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Motorola Got Questioned by U.S. Judges on Tax Structure

November 14, 2014 By Micheal Baptiste Leave a Comment

motorola antitrust suit

If you keep up with tech news, you know that Motorola Mobility, now a unit of China’s Lenovo Group Ltd, is trying to make an argument in a trial against  a handful of Asian LCD flat screen suppliers, accused of a price – fixing conspiracy. But instead of making its case against the overseas suppliers in the 7th Circuit Court of Appeals, Motorola got questioned by U.S. judges on its tax structure and potential tax inversion schemes secretly sought by the company.

To resume the story, back in 2009, Motorola sued Asian based suppliers AU Optronics, Chunghwa Picture Tubes, HannStar Display, LG Display, Samsung, Sanyo, Sharp and Toshiba for fixing prices on mobile phone displays sold to Motorola foreign units.

Since then, Motorola tried two times to convince the judges that United States antitrust law can be applied overseas against companies that do business in the U.S. and twice before, Motorola’s action was dismissed by the appeals court, last time in March this year. However, the company was granted another hearing which took place on Thursday, and let’s just say that the 7th Circuit three judges panel was not kind with the company.

Motorola tries to build its case on the fact that the former U.S. based parent company and its subsidiaries paid the Asian suppliers a sum around $5 billion between 1996 and 2006 and that these suppliers are liable to be sued under U.S. law because the parent company was the one which negotiated its supply contracts.

However, instead of being able to make its point, Motorola got questioned by U.S. judges on hot issues, such as tax inversions strategies. Judge Richard Posner wondered about Motorola’s legal position and its true intentions, arguing that

For tax purposes, you treat the foreign subsidiaries as separate, but for antitrust purposes, you treat them as part of Motorola.

Judge Posner openly questioned Motorola’s lawyer if they had a strategy of going for U.S. antitrust protection benefits, while planning to shift the tax burden to other countries with lower taxes, in a tax inversion scheme which is not unknown to U.S. authorities and very popular among big corporations.

Nobody said Motorola was caught off guard by these questions, but it is clear that the panel judges cast doubt on the legitimacy of their legal case. We have to remember that this third hearing came as a concession made by the Obama administration which considered the former March ruling against Motorola’s case as a threat to its ability of prosecuting global price – fixing practices.

The court will issue a decision at any given time, as the panel didn’t rule on the spot. While there is still legal debate over the legitimacy of  Motorola’s fight against its suppliers, the fact that Motorola got questioned by U.S. judges on its tax strategy gives other companies something to think about.

 

 

Filed Under: Cameras, News Tagged With: LCD display, Lenovo, Motorola, Samsung, Sanyo

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