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Kantu Electronics is a Hong Kong company that manufacturers computer chips. Its customers
are primarily U.S. high tech companies. Those companies buy Kantuâ€™s chips and integrate them
into their systems. The process of integration takes place in the U.S. at the factories of Kantuâ€™s
customers. There are only 5 companies, including Kantu, that manufacture the specific chips
that Kantu manufacturers. Therefore, there are 5 companies that make up the relevant
product market for the production of these chips. They are all located in China, but they all
compete in the U.S. market.
Kantuâ€™s main office and production facilities are in Shenzhen, China. It manufactures its chips
there and transports them to the Port of Hong Kong. The products are then taken by a vessel of
Kantuâ€™s selection to the Port of Los Angeles. From there, the chips are taken by rail to Kantu,
U.S. which is a wholly owned subsidiary of Kantu located in Memphis, Tennessee. From there
the chips are taken by trucks to the customersâ€™ locations where they are integrated into Kantuâ€™s
customersâ€™ end products.
Memphis is the site of Kantu, U.S. because it is in the heartland of the United States. Its
overland trucking is some of the best in the nation because of the number of truck terminals
that are primarily on the south and southwest sides of Memphis. If necessary, the chips are
shipped by air via Federal Express which has its headquarters and primary air shipping
operations in Memphis.
In addition, because of the development of the tech industry in Memphis and the corporate
headquarters that are located there, many of Kantuâ€™s chips are integrated into final products by
Kantiâ€™s Memphis customers which fully integrated products are then sold to Memphis tech
companies and corporate headquarters in the Memphis area.
Because competition among chip manufacturers has become quite intense, Kantu had a
meeting in Hong Kong with its competitors. At that meeting, all of the competitors agreed to
price their chips at the same price and that they would, thereafter compete on other attributes
of competition, such as speed of manufacturing, delivery times, and service of the warranties
that they provide customers, and the response time for servicing any warranty complaints by
Assume that there are no antitrust, antitrust conspiracy, or price fixing laws in China.
United States, the Sherman Act prohibits monopolization, attempts to monopolize, antitrust
conspiracies, and anti-competitive price fixing, etc.
The Department of Justice is considering filing in the Western District of Tennessee a RICO
action against Kantu arising out of the price fixing and conspiracy to fix prices. The Western
District of Tennessee is the jurisdiction that handles federal cases in the Memphis area.
You are the primary research attorney for the U.S. Attorney in the Western District of
Tennessee. U.S. Attorney General Jeff Sessions invites you to Washington to a meeting with the
U.S. Attorney for the Western District to discuss this potential action. He asks you for the issues
that you see with respect to this contemplated RICO action. What do you tell him?
If, on the other hand, you were one of Kantuâ€™s U.S. customers, would you be able to bring a civil
RICO action against Kantu in the Western District?