In Motorola Mobility, LLC v. AU Optronics Corporation, the Seventh Circuit dismissed Motorola’s Sherman Act claims under the Foreign Trade Antitrust Improvement Act. In doing so, they held that Motorola’s American parent corporation was a separate entity from their foreign subsidiaries, and thus barred from bringing suit under the indirect purchaser doctrine. The effect of the Seventh Circuit’s decision precluded injured purchasers from recovering damages under the Sherman Act—Motorola’s subsidiaries could not sue because their injuries occurred abroad, while Motorola could not sue because it did not make direct purchases from the antitrust violators.
Courts have often considered a parent and wholly owned subsidiary as a single economic entity for the purposes of antitrust laws, such as under the indirect purchaser doctrine and intra-enterprise conspiracy doctrine. While parents and subsidiaries are two distinct entities in a legal corporate context, there are certain economic benefits for considering them one unit, such as promoting economic efficiency, supporting the efficient use of international supply chains, and encouraging deterrence. Therefore, basic antitrust inquiries, such as the existence of market power and the possibility of conspiracy, require focusing on the substance, rather than the form, of corporations.
This Note seeks to explore why the Seventh Circuit chose not to treat Motorola’s American parent company and wholly owned foreign subsidiaries as a single economic unit. It further analyzes the treatment of the parent-subsidiary relationship under the Sherman Act and Foreign Trade Antitrust Improvement Act. This Note proposes that an exception needs to be made under the Foreign Trade Antitrust Improvement Act to grant an indirect American parent corporation standing to sue under the Sherman Act when the direct purchaser is a wholly owned foreign subsidiary and the effects of a foreign anticompetitive conduct have a direct impact on United States commerce.
Catherine E. Cognetti,
A Single Call: The Need to Amend The Parent-Subsidiary Relationship Under the FTAIA In View of Motorola Mobility,
21 Fordham J. Corp. & Fin. L. 639
Available at: http://ir.lawnet.fordham.edu/jcfl/vol21/iss4/3