In a recent opinion, the District Court for the District of Delaware dismissed AMD’s antitrust claims against Intel that arose out of Intel’s alleged foreign-related conduct that affected AMD’s foreign sales. Advanced Micro Devices, Inc. v. Intel Corp. (AMD), Civ. Action No. 05-441-JJF, — F.Supp.2d —-, 2006 WL 2742297 (D. Del. Sept. 26, 2006). In that case, AMD had alleged that Intel willfully maintained a monopoly in the x86 microprocessor market, which AMD alleged to constitute a world-wide market, by engaging in such exclusionary conduct as, among other things, "forcing major customers into exclusive or non-exclusive deals, conditioning rebates and other monetary incentives on customers’ agreement to limit or forego purchases from AMD, forcing PC makers and technology partners to boycott AMD product launches and promotions and threatening retaliation against customers introducing AMD computer platforms." Id. at *1.
Intel moved to dismiss, contending that AMD’s complaint did not satisfy the jurisdictional requirements of the Foreign Trade Antitrust Improvements Act of 1982 ("FTAIA"), under which non-import activity involving foreign commerce is actionable under the Sherman Act only if it "both (1) sufficiently affects American commerce, i.e . . [sic] it has a ‘direct, substantial, and reasonably foreseeable effect’ on American domestic, import or (certain) export commerce, and has an affect of a kind that antitrust law considers harmful . . . ." Id. at *2 (quoting from F. Hoffmann-La Roche Ltd. v. Empagran S.A., 542 U.S. 155 (2004) (emphasis and brackets in original).1
Intel argued that AMD was seeking relief "for alleged business practices of Intel that affect the sale of AMD’s microprocessors in foreign countries." Id. at *3. According to Intel, although AMD is an American corporation, it manufactures its microprocessors in Germany, and these "German-made microprocessors" are then assembled into final products in Malaysia, Singapore and China. Id. Intel contended that AMD was seeking recovery for "lost sales of these foreign-made microprocessors to foreign countries" and that AMD also was "seeking redress through the Japanese courts, the European Commission and the Korean Fair Trade Commission for the same business practices of Intel that are alleged here." Id. According to Intel, because AMD’s alleged harm occurred outside of the United States and AMD already was seeking relief for the same harm in the foreign tribunals, the court lacked jurisdiction over AMD’s "foreign commerce claims" under both the FTAIA and principles of foreign comity. AMD, 2006 WL 2742297, at *3.
AMD responded that Intel has kept AMD "from selling microprocessors abroad with the purpose and effect of weakening AMD as a domestic rival" and that "Intel’s ability to coerce U.S. customers from giving AMD more business depends on keeping AMD economically powerless to make these customers whole for the costs that Intel can impose on them. To so marginalize AMD, Intel has necessarily had to cut AMD off from business opportunities throughout the market, including opportunities with foreign customers." Id. at *4 (internal quotation marks and citations omitted). AMD further argued, "Intel’s foreign conduct and the foreign harm it caused are inextricably bound with Intel’s domestic conduct restraining trade and the resulting domestic antitrust injury to AMD," id. at *3, because "the individual instances of lost sales by AMD, whether in the United States or abroad, do not give rise to their own monopolization claim, but rather, that the individual incidents taken together constitute a single monopolization having a foreseeable and substantial effect on U.S. commerce," id. at *6. Accordingly, AMD argued that "it is this single global effect that gives rise to AMD’s claim for damages." Id.
Essentially adopting Intel’s arguments, the District Court dismissed AMD’s claims arising out of Intel’s alleged exclusionary conduct oversees that adversely affected AMD’s foreign sales. Id.at *3. The court explained that the "’direct effects’ requirement of the FTAIA . . . means that there must be an ‘immediate consequence’ of the alleged anticompetitive conduct with no ‘intervening developments.’" Id. at 4 (citing United States v. LSL Biotechnologies, 379 F.3d 672, 680 (9th Cir.2004)). In the Court’s view, however, "AMD’s chain of effects [was] full of twists and turns, which themselves [were] contingent upon numerous developments." Id.
Borrowing from Intel’s arguments, the court explained,
[U]nder AMD’s logic, a deal between Intel and a German retailer to promote Intel-based systems . . . directly affect U.S. commerce because it reduces AMD’s German subsidiary’s sales of German-made microprocessors in Germany, which in turn affects the profitability of the U.S. AMD parent, which in turn affects the funds that AMD has for discounting to U.S. customers, which in turn affects the discounts that it offers in particular U.S. transactions, which in turn affects its competitiveness in the United States, and which in turn affects U.S. commerce.
Id. The Court noted, "reduced income flowing from a foreign subsidiary to a domestic parent is not a direct domestic effect or injury." Id. Further addressing AMD’s alleged chain of effects, the court stated:
AMD’s primary contention that its lost foreign sales have resulted in lost profitability which in turn, has resulted in lost revenues to shareholders and missed opportunities to invest and compete in the United States is premised on a multitude of speculative and changing factors affecting business and investment decisions, including market conditions, the cost of financing, supply and demand, the success or failure of research and development efforts, the availability of funds and world-wide economic and political conditions.
AMD, 2006 WL 2742297, at *4.
The court noted, while it understood "the nature of a global market, the allegations of foreign conduct here result in nothing more than what courts have termed a ‘ripple effect’ on the United States domestic market, and the FTAIA prevents the Sherman Act from reaching such ‘ripple effects.’" Id. at *5 (citing Latino Quimica-Amtex v. Akzo Nobel Chems. B.V., 2005 WL 2207017, at *3, 5-7 (S.D.N.Y. Sept. 8, 2005)). While acknowledging that AMD’s allegations may establish that Intel’s alleged foreign restraints were the "but-for" cause of AMD’s domestic losses and injury, the Court held that those allegations failed to satisfy the required "proximate causation" under the FTAIA:
The FTAIA requires a plaintiff to allege that its claims were directly caused by the domestic effects of the conduct and not the foreign effects. Stated another way, the "statutory language ‘gives rise to’– indicates a direct causal relationship, that is, proximate causation, and is not satisfied by the mere but-for ‘nexus.’" . . . In this case, any alleged harm suffered by AMD has been directly caused by the foreign effects of Intel’s alleged conduct, namely lost foreign sales. The other "ripple effects" of Intel’s foreign conduct on the U.S. market may not have arisen "but for" Intel’s alleged conduct; however, "but for" causation is not the type of direct causation contemplated by the FTAIA.
Id. at *5 (internal citation omitted).
The court also rejected AMD’s reliance on a line of cases, including Continental Ore Co. v. Union Carbide, 370 U.S. 690 (1962) and United States v. Aluminum Co. of Am., 148 F.2d 416 (2d Cir.1945), to supports its claim that a defendant’s foreign restraints which makes the plaintiff less likely to compete domestically falls within the scope of the Sherman Act. In this regard, the Court noted that these cases were decided before the enactment of the FTAIA, the purpose of which was to strip the jurisdiction of federal courts over certain foreign commerce claims under the antitrust laws. Id. at *6.
Finally, in addition to holding that it lacked subject matter jurisdiction over AMD’s "foreign commerce claims," the court also alternatively held that AMD lacked standing to assert such claims under the Sherman Act. The court noted, "To establish standing to bring an antitrust claim, the plaintiff "must have suffered an injury the antitrust laws were intended to prevent, and the injury must flow from that which makes the defendants’ acts unlawful." Id. at *7 (internal citation and quotation marks omitted). The court explained, under the relevant Third Circuit precedent, "this analysis implicates many of the same jurisdictional issues under the FTAIA." Id. Accordingly, the court dismissed AMD’s claims for lack of standing for the same reasons it rejected those claims under the FTAIA. Id.
1The FTAIA provides:
[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 [the Sherman Act] other than this section. If [the Sherman Act] appl[ies] to such conduct only because of the operation of paragraph (1)(B), then [the Sherman Act] shall apply to such conduct only for injury to export business in the United States.
15 U.S.C. § 6a (1997).