington University Law School. Mr. Kovacic, a former chairman of the United States Federal Trade Commission, said there was a "notable incoherence" in the law and court rulings.

Warning of the business impact of legal uncertainty, the National Association of Manufacturers wrote a friend-of-the-court brief urging the Supreme Court to take the case. The group said it took no position on the criminal or civil cases. Instead, the trade association called for legal clarity. "Companies," its brief states, "need to know where the legal lines are drawn in order to structure their transactions for goods intended for eventual import into the United States."

Richard A. Posner, a federal appeals court judge and a prominent legal theorist, wrote the opinion in the Motorola case. His opinions, law scholars note, are as much conceptual essays as legal documents -- often controversial, but never boring. His ruling in a smartphone patent case in 2012, for example, was a sweeping critique of the patent system, describing it as a system in "chaos."

The Motorola case comes at time of change in the legal landscape, as many other countries are stepping up their antitrust enforcement programs and the Supreme Court generally seeks to restrain the reach of American antitrust laws abroad. Yet the United States remains the venue of choice for plaintiffs to bring civil antitrust suits, mainly because the rewards can be so lucrative. Unlike most other countries, American courts offer triple damage awards for successful plaintiffs, even if companies are able to pass along the higher prices they pay for price-fixed goods to consumers.

On that basis, Motorola is seeking an award of $3.5 billion -- a claim that the defendants say is exorbitantly inflated.

The problem for Motorola, according to Judge Posner, is how the company set up its corporate arrangements. Only 1 percent of the liquid-crystal display panels it bought from the cartel suppliers were shipped directly to Motorola in the United States for assembly in cellphones sold in the United States. …

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