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Ninth Circuit Clarifies Extraterritorial Reach of California Antitrust Laws

In AT&T Mobility LLC v. AU Optronics Corp., Ninth Circuit Case No. 11-16188 (Feb. 14, 2013), the Ninth Circuit held that California’s antitrust law, the Cartwright Act, could apply to a price fixing conspiracy of LCD panels even though purchases of the price-fixed goods all occurred outside California. As long as the conspiratorial conduct that led to the sale of LCD panels was sufficiently connected to California, and was not “slight and casual,” the application of California law does not violate the defendants’ rights under the Due Process Clause. The application of the California antitrust law was “neither arbitrary nor fundamentally unfair.” The Ninth Circuit noted that the same principles of extraterritorial reach also would apply to California's Unfair Competition Law (Business & Professions Code section 17200, et seq.).

The trial court had ruled that because no purchases of the price fixed LCD panels occurred in California, it would violate the Due Process Clause to apply California antitrust law to the defendants. The Ninth Circuit reversed the trial court’s dismissal of the Cartwright Act claims and remanded the case for an individual determination of whether plaintiffs have alleged sufficient conspiratorial conduct within California as to each defendant.

While the Ninth Circuit’s ruling does expand the reach of the California antitrust laws, the ruling has a number of limitations.

First, the case is only a remand to the district court to make an “individual determination consistent with this opinion with respect to each Defendant as to whether Plaintiffs have alleged sufficient conspiratorial conduct within California, that is not ‘slight and casual,’ such that the application of California law to that defendant is ‘neither arbitrary nor fundamentally unfair.’” It remains to be determined whether the plaintiffs can make, much less prove, such allegations.

Second, in a footnote, the court limits its holding to whether extraterritorial application of the Cartwright Act violates Due Process under these circumstances: “The question of whether the Cartwright Act provides a cause of action based exclusively on out of state purchases is distinct from the inquiry of whether such an application would violate the Due Process Clause, and is not at issue in this case.” Thus, the opinion is not even conclusive as to the application of the Cartwright Act to the alleged price fixing conspiracy.

Finally, the court notes that the typical constitutional challenge to state antitrust laws is not based on the Due Process clause but on the Commerce clause. However, since there was no Commerce Clause challenge in the case, the ruling leaves open the possibility that it could be raised sometime later.

In sum, the Ninth Circuit has clarified one aspect of the extraterritorial reach of state antitrust laws — but also raised, without resolving, a variety of other issues regarding the reach of California's antitrust laws. It is now clear that a Due Process challenge to an application of California's antitrust law to an international price fixing cartel will be more difficult. To succeed, a defendant will have to show that none of the conspiratorial conduct was sufficiently connected to California. Nevertheless, a defendant still has a variety of other ways to challenge the extraterritorial application of California's antitrust law that the court did not decide.

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Robert G. Kidwell is a Mintz attorney who counsels clients on business strategies, regulatory matters, policymaking and lobbying, compliance issues, privacy, and litigation. He defends clients in class action and competitor litigation, and guides transactions through merger reviews.