13-2280 

IN THE UNITED STATES COURT OF APPEALS 

FOR THE SECOND CIRCUIT

____________________ 

LOTES CO., LTD., 

Plaintiff-Appellant, 

v. 

HON HAI PRECISION INDUSTRY CO., LTD., FOXCONN INTERNATIONAL 

HOLDINGS, LTD., FOXCONN ELECTRONICS, INC., FOXCONN 

(KUNSHAN) COMPUTER CONNECTOR CO., LTD., AND FOXCONN 

INTERNATIONAL, INC. A/K/A FOXCOMM INTERNATIONAL, INC., 

Defendants-Appellees, 

ON APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE SOUTHERN DISTRICT OF NEW YORK 

(Honorable Shira A. Scheindlin) 

____________________ 

BRIEF FOR THE UNITED STATES AND FEDERAL TRADE COMMISSION AS 

AMICI CURIAE IN SUPPORT OF DEFENDANTS-APPELLEES 

____________________ 

JONATHAN E. NUECHTERLEIN 

General Counsel 

WILLIAM J. BAER 

Assistant Attorney General 

JOHN F. DALY 

Deputy General Counsel for Litigation 

MARK S. HEGEDUS 

Attorney 

Office of the General Counsel 

Federal Trade Commission 

600 Pennsylvania Ave., NW 

Washington, DC 20530-0001 

KRISTEN C. LIMARZI 

JAMES J. FREDRICKS 

Attorneys 

U.S. Department of Justice 

Antitrust Division 

950 Pennsylvania Ave., NW, Room 3224

Washington, DC 20530-0001 

202-307-1403 

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TABLE OF CONTENTS 

TABLE OF AUTHORITIES .................................................................... iii

STATEMENT OF INTEREST .................................................................. 1

STATEMENT OF ISSUE PRESENTED .................................................. 1

STATEMENT OF THE CASE .................................................................. 2

STATEMENT OF THE FACTS ................................................................ 3

1. USB 3.0 Standard and Connectors ................................................ 3

2. Defendants Allegedly Misled USB-IF and Brought Patent 

Enforcement Proceedings in China to Reduce Competition .......... 6

3. Defendants’ Conduct Allegedly Injures Lotes in China and 

Affects Commerce in the United States ......................................... 7

4. The Court Found No Direct Effect on U.S. Commerce .................. 9

SUMMARY OF ARGUMENT ................................................................. 11

ARGUMENT ........................................................................................... 13

I. Congress Enacted the FTAIA to Promote U.S. Exports While 

Protecting U.S. Domestic and Import Commerce and U.S. 

Exporters from Anticompetitive Conduct .................................... 13

II. The FTAIA Bars Lotes’ Claim Because the Alleged Effect on U.S. 

Commerce Did Not Give Rise to Lotes’ Claim ............................. 16

A. To Give Rise to a Claim, the Effect on U.S. Commerce Must 

Proximately Cause the Plaintiff’s Injury ..................................... 16

B. Lotes’ Claims Do Not Arise from the Alleged Effects on U.S. 

Commerce ..................................................................................... 19

III.This Court Should Not Endorse the District Court’s Flawed 

Analysis of Direct Effects ............................................................. 24

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ii 

A. In the FTAIA, “Direct” Means a Reasonably Proximate Causal 

Nexus, Not an Immediate Consequence ...................................... 24

B. A Multiple-Step Foreign Manufacturing Process Does Not 

Preclude a Direct Effect on U.S. Commerce ................................ 33

CONCLUSION ........................................................................................ 37

CERTIFICATE OF SERVICE ................................................................. 39

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iii 

TABLE OF AUTHORITIES 

FEDERAL CASES 

Access Telecom, Inc. v. MCI Telecommunications Corp., 

 197 F.3d 694 (5th Cir. 1999) ................................................................ 35 

American Home Products Corp. v. Liberty Mutual Insurance Co., 748 

F.2d 760 (2d Cir. 1984) ........................................................................ 21 

Animal Science Products, Inc. v. China Minmetals Corp., 654 F.3d 462 

(3d Cir. 2011).......................................................................................... 9 

Associated General Contractors of California, Inc. v. California State 

Council of Carpenters, 459 U.S. 519 (1983) ........................................ 26 

Blue Shield of Virginia v. McCready, 457 U.S. 465 (1982) .................... 26 

CSR Ltd. v. Cigna Corp., 405 F. Supp. 2d 526 (D.N.J. 2005) ................. 35 

In re Dynamic Random Access Memory (DRAM) Antitrust Litig., 546 

F.3d 981 (9th Cir. 2008) ....................................................................... 19 

Empagran S.A. v. F. Hoffmann-LaRoche, Ltd., 417 F.3d 1267 (D.C. Cir. 

2005) ............................................................................................... 18, 19 

F. Hoffmann-La Roche Ltd. v. Empagran S.A., 

 542 U.S. 155 (2004) ...................................................................... passim

Filetech S.A. v. France Telecom S.A., 157 F.3d 922 (2d Cir. 1998) .......... 9 

Hartford Fire Insurance Co. v. California, 509 U.S. 764 (1993) ............ 23 

Korea Kumho Petrochemical v. Flexsys America LP, 

 No. C07-01057, 2008 WL 686834 (N.D. Cal. 2008) ............................. 35 

Kruman v. Christie's International PLC, 

 284 F.3d 384 (2d Cir. 2002) ................................................................. 21 

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iv 

Loeb Industries, Inc. v. Sumitomo Corp., 

 306 F.3d 469 (7th Cir. 2002) ................................................................ 26 

Mandeville Island Farms, Inc. v. American Crystal Sugar Co., 

 334 U.S. 219 (1948) .............................................................................. 27 

Metallgesellschaft AG v. Sumitomo Corp. of America, 

 325 F.3d 836 (7th Cir. 2003) ................................................................ 33 

Minn-Chem, Inc. v. Agrium, Inc., 683 F.3d 845 (7th Cir. 2012) .... passim

In re Monosodium Glutamate (MSG) Antitrust Litig., 

 477 F.3d 535 (8th Cir. 2007) ................................................................ 19 

Olsen v. Pratt & Whitney Aircraft, 136 F.3d 273 (2d Cir. 1998) ........... 16 

Republic of Argentina v. Weltover, Inc., 504 U.S. 607 (1992) .... 10, 29, 30 

Rothstein v. UBS AG, 708 F.3d 82 (2d Cir. 2013) .................................. 20 

Sniado v. Bank Austria AG, 378 F.3d 210 (2d Cir. 2004) ...................... 18 

In re TFT-LCD (Flat Panel) Antitrust Litigation, 

 822 F. Supp. 2d 953 (N.D. Cal. 2011) .......................................... passim

Trustees of the Chicago Truck Drivers, Helpers & Warehouse Workers 

Union (Independent) Pension Fund v. Leaseway Transportation 

Corp., 76 F.3d 824 (7th Cir. 1996) ....................................................... 29 

TRW Inc. v. Andrews, 534 U.S. 19 (2001) .............................................. 31 

United States v. LSL Biotechnologies, 

 379 F.3d 672 (9th Cir. 2004) ........................................................ passim

United States v. Nippon Paper Industries Co., 

 109 F.3d 1 (1st Cir. 1997) .................................................................... 23 

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FEDERAL STATUTES AND RULES 

15 U.S.C.: 

 § 1 .................................................................................................... 2, 37 

 § 2 .................................................................................................... 2, 37 

 § 6a .............................................................................................. passim

 § 45(a)(3) ............................................................................................... 1 

28 U.S.C. § 1605(a)(2) .............................................................................. 29 

Federal Rule of Appellate Procedure 29(a) ............................................... 1 

Pub. L. No. 97-290, § 102(b), 96 Stat. 1233, 1234 ................................... 13 

 

 MISCELLANEOUS 

H.R. Rep. No. 97-686 (1982), 

reprinted in 1982 U.S.C.C.A.N. 2487 ................................ 13, 15, 23, 28 

IB Philip E. Areeda & Herbert Hovenkamp, Antitrust Law 

 (4th ed. 2013) ....................................................................................... 32 

Webster’s Third New International Dictionary 640 (1981) .................... 29 

 

 

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STATEMENT OF INTEREST 

The United States and the Federal Trade Commission enforce the 

federal antitrust laws and have a strong interest in the correct 

interpretation of the Foreign Trade Antitrust Improvements Act 

(FTAIA), which added Section 6a to the Sherman Act, 15 U.S.C. § 6a. 

To promote U.S. exports, Section 6a makes the Sherman Act’s other 

sections inapplicable to conduct involving export or wholly foreign 

commerce except when that conduct has a “direct, substantial, and 

reasonably foreseeable effect” on certain U.S. commerce and that effect 

“gives rise to a claim.” 15 U.S.C. § 6a. The FTAIA also added Section 

5(a)(3) to the FTC Act, 15 U.S.C. § 45(a)(3), which closely parallels 

Section 6a. This amicus brief addresses the requirements of the effects 

exception. It is filed pursuant to Federal Rule of Appellate Procedure 

29(a). 

STATEMENT OF ISSUE PRESENTED 

Whether the FTAIA bars Sherman Act damages claims by a foreign 

plaintiff for injury suffered in wholly foreign commerce and not derived 

from the alleged anticompetitive conduct’s effects on U.S. commerce. 

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2 

STATEMENT OF THE CASE 

Lotes Co., Ltd., a Taiwan corporation, sued Hon Hai Precision 

Industry Co., Ltd., another Taiwan corporation, and Foxconn 

International Holdings Ltd., a Cayman Islands corporation, and several 

other Foxconn entities, including both foreign and U.S. corporations. 

First Am. Compl. (FAC) ¶¶ 1-6 (JA-28-30). Lotes alleges that 

defendants’ conduct in connection with a standard-setting organization 

in the United States and patent-enforcement proceedings in China 

violated Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2. FAC 

¶¶ 7, 104, 114 (JA-30-31, 67, 70).1 The defendants moved to dismiss 

arguing, among other things, that the FTAIA makes the Sherman Act 

inapplicable to the alleged conduct because it had no direct effect on 

U.S. commerce. Mem. of Law in Supp. of Defs.’ Mot. to Dismiss Pl.’s 

First Am. Compl. 8 (ECF No. 29) (Defs. Mem.). The district court 

granted the motion, holding that the FTAIA deprives the court of 

jurisdiction to adjudicate Lotes’ Sherman Act claims. Op. and Order 

(Op.) 31 (JA-272). Lotes appealed. 

 1 Lotes brought additional causes of action, FAC ¶ 7 (JA-31), which 

this brief does not address. 

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STATEMENT OF THE FACTS 

1. USB 3.0 Standard and Connectors 

Lotes and the defendants are competing makers of Universal Serial 

Bus (USB) connectors that are incorporated into notebook computers 

and the motherboards used in desktop computers and servers. FAC 

¶¶ 15, 21 (JA-34, 36-37). USB connectors are used primarily to connect 

computer peripherals to computers or other electronic devices and allow 

data transmission between the peripheral and the computer over a 

standardized data link. FAC ¶ 16 (JA-34). They are a “critical 

component of contemporary computers and consumer electronic devices” 

and “a practical necessity for all competitors in these markets.” FAC 

¶ 17 (JA-35). 

USB Implementers Forum, Inc. (USB-IF) is a non-profit 

organization based in the United States that sets the technical 

standards for USB connectors. FAC ¶¶ 18, 25, 31, 36 (JA-35, 38, 41, 

43). These standards allow different manufacturers to produce 

connectors and devices that communicate seamlessly over a USB 

connection. FAC ¶ 37 (JA-43). USB 3.0 is the latest standard, and USB 

connectors that meet it provide much faster data transfer rates than 

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previous connectors. FAC ¶ 16 (JA-34). Consequently, USB 3.0 should 

soon be ubiquitous. FAC ¶¶ 20, 66 (JA-36, 56). 

In setting its USB 3.0 standard, USB-IF took steps to avoid the 

possibility that once the standard incorporates patented technology and 

is widely adopted, the patent owners would “demand exorbitant terms” 

to license their patents “or even refuse to license [them] altogether.” 

FAC ¶¶ 28-31 (JA-39-41). USB-IF reached agreements with 

contributors of patented technology to the USB 3.0 standard, including 

defendants, committing them to license the necessary patents on 

reasonable and non-discriminatory, zero-royalty (RAND-Zero) terms. 

FAC ¶¶ 38, 48-50 (JA-44, 48-49). USB-IF represented to adopters of the 

USB 3.0 standard, including Lotes, that they are entitled to RAND-Zero 

licenses for all patents necessary to practice the USB 3.0 standard. 

FAC ¶ 31 (JA-41). 

Relying on these RAND-Zero commitments, Lotes “invested 

millions of dollars in research & development and has built two 

factories in China” to manufacture USB 3.0 connectors. FAC ¶ 48 (JA48). Lotes’ connectors are “components of motherboards and other 

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devices intended predominantly for export to the United States.” FAC 

¶ 68 (JA-56). 

Lotes and other USB connector makers compete for market share 

in the markets for USB 3.0 connectors for notebooks, desktops, and 

servers by selling to foreign-located original design manufacturers. 

FAC ¶ 22 (JA-37). These manufacturers make and assemble connectorincorporating computer products for many brand-name computer 

companies. Id.2 Under this “outsourcing” business model, these 

companies have these products made more cheaply in “low-cost 

countries.” FAC ¶ 33 (JA-42). These products, “in turn, make their way 

into the hands of businesses and consumers around the globe,” 

including “numerous retail consumer outlets like Best Buy, Costco, 

Target, Walmart, and others” in the United States. FAC ¶¶ 19, 63 (JA36, 55). 

 2 In “combination,” the defendants allegedly have “dominant 

market power as a manufacturer” of connector-incorporating products. 

FAC ¶ 34 (JA-42). Defendants incorporate their USB 3.0 connectors 

into these products. FAC ¶ 23 (JA-37-38). 

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2. Defendants Allegedly Misled USB-IF and Brought Patent 

Enforcement Proceedings in China to Reduce Competition 

Lotes alleges that defendants engaged in anticompetitive conduct 

“designed either to foreclose Lotes from several relevant competitive 

markets or to raise Lotes’ costs in those markets to the point that Lotes 

becomes uncompetitive and Defendants become a monopoly.” FAC ¶ 19 

(JA-36). Specifically, defendants convinced USB-IF to incorporate their 

patented technologies into the USB 3.0 standard by falsely committing 

to license on RAND-Zero terms patents that are necessary to practice 

the standard. FAC ¶¶ 50, 73 (JA-49-50, 59). Through this deception, 

defendants eliminated competing technologies from consideration for 

the standard and “gained market power” that “their patents alone had 

not conferred.” FAC ¶¶ 51, 73 (JA-49, 59) 

 Defendants then violated their agreements to license essential 

patents on RAND-Zero terms, “and instead launched enforcement 

campaigns capable of raising rivals’ costs and/or driving them from the 

market.” FAC ¶ 73 (JA-59). Defendants did not enter “good faith” 

patent license negotiations with Lotes, but rather sued Lotes in China 

for infringing Chinese patent claims allegedly necessary to practice the 

USB 3.0 standard and requested that Lotes’ production of USB 3.0 

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connectors be stopped and its USB 3.0 connectors destroyed. FAC 

¶¶ 42, 45, 53-59 (JA-45-46, 50-53). The Lotes USB 3.0 connectors 

identified in the enforcement action include “products shipped for use in 

the United States market,” and enjoining their production “would 

disrupt the supply of computer products into the United States, 

especially notebook computers.” FAC ¶ 58 (JA-52-53). Defendants also 

contacted Lotes’ customers and distributers and told them defendants 

have the sole patent rights on USB 3.0 connectors and would sue the 

customers and distributors if they did not purchase from defendants. 

FAC ¶ 51 (JA-49-50). 

Defendants also allegedly refused to license on RAND-Zero terms 

other makers of USB 3.0 connectors and threatened those makers with 

patent litigation. Id.

3. Defendants’ Conduct Allegedly Injures Lotes in China and Affects 

Commerce in the United States 

Lotes alleges that “[a]nything that affects the price, quantity, or 

competitive nature of the production market for USB 3.0 connectors will 

. . . have a direct, substantial, and reasonably foreseeable effect on U.S. 

commerce” because any price increases in USB 3.0 connectors will 

“inevitably” be passed on in the price paid by purchasers in the United 

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States for connector-incorporating computer products. FAC ¶¶ 47, 63 

(JA-48, 55). In this way, Lotes contends, the injury it suffers in China—

lost sales and potential elimination as a supplier of USB 3.0 

connectors—“would thus damage competition, increase prices, and 

harm consumers in the United States.” FAC ¶ 64 (JA-55). 

Defendants have “endangered all of Lotes’ existing and prospective 

business relationships” and threatened to close Lotes’ factories in China 

that make USB 3.0 connectors. FAC ¶¶ 68-69 (JA-56-57). If defendants 

force the closure of those factories or raise Lotes’ costs, they would 

become “dominant suppliers,” Lotes would be “effectively eliminat[ed] 

. . . as a major competitor,” and “major U.S. companies . . . would face 

loss or compromise of their electronics products.” FAC ¶¶ 63, 69, 73 

(JA-54-55, 57, 59). Moreover, defendants’ “willingness to bring suit 

against Lotes in contravention of the USB-IF RAND-Zero terms has an 

in terrorem effect capable of curbing competitive manufacture and 

raising prices to U.S. consumers across the full range of products 

incorporating USB 3.0 connectors.” FAC ¶ 71 (JA-58). 

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4. The Court Found No Direct Effect on U.S. Commerce 

The district court assumed that the defendants engaged in 

anticompetitive conduct, but held that the court lacked subject-matter 

jurisdiction to adjudicate Lotes’ Sherman Act claims.3 Op. 17, 31 (JA258, 272). The FTAIA, the court explained, sets forth a general rule 

that the Sherman Act does not apply to conduct involving trade or 

commerce (other than import trade or import commerce) with foreign 

nations, but includes an exception when the conduct “significantly 

harms domestic commerce.” Op. 18 (JA-259). This “domestic-injury 

exception” applies where the conduct “(1) has a ‘direct, substantial, and 

reasonably foreseeable effect’ on American domestic, import, or (certain) 

export commerce, and (2) has an effect of a kind that antitrust law 

considers harmful, i.e., the ‘effect’ must ‘giv[e] rise to a [Sherman Act] 

claim.’” Op. 19 (JA-260) (quoting F. Hoffmann-La Roche Ltd. v. 

 3 The court noted an apparent circuit split on whether the FTAIA 

strips the courts of subject-matter jurisdiction or “imposes a substantive 

merits limitation.” Op. 19-22 (JA-260-63) (quoting Animal Science 

Prods., Inc. v. China Minmetals Corp., 654 F.3d 462, 466 (3d Cir. 

2011)). It considered itself bound by Filetech S.A. v. France Telecom 

S.A., 157 F.3d 922 (2d Cir. 1998), to treat the FTAIA as a “jurisdictiondefining statute.” Op. at 22 (JA-263). This brief addresses neither this 

question nor whether defendants engaged in anticompetitive conduct. 

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Empagran S.A., 542 U.S. 155, 162 (2004) (quoting 15 U.S.C. § 6a(1), 

(2))). 

The court addressed only the first requirement, concluding that any 

effect the conduct had on the relevant U.S. commerce was not direct. 

Op. 23-24 (JA-264-65). The court held that “an effect is ‘direct’ if it 

follows as an immediate consequence of the defendant’s activity.” Op. 

23 (JA-264) (quoting United States v. LSL Biotechnologies, 379 F.3d 

672, 680 (9th Cir. 2004) (citing Republic of Argentina v. Weltover, Inc., 

504 U.S. 607, 618 (1992))). Applying this holding to the “‘long and 

convoluted series of transactions and manufacturing steps’” alleged 

here, the court found “a disconnect between the relevant (foreign) 

market [in USB 3.0 connectors] – the market which defendants are 

allegedly attempting to monopolize – and the U.S. market supposedly 

affected by defendants’ attempted monopolization (notebooks, desktop 

computers, servers).” Op. 23-24 (JA-264-65) (quoting Defs. Mem. 10). 

Thus, any increase in computer prices or reduction in competition in the 

United States resulting from defendants’ conduct is not sufficiently 

linked to that conduct to qualify as its direct effect. Op. 24 (JA-265). 

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SUMMARY OF ARGUMENT 

Congress enacted the FTAIA to make clear to U.S. exporters and 

U.S. firms doing business abroad that the Sherman Act does not apply 

to their business arrangements if they adversely affect only foreign 

markets. But Congress also sought to ensure that purchasers in the 

United States remained fully protected by the federal antitrust laws. 

Thus, the FTAIA leaves the Sherman Act applicable to (1) conduct 

“involving” import trade or commerce (the import commerce exclusion) 

and (2) conduct that has a “direct, substantial, and reasonably 

foreseeable effect” on U.S. commerce when that effect causes the 

plaintiff’s injury and thus “gives rise to [the] claim” at issue (the effects 

exception). 15 U.S.C. § 6a. 

The district court’s conclusion that Lotes’ Sherman Act claims do 

not satisfy the effects exception is based on a flawed analysis. The court 

erred by defining “direct . . . effect” as an “immediate consequence” 

because “direct” in the context of the FTAIA means a reasonably 

proximate causal nexus. See Minn-Chem, Inc. v. Agrium, Inc., 683 F.3d 

845, 856-58 (7th Cir. 2012) (en banc). The court also erred by focusing 

on the number of steps in the manufacturing process. Under either an 

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immediate consequence or proximate cause standard, the existence of 

multiple foreign “transactions and manufacturing steps,” Op. 23 (JA264) (quoting Defs. Mem. 10), need not render an effect indirect. 

Indeed, a contrary rule would leave U.S. commerce vulnerable to 

anticompetitive conduct involving components incorporated into 

finished products abroad that increases the prices of those finished 

products to U.S. purchasers in a non-remote, substantial, and 

reasonably foreseeable way. 

While the Court should not endorse the district court’s analysis, it 

need not undertake its own, a potentially difficult and fact-intensive 

task. Instead, the Court should affirm on the simpler basis that Lotes’ 

claims cannot satisfy the effects exception’s requirement that the effect 

on U.S. import commerce “gives rise to [its] claim.” 15 U.S.C. § 6a(2); 

see Empagran, 542 U.S. at 173-74. Even assuming defendants’ conduct 

had a direct, substantial, and reasonably foreseeable effect on U.S. 

import commerce in connector-incorporating computer products, that 

effect would not be the cause of Lotes’ injuries—lost sales in wholly 

foreign commerce and the potential closure of its foreign factories. In 

the causal chain, Lotes’ injuries precede, indeed contribute to, the effect 

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on U.S. import commerce. Thus, that effect does not give rise to Lotes’ 

Sherman Act claims as the FTAIA’s effects exception requires. 

ARGUMENT 

I. Congress Enacted the FTAIA to Promote U.S. Exports While 

Protecting U.S. Domestic and Import Commerce and U.S. 

Exporters from Anticompetitive Conduct 

The FTAIA should be construed in light of its history and purpose. 

See F. Hoffmann-La Roche Ltd. v. Empagran S.A., 542 U.S. 155, 169 

(2004). The statute “seeks to make clear to American exporters (and to 

firms doing business abroad) that the Sherman Act does not prevent 

them from entering into business arrangements (say, joint-selling 

arrangements), however anticompetitive, as long as those arrangements 

adversely affect only foreign markets.” Id. at 161. By making clear to 

U.S. firms when the antitrust laws apply to conduct involving export 

commerce or other commerce outside the United States, Congress 

intended to “increase United States exports of products and services.” 

Pub. L. No. 97-290, § 102(b), 96 Stat. 1233, 1234; see also H.R. Rep. No. 

97-686, at 7-8 (1982), reprinted in 1982 U.S.C.C.A.N. 2487, 2494. 

To this end, Congress limited the application of the Sherman Act 

when the challenged conduct involves either (1) export commerce or (2) 

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wholly foreign commerce—that is, commerce within, between, or among 

foreign nations. Empagran, 542 U.S. at 163. The FTAIA provides that: 

Sections 1 to 7 of [the Sherman Act] shall not apply to conduct 

involving trade or commerce (other than import trade or import 

commerce) with foreign nations unless— 

(1) such conduct has a direct, substantial, and reasonably 

foreseeable effect— 

(A) on trade or commerce which is not trade or commerce with 

foreign nations, or on import trade or import commerce with 

foreign nations; or 

(B) on export trade or export commerce with foreign nations, 

of a person engaged in such trade or commerce in the United 

States; and 

(2) such effect gives rise to a claim under the provisions of 

sections 1 to 7 of this title, other than this section. 

15 U.S.C. § 6a. 

The statutory language makes clear that the FTAIA does not apply 

to conduct involving import commerce. Such conduct, like conduct 

involving purely domestic commerce, remains fully subject to the 

Sherman Act. This is commonly referred to as the FTAIA’s “import 

commerce exception,” but the term is a misnomer. “Import trade and 

commerce are excluded at the outset from the coverage of the FTAIA in 

the same way that domestic interstate commerce is excluded.” MinnChem, Inc. v. Agrium, Inc., 683 F.3d 845, 854 (7th Cir. 2012) (en banc). 

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The import commerce language contained in the parentheses was 

included so that there would be “no misunderstanding that import 

restraints, which can be damaging to American consumers, remain 

covered by the law.” H.R. Rep. No. 97-686, at 9, reprinted in 1982 

U.S.C.C.A.N. at 2494; see also Minn-Chem, 683 F.3d at 854.4

The FTAIA declares the Sherman Act inapplicable to conduct 

involving only non-import commerce with foreign nations—i.e., export 

commerce or wholly foreign commerce—unless two requirements are 

met. First, the conduct must have a “direct, substantial, and 

reasonably foreseeable effect” on commerce within the United States, 

U.S import commerce, or the export trade of a U.S. exporter (collectively 

U.S. commerce). 15 U.S.C. § 6a(1). Second, a plaintiff seeking damages 

must establish that this effect “gives rise to a claim under” the Sherman 

Act. 15 U.S.C. § 6a(2). 

Because failure to meet this second requirement disposes of Lotes’ 

Sherman Act claims, we turn to the “gives rise to” requirement first. 

 4 Lotes did not argue that defendants’ conduct involves import 

commerce, and the district court did not consider the import commerce 

exclusion. Therefore, this brief does not address its application here. 

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II. The FTAIA Bars Lotes’ Claim Because the Alleged Effect on U.S. 

Commerce Did Not Give Rise to Lotes’ Claim 

The district court dismissed the claim on the ground that Lotes 

failed to establish that the challenged conduct had a direct, substantial, 

and reasonably foreseeable effect on U.S. commerce. Op. 23 (JA-264); 

see 15 U.S.C. § 6a(1). Lotes’ challenge to that conclusion raises difficult 

and fact-intensive questions, and the district court’s analysis was 

flawed in several respects. This Court need not reach that issue, 

however, because there is a simpler basis for affirming: the challenged 

conduct does not meet the exception’s requirement that the effect on 

U.S. commerce “gives rise to a claim under [the Sherman Act],” 15 

U.S.C. § 6a(2).5

A. To Give Rise to a Claim, the Effect on U.S. Commerce Must 

Proximately Cause the Plaintiff’s Injury 

The FTAIA requires an antitrust plaintiff challenging conduct 

involving only non-import foreign commerce to show that the conduct’s 

effect on U.S. commerce “gives rise to” the plaintiff’s own Sherman Act 

 5 The Court “may affirm on any grounds for which there is a record 

sufficient to permit conclusions of law, including grounds not relied 

upon by the district court.” Olsen v. Pratt & Whitney Aircraft, 136 F.3d 

273, 275 (2d Cir. 1998). 

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claim. It is not sufficient that someone else might have a Sherman Act 

claim arising from the conduct’s U.S. effects. 

In Empagran, the Supreme Court expressly rejected the argument 

that foreign plaintiffs who purchased price-fixed products in wholly 

foreign commerce satisfied the FTAIA exception’s “gives rise to” 

requirement by showing that the price-fixing that injured them also 

gave rise to claims by purchasers in the United States. 542 U.S. at 173-

75. The Court explained that “Congress would not have intended the 

FTAIA’s exception to bring independently caused foreign injury within 

the Sherman Act’s reach.” Id. at 173. No case prior to the FTAIA had 

applied the Sherman Act to allow foreign plaintiffs to recover for 

“foreign injury” caused by “foreign anticompetitive conduct” producing 

both “an adverse domestic effect” and “an independent foreign effect 

giving rise to the claim.” Id. at 158-59. And the FTAIA did not expand 

the Sherman Act’s reach. Id. at 169-73. 

Consistent with the pre-FTAIA understanding that the antitrust 

laws “redress domestic antitrust injury that foreign anticompetitive 

conduct has caused” and “principles of prescriptive comity,” the Court 

explained, the term “gives rise to a claim” must mean “gives rise to the 

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plaintiff’s claim.” Id. at 165, 173-74; see also Sniado v. Bank Austria 

AG, 378 F.3d 210, 212 (2d Cir. 2004) (holding that the FTAIA requires 

plaintiff to “allege that the [foreign] conspiracy’s effect on domestic 

commerce gave rise to his claims.”). 

On remand in Empagran, the D.C. Circuit held that “[t]he 

statutory language—‘gives rise to’—indicates a direct causal 

relationship, that is, proximate causation,” between the conduct’s 

effects on U.S. commerce and the plaintiff’s claim. Empagran S.A. v. F. 

Hoffmann-LaRoche, Ltd., 417 F.3d 1267, 1271 (D.C. Cir. 2005) 

(Empagran II). The court explained that the proximate causation 

standard “accords with principles of ‘prescriptive comity,’” pursuant to 

which courts “‘ordinarily construe[ ] ambiguous statutes to avoid 

unreasonable interference with the sovereign authority of other 

nations.’” Empagran II, 417 F.3d at 1271 (quoting Empagran, 542 U.S. 

at 164). Applying that standard, the court rejected the foreign 

plaintiffs’ claim that the effects on U.S. commerce caused their injury. 

“While maintaining super-competitive prices in the United States may 

have facilitated the” price fixers’ ability “to charge comparable prices 

abroad,” the court concluded this fact demonstrated “at most but-for 

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causation.” Id. Thus, plaintiffs had failed to establish that “the U.S. 

effects of the [anticompetitive] conduct—i.e., increased prices in the 

United States—proximately caused the foreign [plaintiffs’] injuries.” Id. 

All other courts of appeals to consider the question have joined the 

D.C. Circuit. They have held that, under the FTAIA exception’s “gives 

rise to” requirement, the effect must be the “direct or proximate” cause 

of the plaintiff’s injury. In re Dynamic Random Access Memory 

(DRAM) Antitrust Litig., 546 F.3d 981, 988 (9th Cir. 2008); In re 

Monosodium Glutamate (MSG) Antitrust Litig., 477 F.3d 535, 538 (8th 

Cir. 2007). This standard, these courts explained, is “consistent with 

general antitrust principles, which typically require a direct causal link 

between the anticompetitive practice and plaintiff’s damages.” DRAM, 

546 F.3d at 988; see MSG, 477 F.3d at 538-39 (Proximate cause is 

“consistent with general antitrust principles, which typically require a 

more direct causation standard.”). 

B. Lotes’ Claims Do Not Arise from the Alleged Effects on U.S. 

Commerce 

Lotes alleges that defendants’ conduct had the effect “of driving up 

prices of consumer electronic devices in the U.S.” Lotes Br. 42 (citing 

FAC ¶¶ 20-23, 68-73 (JA-36-38, 56-59)). But the higher prices in the 

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United States did not cause Lotes’ injury. To the contrary, Lotes 

suffered only foreign injury from lost sales of USB 3.0 connectors in 

wholly foreign commerce and the potential closures of its foreign 

factories; that injury results from defendants’ conduct, not its effect on 

U.S. commerce.6

To the extent Lotes alleges any causal connection between its 

injury and the effects on U.S. commerce, the line of causation runs in 

the wrong direction. Lotes alleges that defendants’ conduct will reduce 

competition in the supply of, and increase the prices for, USB 3.0 

connectors by barring Lotes’ foreign manufacture of USB 3.0 

connectors, and that the resulting price increases to purchasers of USB 

3.0 connectors “will inevitably [be] pass[ed] on to U.S. consumers.” FAC 

¶ 63 (JA-55). In this way, the “loss of Lotes in the USB 3.0 connector 

market would thus damage competition, increase prices, and harm 

consumers in the United States.” FAC ¶ 64 (JA-55) (emphasis added). 

Lotes’ injury precedes the higher U.S. prices in the causal chain. “An 

 6 Lotes’ complaint includes conclusory allegations that it suffered 

injury in the Southern District of New York, but does not identify any 

such injury. See, e.g., FAC ¶¶ 11, 13 (JA-32-33). Without a factually 

specific identification of domestic injury, the Court need not credit these 

allegations. See Rothstein v. UBS AG, 708 F.3d 82, 94 (2d Cir. 2013). 

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effect never precedes its cause,” American Home Products Corp. v. 

Liberty Mutual Insurance Co., 748 F.2d 760, 765 (2d Cir. 1984), and 

therefore the effect on U.S. commerce, the higher U.S. prices, cannot be 

the proximate cause of Lotes’ injury. 

While the Sherman Act does not apply to Lotes’ challenge to 

defendants’ conduct, the statute could apply to that same conduct if 

another plaintiff made a claim arising out of effects on U.S. commerce. 

For example, the Sherman Act would apply if purchasers of connectorincorporating computer products in the United States paid higher prices 

and those price increases were a direct, substantial, and reasonably 

foreseeable effect of defendants’ conduct. In that scenario, the conduct’s 

effect on U.S. commerce would give rise to those plaintiffs’ claims. 

Similarly, the government would have ample authority to bring an 

action to enforce the Sherman Act. See Empagran, 542 U.S. at 170; cf.

Kruman v. Christie’s Int’l PLC, 284 F.3d 384, 398 (2d Cir. 2002) (“[T]he 

Sherman Act contains its own enforcement provision that can be 

invoked by the United States even when no plaintiff has suffered an 

injury.”), abrogated on other grounds by Empagran, 542 U.S. 155. 

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There is nothing anomalous about this result. By operation of the 

FTAIA exception’s “gives rise to a claim” requirement, the Sherman Act 

“can apply and not apply to the same conduct” depending on whether 

the particular plaintiff’s claim arises from the requisite effect. 

Empagran, 542 U.S. at 173-74. Thus, for example, while the pricefixing conspiracy in Empagran “did have domestic effects, and those 

effects were harmful enough to give rise to ‘a’ claim,” the FTAIA barred 

the foreign plaintiffs’ claims on the assumption that the conduct 

“independently caused [their] foreign injury.” Id. at 174-75. 

Nor is it dispositive that some of the alleged conduct occurred in 

the United States. Lotes contends “that a group of U.S. and foreign 

companies is engaging in a U.S.-based patent hold-up.” Lotes Br. 42. 

But Lotes does not contend defendants are refusing to license U.S. 

patents in U.S. commerce. Rather, they are allegedly enforcing Chinese 

patents in China, and thus allegedly foreclosing “competition with 

respect to USB 3.0 connectors installed abroad in U.S.-bound consumer 

electronic devices.” Id. 

The FTAIA’s exception requires the plaintiff to establish that the 

challenged conduct affects U.S. commerce, 15 U.S.C. § 6a(1), and that 

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“such effect gives rise to a claim” under the Sherman Act, 15 U.S.C. 

§ 6a(2). Whether these requirements are met does not necessarily turn 

on the location of the conduct or the nationality of the actors. Indeed, 

potentially anticompetitive conduct in the United States by U.S. 

exporters is precisely the sort of conduct Congress sought to exclude 

from the Sherman Act so long as it affects only non-import foreign 

commerce. See H.R. Rep. No. 97-686 at 10, reprinted in 1982 

U.S.C.C.A.N. 2487, 2495. Conversely, the FTAIA leaves the Sherman 

Act fully applicable to conduct involving U.S. import commerce, even if 

the conduct takes place entirely outside the United States.7 Thus, even 

if Lotes’ foreign injury was caused by conduct in the United States, that 

alone does not satisfy the requirement that the conduct’s effects on U.S. 

commerce give rise to Lotes’ claims. 

 7 “[T]he Sherman Act applies to foreign conduct that was meant to 

produce and did in fact produce some substantial effect in the United 

States.” Hartford Fire Ins. Co. v. Cal., 509 U.S. 764, 796 (1993). Thus, 

the Sherman Act authorizes antitrust actions “predicated on wholly 

foreign conduct which has an intended and substantial effect in the 

United States.” United States v. Nippon Paper Indus. Co., 109 F.3d 1, 4 

(1st Cir. 1997). 

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III. This Court Should Not Endorse the District Court’s Flawed 

Analysis of Direct Effects 

There is no need for this Court to determine whether the district 

court erred in holding that the challenged conduct lacks a “direct, 

substantial, and reasonably foreseeable” effect on U.S. commerce. If the 

Court addresses this holding, however, it should reject the district 

court’s flawed analysis. 

A. In the FTAIA, “Direct” Means a Reasonably Proximate Causal 

Nexus, Not an Immediate Consequence 

The district court’s analysis errs from its outset by following United 

States v. LSL Biotechnologies, 379 F.3d 672 (9th Cir. 2004) and defining 

a direct effect as one that “follows as an immediate consequence of the 

defendant’s activity.” Op. 23 (JA-264) (quoting 379 F.3d at 680). In the 

context of the FTAIA, the term direct means only a reasonably 

proximate causal nexus. Thus, the Seventh Circuit recently held that 

proximate cause is the appropriate standard by which to determine 

whether there is a “direct” effect on U.S. commerce for purposes of the 

FTAIA. Minn-Chem, 683 F.3d at 857. The FTAIA thus leaves the 

Sherman Act applicable to conduct involving non-import foreign 

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commerce if it has a reasonably proximate (as well as substantial and 

reasonably foreseeable) effect on U.S. commerce. 

The district court’s analysis does not provide any reason for 

adopting the LSL definition, nor does it acknowledge the en banc 

holding of the Seventh Circuit in Minn-Chem, which expressly rejected 

that definition. The court does state that any higher computer prices 

and reduced competition in the United States resulting from the 

defendants’ foreign anticompetitive conduct “are simply too attenuated 

to establish the proximate causation required by the FTAIA.” Op. 24 

(JA-265). The juxtaposition of this statement with the court’s adoption 

of LSL’s definition of direct suggests that the district court did not 

appreciate the difference between LSL’s immediate consequence 

standard and Minn-Chem’s proximate causation standard. Op. 23-24 

(JA-264-65). 

While the LSL and Minn-Chem standards may lead to the same 

result in some cases, the distinction is important. The LSL definition 

“results in a stricter test than the complete text of the statute can bear,” 

Minn-Chem, 683 F.3d at 857, and thus imposes a higher burden on 

plaintiffs than Congress intended. 

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Defining directness in terms of proximate causation terms accords 

with antitrust law’s understanding of “direct” and the term’s use in the 

FTAIA. Antitrust courts have long relied on the concept of “directness” 

in determining whether a private plaintiff’s injury gives rise to standing 

under the antitrust laws. See Blue Shield of Va. v. McCready, 457 U.S. 

465, 476-77 & n.12 (1982) (citing cases). The courts have contrasted the 

“directness” of some injuries with the “remoteness” of others and have 

applied the common-law concept of proximate cause. Id. at 476-77 

nn.12-13. “[D]irectness relates to the question whether there exists a 

chain of causation between a defendant’s action and a plaintiff’s injury 

or (in contrast) if the connection is based instead only on ‘somewhat 

vaguely defined links.’” Loeb Indus., Inc. v. Sumitomo Corp., 306 F.3d 

469, 486-87 (7th Cir. 2002) (quoting Associated Gen. Contractors of 

Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 540 (1983)). 

Defining “direct” for purposes of the FTAIA’s effects exception in 

terms of proximate causation addresses this “classic concern about 

remoteness.” Minn-Chem, 683 F.3d at 857. It is also fully supported by 

principles of prescriptive comity. By leaving the Sherman Act 

applicable to conduct that has a reasonably proximate (as well as 

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substantial and reasonably foreseeable) effect on U.S. commerce, 

Congress sought to redress domestic antitrust injuries in this 

commerce. American “courts have long held that application of our 

antitrust laws to foreign anticompetitive conduct is nonetheless 

reasonable, and hence consistent with principles of prescriptive comity, 

insofar as they reflect a legislative effort to redress domestic antitrust 

injury that foreign anticompetitive conduct has caused.” Empagran, 

542 U.S. at 165. 

Thus, if a conspiracy of foreign manufacturers to fix the price of 

components sold to other foreign manufacturers proximately caused 

effects on import commerce in finished products incorporating that 

price-fixed component—notably by increasing the price—that effect 

would be viewed as direct, and the FTAIA exception would apply 

(assuming the effect was also reasonably foreseeable and substantial). 

See In re TFT-LCD (Flat Panel) Antitrust Litig., 822 F. Supp. 2d 953, 

959-64 (N.D. Cal. 2011); cf. Mandeville Island Farms, Inc. v. Am. 

Crystal Sugar Co., 334 U.S. 219, 235-38 (1948) (a restraint of local 

commerce in sugar beets had the requisite effect on interstate 

commerce in sugar). Similarly, a cartel making no sales into the United 

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States would come within the direct effects exception if it created “a 

world-wide shortage . . . that had the effect of raising domestic prices.” 

H.R. Rep. 97-686, at 13, reprinted in 1982 U.S.C.C.A.N. 2487, 2498. 

But “foreign activities that are too remote from the ultimate effects on 

U.S. domestic or import commerce” are excluded from the Sherman 

Act’s reach. Minn-Chem, 683 F.3d at 857. 

The panel majority in LSL offered no sound reason for its holding 

that an effect is “direct” in the context of the FTAIA if “it follows as an 

immediate consequence of the defendant’s activity,” and hence, “[a]n 

effect cannot be ‘direct’ where it depends on . . . uncertain intervening 

developments,” 379 F.3d at 680-81.8 The majority’s reliance on a 

dictionary definition, see id., is unpersuasive. When the FTAIA was 

enacted in 1982, there were many “ordinary and common” usages of the 

term “direct.” LSL, 379 F.3d at 692 (Aldisert, J., dissenting). The 

definition of “direct” adopted by the LSL majority corresponds to one 

such usage—“proceeding from one point to another in time or space 

 8 In LSL, the government argued that “direct” in the context of the 

FTAIA invoked the concept of proximate causation. While the panel 

majority declined to define direct effect in terms of proximate causation, 

the dissent agreed with the government. 379 F.3d at 691-94 (Aldisert, 

J., dissenting). 

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without deviation or interruption”—while the definition adopted by the 

LSL dissent corresponds to another—“characterized by or giving 

evidence of a close especially logical, causal, or consequential 

relationship.” Webster’s Third New International Dictionary 640 

(1981). 

The LSL majority did not reference any definition of “direct” other 

than its own, much less explain why any such construction would be 

inferior. The majority may have adopted the first dictionary definition 

because it was first, but “the relative order of the common dictionary 

definitions of a single term does little to clarify that term’s meaning 

within a particular context. When a word has multiple definitions, 

usage determines its meaning.” Trs. of the Chi. Truck Drivers, Helpers 

& Warehouse Workers Union (Indep.) Pension Fund v. Leaseway 

Transp. Corp., 76 F.3d 824, 828 n.4 (7th Cir. 1996). 

The LSL majority also relied on the fact that the Supreme Court 

had defined a “nearly identical term” in the Foreign Sovereign 

Immunities Act (FSIA), 28 U.S.C. § 1605(a)(2), in the same way. 379 

F.3d at 680 (citing Republic of Arg. v. Weltover, Inc., 504 U.S. 607 

(1992)). But, as the Minn-Chem court explained, “the Ninth Circuit 

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jumped too quickly to the assumption that the FSIA and the FTAIA use 

the word ‘direct’ in the same way.” 683 F.3d at 857. While both 

statutes have a “direct effects” exception, the statutory purpose and 

language differ. The FSIA deals with foreign nations’ general immunity 

from suit and applies to numerous federal statutes, while the FTAIA 

limits the Sherman Act’s application to conduct involving export and 

wholly foreign commerce. And the FSIA’s “direct effect” exception does 

not include an expressed or “unexpressed requirement of ‘substantiality’ 

or ‘foreseeability,’” Weltover, 504 U.S. at 618, while the FTAIA requires 

a “direct, substantial, and reasonably foreseeable effect,” 15 U.S.C. § 6a. 

Placing the term “direct” in the context of the FTAIA 

demonstrates the flaws in the LSL majority’s definition. Following “as 

an immediate consequence” could be understood to mean that there can 

be no subsequent sales or other steps before the product is sold or 

delivered into the United States. If so, the direct effects exception 

would reach only conduct that qualifies for the import commerce 

exclusion. See Minn-Chem, 683 F.3d at 857 (“To demand a foreseeable, 

substantial, and ‘immediate’ consequence on import or domestic 

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commerce comes close to ignoring the fact that straightforward import 

commerce has already been excluded from the FTAIA’s coverage.”). 

Moreover, any antitrust injury that is an “immediate 

consequence” of anticompetitive conduct would be “reasonably 

foreseeable,” so the LSL majority’s definition of “direct” robs the 

“reasonable foreseeab[ility]” requirement of any function. The LSL

majority’s definition of “direct” thus violates the “cardinal principle” 

that a statute should be interpreted so that, if possible, “no clause, 

sentence, or word shall be superfluous, void, or insignificant.” TRW Inc. 

v. Andrews, 534 U.S. 19, 31 (2001). 

In contrast, if “direct” is defined as “reasonably proximate,” the 

import commerce exclusion and the effects exception fit comfortably 

together: the former applies when the challenged conduct itself involves 

import commerce, while the latter applies when the challenged conduct 

proximately causes an effect on import commerce (or on commerce 

within the United States or certain export commerce). While proximate 

cause includes notions of foreseeability, proximate cause and reasonable 

foreseeability are distinct concepts. And defining direct as reasonably 

proximate gives each of the three parts of the direct effects exception its 

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own function: “direct” goes to the effect’s cause, “substantial” goes to its 

amount, and “reasonably foreseeable” goes to its objective predictability. 

Lastly, adopting the LSL majority’s definition of “direct” could 

undermine Congress’s objective of protecting purchasers in the United 

States from anticompetitive conduct. Many finished products sold in 

the United States are manufactured or assembled abroad and 

incorporate component parts sold, manufactured, or assembled in other 

countries. Courts applying the LSL definition could erroneously find 

that the foreign assembly of these finished products constitutes an 

“interruption” that places anticompetitive conduct involving the 

component parts outside the reach of the Sherman Act, even though 

that conduct proximately causes substantial and reasonably foreseeable 

effects on U.S. import commerce in those finished products.9 See IB 

Philip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 272i1, at 309 

(4th ed. 2013) (“Many, perhaps most, restraints are on ‘intermediate’ 

goods,” but effects “that occur in upstream markets quickly filter into 

consumer markets as well.”). 

 9 One district court applying LSL has avoided this error. In re 

TFT-LCD, 822 F. Supp. 2d at 959-64; see infra pp. 34-35. 

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Defining “direct effects” as reasonably proximate effects ensures 

the proper inquiry. And it accomplishes Congress’s primary goal of 

protecting purchasers in the United States, while allowing U.S. firms to 

engage in export or wholly foreign commerce that has no U.S. effects 

without fear of treble damages lawsuits under the Sherman Act based 

on sales outside the United States. 

B. A Multiple-Step Foreign Manufacturing Process Does Not Preclude 

a Direct Effect on U.S. Commerce 

“In a global economy, where domestic and foreign markets are 

interrelated and influence each other, it is sometimes difficult to put 

strict economic boundaries around any particular country.” 

Metallgesellschaft AG v. Sumitomo Corp. of Am., 325 F.3d 836, 842 (7th 

Cir. 2003). Yet, the court below focused its analysis on the number and 

the location of steps in the manufacturing process. See Op. 23-24 (JA264-65). The application of the effects exception turns on the 

challenged conduct’s impact on purchasers in the United States, not the 

manufacturing process used. Cf. Metallgesellschaft, 325 F3d at 842 (“A 

global conspiracy to inflate prices could have anticompetitive effects on 

the U.S. economy whether the conspiracy occurred within the United 

States or abroad.”). 

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While the court adopted LSL’s construction of direct, it did not 

correctly apply that standard. Under LSL, “an effect does not become 

‘indirect’ simply because the American [brand name computer 

companies] use a complex manufacturing process.” In re TFT-LCD, 822 

F. Supp. 2d at 964. Nor does the existence of multiple foreign 

“transactions and manufacturing steps,” Op. 23 (JA-264) (quoting Defs. 

Mem. 10), preclude a finding of a direct effect under either LSL or 

Minn-Chem. 

In In re TFT-LCD, the court held that a direct effect on U.S. 

commerce exists where a conspiracy to fix the price of LCD panels that 

were made in foreign countries, sold to foreign entities, and generally 

incorporated into finished products at foreign factories, had increased 

the prices for finished products sold in the United States. 822 F. Supp. 

2d at 959-64. Applying LSL, the court explained that when “the nature 

of the effect does not change in any substantial way before it reaches 

the United States consumer, the effect is an ‘immediate consequence’ of 

the defendant’s anticompetitive behavior.” Id. at 964. The “effect of 

defendants’ anticompetitive conduct did not change significantly 

between the beginning of the process (overcharges for LCD panels) and 

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the end (overcharges for televisions, monitors, and notebook computers 

[incorporating those panels]).” Id. And thus, “the effect ‘proceeded 

without deviation or interruption’ from the LCD manufacturer to the 

American retail store.” Id.

The court below sought to distinguish In re TFT-LCD because it 

involved price fixing “whose effects were easily quantifiable.” Op. 30 

(JA-271). But the effects exception is not limited to price fixing. See, 

e.g., Access Telecom, Inc. v. MCI Telecomms. Corp., 197 F.3d 694, 712 

(5th Cir. 1999); Korea Kumho Petrochemical v. Flexsys Am. LP, No. 

C07-01057, 2008 WL 686834, at *6-7 (N.D. Cal. 2008); CSR Ltd. v. 

Cigna Corp., 405 F. Supp. 2d 526 (D.N.J. 2005). Nor does the effects 

exception require quantification of the effect. 

The percentage of the market controlled by defendants and the 

significance of the component part to the finished product may help a 

plaintiff show that there is an effect on U.S. commerce, but they do not 

impact whether that effect would be direct. Assuming Lotes established 

that the conduct caused USB 3.0 connector price increases and, in turn, 

affected the prices of connector-incorporating products imported to the 

United States, the fact that connectors were “but one component in a 

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36 

host of components” or that the market shares may significantly differ 

from In re TFT-LCD, Op. 30 (JA-271), does not render that effect 

indirect. 

The same conclusion holds under the Minn-Chem proximate cause 

standard: anticompetitive conduct that increases the price of a 

component part has a direct effect when it proximately causes a price 

increase on a product sold in U.S. import or domestic commerce. Cf. 

Minn-Chem, 683 F.3d at 859 (“foreign supply restrictions, and the 

concomitant price increases forced upon the Chinese purchasers, were a 

direct—that is, proximate—cause of the subsequent price increases in 

the United States”). Indeed, in our view, the Minn-Chem proximate 

cause standard is superior because it is not as potentially susceptible to 

a misinterpretation focusing on the particular manufacturing process as 

is LSL’s focus on “immediate consequences.” 

* * * 

We take no position on whether the challenged conduct could be 

found to have an effect on U.S. commerce and whether that effect would 

be direct under the appropriate standard. In our view, the Court need 

not remand for such determinations because any such effect would 

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37 

plainly not “give rise to” Lotes’ Sherman Act claims. If this Court 

reaches the issue of direct effects, it should make clear that the inquiry 

focuses on proximate causation. 

CONCLUSION 

The judgment should be affirmed on the alternative basis that the 

alleged effect on U.S. commerce of the challenged conduct does not give 

rise to Lotes’ Sherman Act claims and therefore the FTAIA renders 

Sections 1 and 2 of the Sherman Act inapplicable. 

Respectfully submitted. 

 /s/ James J. Fredricks 

 

JONATHAN E. NUECHTERLEIN 

General Counsel 

WILLIAM J. BAER 

Assistant Attorney General 

JOHN F. DALY 

Deputy General Counsel for 

Litigation 

MARK S. HEGEDUS 

Attorney 

Office of the General Counsel 

Federal Trade Commission 

600 Pennsylvania Ave., NW 

Washington, DC 20530-0001 

KRISTEN C. LIMARZI 

JAMES J. FREDRICKS 

Attorneys 

U.S. Department of Justice 

Antitrust Division 

950 Pennsylvania Ave., NW, 

Room 3224 

Washington, DC 20530-0001 

202-307-1403 

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CERTIFICATE OF COMPLIANCE 

1. This brief complies with the type-volume limitation of Fed. R. 

App. P. 29(d) and 32(a)(7)(B) because this brief contains 6994 words, 

excluding the parts of the brief exempted by Rule 32(a)(7)(B)(iii). 

2. This brief complies with the typeface requirements of Rule 

32(a)(5) of the Federal Rules of Appellate Procedure and the type style 

requirements of Rule 32(a)(6) because this brief has been prepared in a 

proportionally spaced typeface using Microsoft Office Word 2007 with 

14-point New Century Schoolbook font. 

 /s/ James J. Fredricks 

Attorney

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CERTIFICATE OF SERVICE 

I, James J. Fredricks, hereby certify that on October 7, 2013, I 

electronically filed the foregoing Brief for the United States and Federal 

Trade Commission as Amici Curiae in Support of DefendantsAppellants with the Clerk of the Court of the United States Court of 

Appeals for the Second Circuit by using the CM/ECF System. I also 

sent six paper copies to the Clerk of the Court. 

I certify that all participants in the case are registered CM/ECF 

users and that service will be accomplished by the CM/ECF system. 

Date: October 7, 2013 /s/ James J. Fredricks 

Attorney

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