Tuesday, March 22, 2011

Dell’s Price Fixing Claims Against Display Panel Suppliers Survive Dismissal

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The Foreign Trade Antitrust Improvements Act (FTAIA) did not require dismissal of Dell Inc.’s claims that suppliers of thin film transistor-liquid crystal display (TFT-LCD) panels engaged in a global price fixing conspiracy, the federal district court in San Francisco has ruled.

Generally, the FTAIA excludes from the reach of the Sherman Act anticompetitive conduct that causes only foreign injury.

Dell, a direct purchaser of both TFT-LCD panels and finished products that incorporate TFT-LCD panels, brought claims against numerous domestic and foreign defendants. The complaint alleged that defendants Sharp Corp., Hitachi Displays Ltd., and Epson Imaging Devices Corp. had pled guilty to criminal charges of conspiring to fix TFT-LCD panel prices, and that Sharp and Hitachi admitted that they conspired to fix prices as to Dell.

Dell asserted that it was an intended victim of the price fixing conspiracy and that the conspiracy was carried out, in part, in the United States.

Foreign Transactions

Some of the claims were based on master purchase agreements (MPAs) between Dell and certain of the defendants, the terms of which made clear that the transactions included foreign transactions between the defendants and Dell’s foreign affiliates.

The defending suppliers did not dispute that the federal district court had jurisdiction over claims based on products that they imported into the United States. However, they unsuccessfully argued that the court lacked jurisdiction over any claim based on a transaction that occurred outside the United States.

Foreign Injury, Domestic Effect of Conspiracy

The court rejected the defending supplier's contentions that Dell did not allege sufficient facts to establish that its foreign injury (paying higher prices abroad) was proximately caused by any domestic effect of the alleged conspiracy. Dell alleged that an important domestic effect of the conspiracy was the setting of a global price for all TFT-LCD products purchased from the defendants, which was negotiated at the technology company's Texas headquarters.

The negotiated worldwide price applied to all TFT-LCD products, wherever purchased, and was binding on the technology company and its subsidiaries. These allegations established a link between the challenged conduct, its domestic effect, and the technology company’s foreign injury.

The technology company pleaded sufficient facts to establish that the MPAs and subsequent price negotiations were a domestic effect of the alleged conspiracy that proximately caused its foreign injury, according to the court.

The March 16 decision is In re: TFT-LCD (Flat Panel) Antitrust Litigation, 2011-1 Trade Cases ¶77,382.

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