Existing Antitrust and Trade Law
This Part summarizes basic principles of the antitrust and antidump- ing laws.
Antitrust Law
Introduction: The Economic Foundations of
Market economics posits that consumers achieve optimal benefits when they engage in voluntary exchanges of goods and services within competitive markets When all transactions are voluntary, each consumer is empowered to make choices that best suit their needs and preferences.
19 See Zenith Radio Corp v Matsushita Elec Indus Co., 723 F.2d 238, 316-17 (3d Cir 1983), rev'd on other grounds, 475 U.S 574 (1986).
Antitrust and trade law aim to facilitate voluntary exchanges of goods and services, ensuring that no party can improve their situation through further transactions When exchanges occur at competitive prices, society benefits from increased overall wealth compared to scenarios with inflated or deflated prices Therefore, the primary objective of antitrust law is to maintain market competitiveness.
Antitrust law recognizes an individual business firm as the fundamental economic unit, focusing on its competitive actions against other firms within the same relevant product market In this context, all firms strive to enhance their market position.
23 See id.; Brown Shoe Co v United States, 370 U.S 294, 320 (1962) (noting that the antitrust laws were enacted for "the protection of competition, not competitors"); Brunswick Corp v Riegel Textile Corp., 752 F.2d 261, 266 (7th Cir 1984) (Posner, J.) ("The purpose of the antitrust laws as it is understood in the modem cases is to preserve the health of the competitive process rather than to promote the welfare of particular competitors."), cert denied, 472 U.S 1018 (1985).
24 See Phillip Areeda & Louis Kaplow, Antitrust Analysis: Problems, Text, Cases
25 A relevant market for a product is defined by reference to the substitutability of one product for another See Hovenkamp, supra note 17, § 3.2, at 59-61 "A 'relevant market,' then, is the narrowest market which is wide enough so that products from adja- cent areas or from other producers in the same area cannot compete on substantial parity with those included in the market." Sullivan, supra note 17, § 12, at 41 Firms compete with one another for sales in the same market-the "relevant market."
The accurate identification of the relevant market is essential in antitrust litigation, as it serves as the foundation for assessing a firm's market power Historically, prior to 1982, defining the relevant market was often seen as "a game of creative market definition." However, since the introduction of the Merger Guidelines, the process has been standardized, providing an economic framework for market definition According to these Guidelines, a market is defined as a collection of products and a geographic area where a hypothetical firm could exert market power.
Market power is not held by a firm if a small but significant price increase leads buyers to switch to alternative products or encourages new competitors to enter the market The "five-percent test" is used to assess this by modeling price increases of five percent for each product from merging firms and analyzing the expected competitive responses If buyers turn to substitutes or new competitors emerge, the relevant market is expanded until the price increase becomes profitable Despite the Guidelines, market definition remains a contentious issue in antitrust cases, as highlighted by Professor Kelly.
In trade cases, there is a notable absence of economic methodology for defining a relevant market, which contrasts sharply with antitrust cases This divergence in methodology is crucial for comprehending the perceived deficiencies in antidumping laws regarding causal analysis As a result, many commentators argue that these laws ultimately impose unnecessary restraints.
In the context of international trade, the concept of setting a profit-maximizing price is fundamental to understanding competition This principle is further examined in the analysis of dumping claims, highlighting the need for a more robust causal evaluation.
Market concentration refers to the number of firms in a market and their respective market shares A market is considered concentrated when a small number of firms hold a significant portion of the market This concentration is linked to market power, as firms in a concentrated market can influence overall pricing and output decisions However, this influence may vary, especially if a firm controls only a minor share of the market despite the overall concentration.
The "four-firm concentration ratio" (CR4) is a key indicator of market concentration, calculated by summing the market shares of the four largest firms in a specific market For instance, if the top four firms hold market shares of 30%, 25%, 15%, and 5%, the CR4 would total 75% This metric is essential for assessing the competitive landscape within an industry.
Most economists today utilize the Herfindahl-Hirschman Index (HHI) to measure market concentration, which is calculated by summing the squares of each firm's market share For instance, in a market with four firms holding shares of 40%, 25%, 20%, and 15%, the HHI totals 2850 The HHI can range from 10,000, indicating a pure monopoly, to nearly zero in an atomistic market The Department of Justice and Federal Trade Commission rely on the HHI when assessing horizontal mergers, as it effectively indicates the potential competitive impact of such consolidations.
According to current policy, the Herfindahl-Hirschman Index (HHI) is used to assess market concentration post-merger: an HHI below 1000 indicates an unconcentrated market, an HHI between 1000 and 1800 signifies moderate concentration, and an HHI above 1800 reflects a highly concentrated market This classification is outlined in the Merger Guidelines and further discussed in Hovenkamp's work.
26 In a perfectly competitive market, every good is priced at the cost of production, leaving producers and sellers only enough profit to maintain investment in the industry, and every person willing to pay this price will be able to buy the good See Hovenkamp, supra note 17, § 1.1, at I to 2 In such a market, firms are all "price takers"; that is, individually, they cannot affect the market price See id § 1-1, at 9 All sellers manufac- ture a perfectly homogeneous product, and thus the consumer is completely indifferent as to from whom he buys See id § 1-1, at 2 Each seller is so small that its entry into or exit from the market has no effect on the decisions of other sellers Further, all sellers have the same access to needed inputs and all participants have complete knowledge of price, output, and other information about the market In such instances, a firm's profit- maximizing price is equal to its marginal cost of production See id § 1.1, at 13 Margi- nal cost is the incremental cost a firm incurs in producing one additional unit of output. See id § 1.1, at 10 Another producer in the perfectly competitive market will undercut any firm that attempts to set a price greater than marginal cost because the individual competitor faces an infinite elasticity of demand-any increase in price, however slight, will induce consumers to switch to substitute products, which other suppliers will readily offer in response to a competitor's price increase A firm that raises prices above margi- nal cost will thus lose all sales See id § 1.1, at 9.
A monopolist differs from a perfect competitor as it is the sole seller in a market, granting it the power to control total market output Unlike competitors, a monopolist can increase prices by reducing output without facing immediate competition Both monopolists and perfect competitors aim to maximize revenue by aligning marginal revenue with marginal cost; however, for monopolists, marginal revenue is consistently lower than the price Consequently, the output level where marginal cost equals marginal revenue results in a price that exceeds marginal cost.
ANTITRUST& TRADE LAW under the antitrust laws.
The Sherman Antitrust Act
The Sherman Antitrust Act 2 " (the "Sherman Act"), coined the
The Sherman Act, often referred to as the "Magna Carta of free enterprise," does not explicitly ban certain forms of anticompetitive behavior Instead, it empowers courts to identify and prevent such activities, allowing them to evolve antitrust law through judicial interpretation and reasoning.
The Sherman Act aims to foster competition among businesses in the market by prohibiting agreements or collaborations that create a single economic entity, commonly referred to as a trust or cartel Without these legal safeguards, companies could share pricing and production data or collaborate to suppress competition, potentially allowing them to operate as a monopolistic entity This lack of competition could lead to restricted output and increased prices for consumers Section 1 of the Sherman Act specifically addresses these concerns.
To prevent such abuses, section 1 of the Sherman Act proscribes
"every contract, combination in the form of trust or otherwise, or con- spiracy, in restraint of trade or commerce among the several States, or with foreign nations.", 32
The Sherman Act case law primarily addresses the definition of an agreement between firms and the evidence required to establish its existence In this context, the concept of marginal revenue is crucial, as it represents the additional profit gained from producing one more unit of output Unlike firms in a perfectly competitive market, monopolists can set higher profit-maximizing prices while operating at lower output levels.
Most businesses function in an oligopoly, a market structure characterized by a limited number of producers, rather than in a perfectly competitive market or a monopoly The behavior of firms in an oligopoly is intermediate, exhibiting traits between monopolistic and perfectly competitive firms.
19 27 Act of July 2, 1890, ch 647, 26 Stat 209 (codified as amended at 15 U.S.C §§ 1-
7) (1988)) The elements of a Sherman Act § 1 violation are: (1) joint action that (2) unreasonably restrains trade, and (3) affects interstate or foreign commerce See Stan- dard Oil Co v United States, 221 U.S 1, 5-6 (1910).
29 See Areeda & Kaplow, supra note 24, at 51.
30 See Sullivan, supra note 17, § 59, at 152-55.
31 See Areeda & Kaplow, supra note 24, at 188.
33 An agreement can be express, see, e.g., United States v Trans-Missouri Freight Ass'n, 166 U.S 290, 331-32, 341-42 (1897) (holding that "memorandum of agreement" between eighteen railroads for setting uniform freight rates had violated the Sherman Act), or inferred from circumstantial evidence See, eg., American Tobacco Co v United States, 328 U.S 781, 809-10 (1946) (finding conspiracy from circumstantial evi- dence, where prices of competing brands of cigarettes increased on the same day, where there was no economic justification for the increase); id at 809 ("No formal agreement is necessary to constitute an unlawful conspiracy."); Eastern States Retail Lumber Dealers'
2056 FORDIJAM LAW REVIEW [Vol 62 discussed whether concerted refusals to deal, 34 geographic divisions of a market between competitors, 35 mergers and joint ventures in certain cir-
In Ass'n v United States, the court upheld the finding that retail lumber dealers conspired to boycott wholesalers who sold directly to consumers, inferring conspiracy from the dealers' circulation of lists of offending wholesalers Similarly, in Ambook Enter v Time, the court noted that evidence of conscious parallelism could support an inference of agreement when combined with other circumstantial evidence of coercion Overseas Motors v Import Motors Ltd further established that conspiracy could be inferred when the circumstances suggest that parallel actions were not coincidental However, in Theatre Enters v Paramount Film Distrib Corp., the court concluded that the defendants' uniform actions were due to independent business judgments rather than an agreement, emphasizing that while circumstantial evidence of parallel behavior may challenge traditional views on conspiracy, "conscious parallelism" does not eliminate the possibility of conspiracy under the Sherman Act.
34 Any agreement affecting competitive behavior arguably is the equivalent of an understanding that the collaborators will not buy or sell on any other terms Thus, it is often difficult to distinguish a concerted refusal to deal, commonly known as a boycott, from a refusal to sell except on condition Boycott cases, however, are distinguishable from price-fixing cases: the former involve an agreement to refrain from competition within a group to exploit, but not destroy, customers or suppliers, whereas the latter often involve collective activity among a group of competitors to weaken a rival Boycott cases are actionable under both § 1 of the Sherman Act, as combinations in restraint of trade, and under § 2, as combinations and conspiracies in an attempt to monopolize See Areeda & Kaplow, supra note 24, at 364-65; Aspen Highlands Skiing Co v Aspen Skiing Corp., 472 U.S 585, 608-11 (1985) (finding liability from defendant's abrupt refusal to continue cooperating in group ticket plan, where there was no procompetitive justifica- tion for doing so); Eastern States, 234 U.S at 614 (finding that defendant retail lumber dealer had conspired to boycott wholesalers who made direct sales to consumers, thus competing with member dealers) ("An act harmless when done by one may become a public wrong when done by many acting in concert, for it then takes on the form of a conspiracy, and may be prohibited "); Fashion Originators' Guild of Am., Inc v. FTC, 312 U.S 457, 465-68 (1941) (finding defendant Guild and designer manufacturers and sellers of garments in violation of the Sherman Act for maintaining policy of boycott- ing retailers who also accepted for sale lower-priced copies of designer-labelled fashions); Lorain Journal Co v United States, 342 U.S 143, 149-54 (1951) (holding illegal defend- ant newspaper's unilateral refusal to accept advertising from merchants who also adver- tised with a newly-formed radio station that threatened the newspaper's monopoly of local advertising market) But see Cement Mfrs Protective Ass'n v United States, 268 U.S 588, 601-06 (1925) (finding that no unlawful restraint of commerce occurred where defendant cement manufacturers exchanged credit and other information regarding buy- ers to protect themselves from fraud).
35 Several competitors might agree to divide a market geographically among them- selves such that there will be no competition between them in their respectively allocated areas This is essentially a form of cartel, actionable both as an unlawful agreement in restraint of commerce under § 1, and as attempted monopolization under § 2 See, e.g.,United States v Topco Assocs., 405 U.S 596, 608 (1972) (finding liability under § 1)("This Court has reiterated time and again that '[h]orizontial territorial limitations are naked restraints of trade with no purpose except stifling of competition.' ") (citations omitted).
4ANTITRUST & TRADE LAW2 cumstances, 3 6 cartels, 3 7 and combinations formed for influencing govern- mental bodies to act in a manner that suppresses competition, 38 are illegal under the Sherman Act.
In Section 1 case law, courts have determined that certain horizontal agreements constitute per se violations of the Sherman Act, while others are evaluated using the rule of reason This distinction highlights the varying legal interpretations and implications of different types of agreements in relation to antitrust laws.
36 See, e.g., National Collegiate Athletic Ass'n v Board of Regents of the Univ of Okla., 468 U.S 85, 106-08 (1984) (condemning joint venture as an unreasonable restraint of trade for restricting competition and limiting live broadcasts of college football); Areeda & Kaplow, supra note 24, at 793-921 (mergers).
37 See Areeda & Kaplow, supra note 24, at 188-89 A cartel exists when all competi- tors in a given market join together to act as a single firm, eliminating competition be- tween themselves and setting a restricted output for each member (a quota), thereby raising prices Most cartels, however, are imperfect; members face problems in reaching agreement between one another Individual members of a cartel have natural incentives to cheat other members by selling over their individually allocated output quotas. Cartels often set an output restraining price in lieu of a quota In that case, members also have incentives to violate the agreement with other cartel members "[Tlhe effect of fixing a price well above costs is to induce each collaborator to try to win additional sales." Id at 189 This may result in individual expansion of output to the point where the market will not bear the cartel price See id Individual members may cheat even with knowledge that an increase in individual output will affect the market price Mem- ber firms may also set, and then conceal, their own lower prices, to increase their profits at the expense of the cartel Once discovered, however, cheating may spread and lead to the collapse of the cartel See id Cartel members may also engage in certain non-price competition to increase sales above allocated limits, for example, by offering additional services to consumers without charge See id.
38 A trilogy of Supreme Court cases establish that a firm may petition the govern- ment for relief, either at the judicial, executive, or administrative level, with limited fear of liability under domestic antitrust law This is so even when the petitioner's intent is to eliminate legitimate competition This is commonly known as the Noerr-Pennington doc- trine See Eastern R.R Presidents Conf v Noerr Motor Freight, Inc., 365 U.S 127, 137-40 (1961); United Mine Workers v Pennington, 381 U.S 657, 669-70 (1965); Cali- fornia Motor Transp Co v Trucking Unlimited, 404 U.S 508, 509-11 (1972) Under Noerr-Pennington, however, the right to petition the U.S government is not absolute An antitrust violation occurs when a petition is "a mere sham to cover what is actually noth- ing more than an attempt to interfere directly with the business relationships of a compet- itor " Noerr, 365 U.S at 144 Later cases elaborate on the doctrine and the "sham" exception See FTC v Superior Court Trial Lawyers Ass'n, 493 U.S 411, 424-25 (1990) (distinguishing Noerr and declining to extend immunity to boycotts designed to exact higher fees); Allied Tube & Conduit Corp v Indian Head, Inc., 486 U.S 492, 499-502
(1988) (declining to extend Noerr immunity to attempts to influence a private associa- tion's product standards, which were routinely adopted by state and local governments).
39 A horizontal restraint of trade pertains to an agreement between competitors at the same level of distribution See Black's Law Dictionary 737 (6th ed 1990).
40 Earlier interpretations of the Sherman Act held that any agreement between firms to cooperate in setting prices or output constituted a per se violation of the Sherman Act, regardless of actual effects on competition See, eg., United States v Trans-Missouri Freight Ass'n, 166 U.S 290, 329-31 (1897) (rejecting a defense claim that § 1 prohibited only unreasonable price-fixing agreements, as was the case under the common law The Court also rejected the argument that Congress intended to exclude the railroads from § 1 because of the impossibility of covering fixed costs when subject to unfettered compe- tition.) Courts have long held, however, that certain forms of collaborative activity should be permitted, even though some limits on prices or competition may result. Courts have distinguished these types of restraints under the doctrine known as the rule of reason See Standard Oil Co v United States, 221 U.S 1, 60 (1910) (establishing the
FORDHAM LAW REVIEW man Act cases address the reasonableness of an agreement between competitors 4 ' b Section 2 of the Sherman Act
Section 242 of the Sherman Act imposes penalties on individuals or companies that engage in monopolistic practices, including attempts to monopolize or conspiring with others to dominate any segment of trade or commerce within the United States or with foreign nations.
A pure monopoly exists when a single firm supplies the entire market, but a monopoly can also arise with multiple producers if one firm, the monopolist, dominates output and possesses significant market power The key elements of monopolization include (1) having monopoly power in the relevant market and (2) the intentional acquisition or maintenance of that power, distinct from natural growth due to superior products or business skills The Sherman Act implies a standard of reason, indicating that Congress intended for this standard to guide the determination of violations under its provisions.
The Robinson-Patman Act
The Robinson-Patman Act of 1936 prohibits price discrimination that may significantly reduce competition or create monopolies in commerce This legislation is categorized into two main types of violations based on the position of the injured competitor in the distribution chain First, primary-line violations involve discriminatory pricing practices that harm a competitor directly Second, secondary-line violations focus on discriminatory pricing that negatively impacts a seller's customers.
79 See 15 U.S.C §§ 13-13(b) (1988) The Robinson-Patman Act reads in pertinent part:
It is illegal for individuals engaged in commerce to practice price discrimination among different buyers of similar grade and quality commodities, especially when such transactions occur within the United States This includes any scenario where the price differences could significantly reduce competition, create monopolies, or harm competitors and their customers.
The Robinson-Patman Act is an amendment to § 2 of the Clayton Act, ch 323, § 2, 38 Stat 730, 730-31 (1914) (current version at 15 U.S.C § 13 (1988)).
The Clayton Act was established due to dissatisfaction with early interpretations of the Sherman Act, concerns about the Justice Department's enforcement capabilities, and the necessity for an administrative body to clarify which trade restraints would be deemed actionable.
The Clayton Act of 1914 imposes restrictions on price discrimination, defined as selling the same product at varying prices to similarly situated buyers, as amended by the Robinson-Patman Act It also forbids exclusive dealing arrangements and tying, which makes the sale of one product contingent upon the purchase of another Additionally, the Act limits the acquisition of competing companies and prohibits interlocking directorates, where common board members serve across competing firms Furthermore, it includes various provisions concerning procedural and enforcement measures.
80 See supra notes 2 & 79; Hovenkamp, supra note 17, § 13.1, at 338.
81 See Corn Prods Ref Co v FTC, 324 U.S 726, 742 (1945) (holding that liability under the Robinson-Patman Act does not require that price discrimination must cause injury to competition, only that it "may" have such effect).
83 See Hugh C Hansen, Robinson-Patman Law: A Review and Analysis, 51 Ford- ham L Rev 1113, 1133 (1983).
84 See, e.g., Brooke Group Ltd v Brown & Williamson Tobacco Corp., 113 S Ct.
In the case of 2578 (1993), the court determined that the plaintiff did not demonstrate sufficient evidence to prove a violation of the Robinson-Patman Act regarding the defendant's discounted volume sales to distributors Similarly, in Utah Pie Co v Continental Baking Co., 386 U.S 685, 702 (1967), the court ruled that sellers are prohibited from offering the same goods at varying prices to different buyers if such practices could harm competition.
85 See, eg., FTC v Morton Salt Co., 334 U.S 37, 39-44 (1948) (holding quantity
Robinson-Patman causes of action are secondary-line claims 86
Robinson-Patman Act prohibits price discrimination that harms competition, requiring firms to charge uniform prices to all customers in a market to avoid legal repercussions This regulation increases the cost of engaging in predatory pricing, as companies must implement price cuts across all markets rather than selectively targeting competitors.
The Robinson-Patman Act identifies three key forms of competitive injury: first, a significant and intentional reduction of competition; second, a propensity to establish a monopoly; and third, harm to, or the obstruction or elimination of, competition involving any party that either provides or is aware of the benefits derived from discriminatory practices.
Courts today, guided by Brooke Group Ltd v Brown & Williamson
Tobacco 9 2 and the Areeda-Turner test, 93 apply various price-cost 94 analy- ses to evaluate injury claims under the Robinson-Patman Act 95 In discounts to large buyers illegal because of a reasonable probability of harm to buyers' smaller competitors).
86 See Hansen, supra note 83, at 1134.
88 The Robinson-Patman Act has been criticized as harmful to consumers, because a firm fearing liability under the act takes the course of least resistance: it sets prices at the same level for all customers, rather than promoting competition through selective price cuts See Hansen, supra note 83, at 1190-93 For this reason, critics of the Act assert that it promotes price rigidity among competitors within any particular market See infra text accompanying notes 281-83.
93 See supra text accompanying notes 68-78.
94 See supra notes 61, 67-78 and accompanying text.
95 The Supreme Court's decision in Utah Pie Co v Continental Baking Co., 386 U.S 685 (1967), was for many years the leading precedent for primary-line Robinson- Patman claims There the Court inferred injury to competition from a finding of preda- tory intent without regard to price-cost analysis See Hansen, supra note 83, at 1137. Though not expressly overruled, Utah Pie is honored now only in the breach See Brooke Group Ltd v Brown & Williamson Tobacco Corp., 113 S Ct 2578, 2586-87 (1993). Courts were applying traditional Sherman Act predatory-pricing analysis to Robinson- Patman claims even before the Brooke Group decision See, e.g., D.E Rogers Assocs v. Gardner-Denver Co., 718 F.2d 1431, 1439 (6th Cir 1983) (holding that "principles be- hind proof of predatory intent in Sherman Act claims are equally applicable in a Robinson-Patman suit") (internal quotations omitted), cert denied, 467 U.S 1242 (1984); William Inglis & Sons Baking Co v ITT Continental Baking Co., 668 F.2d 1014, 1040-
41 (9th Cir 1981) (equating predatory-pricing analysis in primary-line Robinson-Patman cases with attempted monopolization claims under § 2 of the Sherman Act), cert denied,
The Robinson-Patman Act allows for the demonstration of competitive injury either through direct market analysis or by establishing predatory intent that implies injury In interpreting the Act's liability scope, it is essential to consider the overarching objectives of antitrust law Additionally, when addressing primary-line injury, the Act's interpretation should be approached with careful consideration of these broader antitrust principles.
The Supreme Court's decision in Brooke Group equated primary-line competitive injury under the Robinson-Patman Act with predatory pricing as defined by Section 2 of the Sherman Act Consequently, similar to the analysis under Section 2, price discrimination is allowed under the Robinson-Patman Act if a price-cost analysis shows no evidence of predatory intent Additionally, the Robinson-Patman Act outlines three substantive defenses for price discrimination claims.
The "cost justification" defense allows for lawful price differentials when the costs associated with servicing one customer exceed those for others in different geographic markets This applies when such differences arise from varying methods or quantities in which products are sold or delivered For instance, transportation cost variations may prevent a producer from offering uniform prices across all markets This principle is grounded in the economic rationale that sellers should not be forced to impose artificially high prices on certain buyers if their actual costs to serve those buyers are lower than for others.
The "meeting competition" defense under section 2(b) of the Act allows for price differentials when made in good faith to match a competitor's low price This provision aims to balance the restrictive nature of the Robinson-Patman Act with the Sherman Act's encouragement of competitive pricing among sellers Notably, both acts address similar substantive issues regarding primary-line injury, highlighting their interconnectedness in promoting fair competition.
96 See Brooke Group, 113 S Ct at 2586-87.
98 See 15 U.S.C § 13(a) (1988) The statute reads in pertinent part:
Trade Law: The Antidumping Statutes
Varieties of Dumping and the American Statutory
Dumping occurs in three distinct forms: sporadic, intermittent, and continuous Sporadic dumping involves the unexpected disposal of excess merchandise in foreign markets to avoid a "fire sale" at home Intermittent dumping is a more regular practice, used by producers to foster customer goodwill, maintain market share during domestic downturns, eliminate competition, or retaliate against foreign competitors Continuous dumping, also known as long-term dumping, aims to maximize economies of scale by sustaining full production levels This type of dumping is often linked to predatory practices, where the intent is to harm or eliminate competition in foreign markets, although predatory dumping can also occur intermittently.
The American antidumping laws aim to curb foreign price discrimination that harms national markets The Antidumping Act of 1916 grants victims of trade dumping the right to seek legal recourse, but it has seen minimal use, with only one unsuccessful case in its first fifty years However, upcoming legislation may breathe new life into its application The Antidumping Act of 1921 continues to be a topic of significant discussion.
112 See Pattison, supra note 6, §§ 1.021l][a]-[c], at 1-4 to 1-5.
Targeted dumping is defined as a specific export sale made at a significantly low price, often characterized as an isolated, rifle-shot transaction This practice is discussed in the context of antidumping law, which serves as a legal and administrative nontariff barrier to trade.
114 See Pattison, supra note 6, § 1.02[1][b], at 1-4 to 1-5.
An increase in production can lead to a reduction in the cost per unit, as higher levels of output often result in greater efficiency This phenomenon, where efficiency improves with increased production, is referred to as "economies of scale."
117 See Pattison, supra note 6, § 1.02[l][c], at 1-5.
121 Act of Sept 8, 1916, c 463 § 801, 39 Stat 798 (codified at 15 U.S.C § 72 (1988)).
122 See McGee, supra note 10, at 492 n.5 (citing Michael S Knoll, United States Antidumping Law: The Case For Reconsideration, 22 Tex Int'l UJ 265, 268 n.22
123 Congress has recently considered proposed changes in the 1916 Act to encourage its implementation See supra note 7 (discussing Sen Metzenbaum's proposed "Interna- tional Fair Competition Act").
The 1921 Act, originally enacted as Pub L No 67-1, ch 14, tit II, 42 Stat 11, was codified at 19 U.S.C §§ 160-71 in 1976 and later repealed in 1979 It was reincorporated into the Trade Agreements Act of 1979, specifically § 2 of Pub L No 96-39, with the codification at 19 U.S.C § 2503 in 1988, and subsequently amended by Pub L No 98-573 in 1984.
The primary legislation regulating dumping in the United States is rooted in international law, as dumping is recognized as an unfair practice under the General Agreement on Tariffs and Trade (GATT).
The Antidumping Act of 1921
The Antidumping Act of 1921 addresses the issue of merchandise dumping into the United States, requiring complainants to demonstrate two key elements: sales by foreign producers at "less-than-fair-value" (LTFV) and either material injury, the threat of injury, or significant delay in establishing a domestic industry due to these LTFV sales Notably, the Act does not require proof of intent, and its application involves detailed procedural guidelines.
The Antidumping provisions, codified at 19 U.S.C §§ 1673-1677k, were established by the Antidumping Act of 1921 during a period of national xenophobia following World War I Lawmakers were concerned about a potential economic threat from Germany, fearing an influx of cheap goods that could undermine American markets However, contrary to these fears, no such German merchant ships were poised to flood the U.S market.
Antidumping provisions are regulated under Article VI of the General Agreement on Tariffs and Trade (GATT), which underwent significant revisions during the Uruguay Round of negotiations For more detailed information, refer to Waller's comprehensive analysis in section 12.01.
The growth of the global service sector highlights a gap in current antidumping laws, which primarily focus on goods rather than services Patrick Sullivan's analysis emphasizes the need for legal revisions to effectively address the issue of foreign firms offering services at predatory prices, as outlined in 19 U.S.C § 1673.
"material injury" as "harm which is not inconsequential, immaterial, or unimportant").
129 See 19 U.S.C § 1673(2)(A)(ii) (1988); 19 U.S.C § 1677(7)(F) (1988) (defining threat of material injury).
130 See 19 U.S.C § 1673(2)(B) (1988); Dong Woo Seo, Material Retardation Stan- dard in the US Antidumping Law, 24 Law & Pol'y Int'l Bus 835 (1993).
To start a dumping investigation, a complainant must file a petition with both the International Trade Administration (ITA) and the International Trade Commission (ITC), as outlined in 19 U.S.C § 1673a(b) (1988) Additionally, the ITA has the authority to initiate an investigation on its own, according to 19 U.S.C § 1673a(a) (1988 & Supp IV 1992) Most cases are initiated through private petitions, highlighting the common practice in these investigations.
"interested party" may bring a complaint before the ITA See 19 U.S.C § 1677(9) (1988) (defining "interested party") Complaints are commonly brought by unions, representa- tives of domestic manufacturers, and trade associations.
The International Trade Administration (ITA) is required to evaluate a petition within twenty days of its filing to determine if it supports a preliminary finding of sales at less than fair value (LTFV), according to 19 U.S.C § 1673a(c) and 19 C.F.R §§ 353.12-.13 The ITA assesses whether the petition includes reasonably available information backing the allegations; if so, the International Trade Commission (ITC) initiates a formal investigation Conversely, if the determination is negative, the petition is dismissed Following this, the ITC has forty-five days to make a preliminary assessment regarding any injury to a domestic industry or the potential establishment of such an industry.
Determining fair value under the Act involves comparing the American sale price of a product with its price in the producer's home market or a third country The dumping margin is calculated by subtracting the import price from the sale price of the allegedly dumped merchandise If the ITC makes a negative determination, the investigation ends; however, following a positive injury determination, the ITA has 160 days to make a preliminary determination on whether sales are likely to occur at less than fair value (LTFV) This period can be shortened to 100 days for repeat offenders or extended to 210 days for complex cases The ITA then has 75 days to provide a final determination of dumping margins, which may be extended by up to 135 days, while the ITC must finalize its injury determination within 120 days of its preliminary findings If a final affirmative determination is made, relief is provided through duties equal to the dumping margin, and importers must post a cash deposit, with the Customs Department responsible for collecting these duties.
The dumping order regulates imported goods until the foreign shipper can prove two consecutive years of no less than fair value (LTFV) sales, as stated in 19 U.S.C § 1675(b)(1),(2) Under the 1921 Act, there is no private right of action for dumping, meaning that domestic producers affected by dumping do not receive direct compensation following a final affirmative determination However, there has been a recent proposal to establish a viable private right of action for those impacted by dumping practices.
The U.S sale price of a commodity is determined based on whether the exporter sells to an unrelated buyer or a related party If the commodity is sold to an unrelated buyer before importation, the "purchase price" is used, as outlined in 19 U.S.C § 1677a(b) Conversely, when the foreign producer and U.S importer are related, the "Exporter's Sales Price" (ESP) is applied, following 19 U.S.C § 1677a(c) and 19 C.F.R § 353.10(c) The key distinction lies in whether the arm's length transaction occurs before or after the commodity's importation into the U.S., with the relevant price being that of the first arm's length transaction concerning the merchandise under review.
The definition of "like product" is outlined in 19 U.S.C § 1677(10) (1988 & Supp 1994) This section is crucial for understanding the complexities of causation issues within antidumping laws, particularly as they relate to the International Trade Commission's (ITC) analysis in determining "like product" classifications.
According to Applebaum & Grace, the "home market price" is excluded from the foreign market value comparison when domestic sales are significantly lower than export sales Specifically, if home market sales account for less than 5% of the total volume exported to countries other than the United States, they are deemed insufficient for determining foreign market value, as outlined in 19 C.F.R § 353.48(a) (1993).
"home market" price is replaced in the comparison with the price of the commodity on
The determination of whether a product is sold at less than fair value (LTFV) in the American market involves comparing the home market price to the U.S price and expressing the difference as a percentage For instance, if Fuji sells film for $1 per roll in New York and $1.50 in Tokyo, it constitutes LTFV sales under current regulations An essential factor in assessing fair value is the timing of price comparisons, as fluctuations in foreign exchange rates can impact the outcome of dumping complaints Additionally, an antidumping complaint must demonstrate material injury or the threat of injury to an entire industry, rather than just to a single producer If a violation of the Antidumping Act is established, a duty equivalent to the "margin of dumping" may be enforced, and in cases where adequate sales data is lacking, fair value is determined through a "constructed-value" analysis based on the producer's costs.
Under trade laws, below-cost sales by foreign producers are not critical to the dumping investigation, contrasting with the predatory pricing assessments found in antitrust laws Relevant regulations, such as 19 U.S.C § 1677b(b) and 19 C.F.R § 353.51, state that these below-cost sales are excluded from the calculation of foreign market value.
The trade laws also include provisions for determining fair value when the foreign producer exports from a country with a non-market economy See 19 U.S.C § 1677b(c)
The margin of dumping is calculated by the formula: (home market price - United States price) / United States price, expressed as a percentage For instance, if the home market price is $1.50 and the United States price is $1.00, the dumping margin would be fifty percent However, this calculation tends to favor the identification of a positive dumping margin, as it uses an average home market price based on sales over six months, which is then compared to individual sales prices in the United States rather than the average prices of those sales during the same period For further insights on this statistical bias, refer to Part II.D and John H Jackson's work on dumping in international trade.
137 See 19 U.S.C § 1677b(a)(1) (1988 & Supp 1994) (providing that the "foreign market value" is the price in the home market at the time the merchandise is first sold in the U.S.); see infra Part II.F.
138 See, e.g., James P West, Comment, Currency Conversion in Antidumping Investi- gations: The Floating Exchange Rate Dilemma, 16 N.C J Int'l L & Com Reg 105
In 1991, discussions centered on adapting antidumping laws' currency conversion provisions to accommodate a system of floating exchange rates, proposing an alternative methodology for currency conversion A report from the Steel AIIS President highlighted ongoing uncertainties in U.S steel trade and the potential for the Multilateral Steel Agreement negotiations to explore the use of rolling averages This approach aims to mitigate the impact of fluctuating exchange rates on dumping margins, as noted in the International Trade Report on December 1, 1993.
Problems with Existing Antitrust and Antidumping Laws in
This section analyzes the conflicting nature of antitrust and antidumping laws, highlighting their limitations in identifying and preventing harm caused by unfair foreign trade practices Additionally, it discusses various elements of the antidumping framework that have faced criticism for being protectionist in nature.
A Jurisdictional Obstacles Inhibit Effective Application of Antitrust
Antitrust laws utilize established economic principles to define unfair trade practices, employing price-cost tests and market definitions to identify such behaviors However, applying American antitrust laws to foreign predatory activities presents considerable jurisdictional challenges, as extraterritorial jurisdiction in antitrust matters often leads to complex conflicts of interest in international law.
143 Roger P Alford, The Extraterritorial Application of Antitrust Law The United
States and European Community Approaches, 33 Va J Int'l L 1, 1 (1992).
The application of the Sherman Act to anticompetitive activities outside the U.S relies on the Commerce Clause, which grants Congress authority to regulate foreign commerce The Supreme Court has affirmed that the Sherman Act encompasses the full extent of this clause, indicating that Congress intended to occupy all areas of its constitutional power over commerce However, the Act's full reach has not been applied internationally due to concerns regarding international law, comity, and potential retaliatory measures from foreign governments against U.S businesses So far, only one international tribunal has addressed the issue of extraterritorial jurisdiction, but it did not establish clear boundaries.
The Supreme Court has gradually expanded the jurisdiction of the Sherman Act over foreign anticompetitive conduct Compare American Banana Co v United Fruit Co.,
In the case of 213 U.S 347, 356-59 (1909), the court ruled that U.S antitrust laws do not apply to actions taking place outside the United States The decision emphasized that the legality of an action is determined solely by the laws of the country where it occurs, highlighting the principle that jurisdiction is limited to national borders This legal precedent underscores the importance of understanding international law when evaluating the implications of business conduct globally.
In the landmark cases of 268, 276 (1927) and United States v Aluminum Co of Am (Alcoa), 148 F.2d 416 (1945), the courts established that conduct occurring partially within the United States can serve as a basis for antitrust suits, even if conspirators are supported by discriminatory foreign legislation Judge Hand in Alcoa argued that agreements made outside the U.S have equivalent effects to those made within its borders He asserted that any state can impose liabilities for conduct outside its jurisdiction if it has repercussions within its territory Consequently, Congress intended for the antitrust Act to apply to foreign conduct, provided that the economic effects are felt within the United States.
The U.S Department of Justice has expanded its jurisdiction, treating certain actions as if they occurred within the nation's borders Courts have broadly interpreted the Alcoa "intended effects" test, often overlooking the original intent behind actions In response, foreign governments have retaliated through legal measures, diplomatic efforts, and the implementation of blocking statutes.
The Second Restatement of Foreign Relations Law tackled concerns regarding the intended effects test by establishing that a state can exercise jurisdiction over conduct occurring outside its borders if that conduct has effects within its territory Specifically, Section 18 stipulates that this jurisdiction is valid if other states with well-developed legal systems recognize the conduct and its effects as essential components of a crime or tort.
The rule applies to conduct that has significant effects within a territory, which arise directly and predictably from actions taken outside that territory Additionally, this rule aligns with the principles of justice widely accepted by states with well-established legal systems.
The American Law Institute's Restatement (Second) of Foreign Relations Law § 18 (1965) acknowledges that multiple states may possess jurisdiction over a legal dispute To prevent conflicts arising from potentially contradictory legal rulings, it recommends that courts employ a balancing of interests test, as outlined in § 40.
In the case of Timberlane Lumber Co v Bank of Am., the Ninth Circuit Court established a comity analysis that balances American and foreign interests, rejecting the intended effects test for neglecting the considerations of other nations The court introduced a three-part test requiring: (1) a restraint that impacts or is intended to impact U.S foreign commerce, (2) a restraint of sufficient magnitude to cause a recognizable injury to the plaintiff.
The court must evaluate the appropriateness of asserting extraterritorial jurisdiction based on international comity and fairness, as highlighted in relevant case law Several factors are established to determine the exercise of jurisdiction, including a ten-factor balancing of interests test from Mannington Mills, which builds on the Timberlane test The Third Restatement of Foreign Relations Law emphasizes that balancing U.S and foreign national interests is essential for jurisdiction, not just an exercise in comity It allows for jurisdiction over conduct that significantly impacts a jurisdiction if deemed "reasonable." However, courts have not uniformly accepted these balancing approaches, with some cases, like National Bank of Canada v Interbank Card Ass'n, requiring proof of actual anticompetitive effects on American commerce to establish jurisdiction over foreign conduct.
In the case of 909, 945-53 (D.C Cir 1984), the court rejected both comity and interest balancing approaches, affirming the concurrent jurisdiction of U.S and British courts Defendants opted to file suits in foreign tribunals rather than fully asserting their jurisdictional defenses in U.S District Court, aiming to obstruct the litigation process This case underscores the United Kingdom's longstanding opposition to U.S antitrust policies affecting British businesses As noted by commentators, the Laker case illustrates the limitations of applying a comity approach to extraterritorial jurisdiction.
In 1994, the Supreme Court affirmed that U.S antitrust laws can be applied to foreign defendants whose actions negatively impact the U.S economy, even if those actions are sanctioned by foreign governments In response to this assertive enforcement, foreign nations have implemented retaliatory measures, such as "discovery blocking statutes" and "judgment blocking statutes," to limit the applicability of American antitrust laws on their citizens Consequently, plaintiffs often prefer to file trade complaints over antitrust actions to navigate around these jurisdictional challenges.
B The Antidumping Laws, However, Are Inexact in Determining
Intent to Injure, and Injury to, Competition
Trade laws effectively navigate the jurisdictional challenges associated with the extraterritorial application of antitrust laws However, the concept of "injury" under antidumping laws lacks a foundation in economic theory Scholarly discussions, such as those by Jeffrey L Snyder and Marques Mendes, explore international antitrust conflicts, including defenses like foreign sovereign immunity and the act of state doctrine.
On April 3, 1992, the Department of Justice (DOJ) announced a significant shift in its antitrust enforcement policy, extending extraterritorial enforcement of U.S laws to foreign business activities that negatively impact U.S exporters, provided such actions would have violated U.S law domestically This change, discussed in Lori B Morgan and Helaine S Rosenbaum's article in the Harvard International Law Journal, raised concerns about potential diplomatic repercussions and adverse effects on foreign trade negotiations This new approach marked a departure from the DOJ's previous stance (1988-1992), which only allowed antitrust prosecutions for foreign activities that directly harmed U.S consumers.
Why Promote Convergence of Antitrust and Trade Law?
This next Part discusses the benefits of harmonizing antitrust and an-
234 See supra note 25 (discussing market concentration).
235 See Galasso, supra note 220, at 415 (noting the "consumer welfare justification" for policing foreign predatory activity).
Peter Sutherland, the Director General of GATT, emphasized that successful trade talks could benefit consumers by reducing the costs associated with trade law protectionism He pointed out that the expenses incurred to save a job, in terms of increased prices and taxes, often surpass the wages paid to the workers.
The debate surrounding the goals of antitrust law reveals significant differences in perspective Posner argues that antitrust should prioritize the efficient functioning of markets and that limiting the actions of large firms to support small businesses is misguided In contrast, Blake and Jones contend that while efficient resource allocation is crucial, promoting consumer choice and fostering entrepreneurial opportunities through the establishment of competitive markets is equally vital.
238 See Waller, supra note 7, § 11.01, at 11-2.
239 See Eckes, supra note 232, at 422.
FORDHAM LAW REVIEW tidumping laws, using a recent trade case to illustrate the merits of convergence.
Principles of Convergence
Antitrust law fosters competitive markets, leading to lower consumer prices, while antidumping laws aim to shield domestic producers from unfair foreign competition This creates a tension between consumer and producer welfare, especially in today's globalized economy where domestic producers increasingly rely on imported components and raw materials Trade policies that raise the costs of these intermediate goods can negatively impact both domestic producers and consumers When American producers face higher prices for inputs, they must pass these costs onto consumers, ultimately harming their competitiveness against foreign firms that do not bear the same antidumping duties As a result, the interplay between antitrust and trade law highlights the need for a balanced approach that considers the interests of both consumers and producers.
The implementation of trade laws aimed at protecting domestic producers from efficient foreign competitors can lead to significant trade and budget deficits, a trend observed in various national economies.
242 See supra note 1; Parts II.B., C., G., H & I.
A significant portion of Japanese exports to the United States consists of intermediate goods, accounting for approximately 50% This highlights the importance of these goods in the trade relationship between Japan and the U.S (Neff, 1994).
Peter Sutherland, the Director General of the GATT, emphasized that import protection leads to increased prices, impacting consumers directly or affecting other producers in the case of intermediate goods.
Dumping penalties, often perceived as a niche issue, have significant economic implications for American consumers, leading to increased prices on a wide range of products These include everyday items such as photo albums, pears, televisions, and cookware, as well as essential goods like aspirin and telephone systems The impact extends to various industries, affecting the costs of materials and equipment, from cement and shock absorbers to paving equipment and fireplace mesh panels.
246 See Stewart A Baker, Panel Discussion, EEC Trade Law and the United States,
1987 Fordham Corp L Inst 527, 531 (Barry E Hawk ed., 1988) Mr Baker noted that a change in prevailing attitudes toward the trade laws might soon occur among lawmakers He continued:
Having practiced trade law in a country known for its stringent application of antidumping laws, I observed that this approach led to a well-protected domestic manufacturing sector However, this protectionism resulted in minimal manufacturing exports, causing the country to depend heavily on agricultural and raw material exports Consequently, it faced significant trade and budget deficits.
Harmonizing antidumping and antitrust laws is essential for minimizing protectionist abuses, which ultimately benefits consumers and producers through enhanced competition and reduced prices Additionally, this alignment safeguards domestic industries against foreign predatory practices To be effective, any reforms must establish a consistent standard applicable to both domestic and international trade.
An Illustration: The Japanese Laptop Computer Screen
Moving Toward Convergence: An International Trade
TRADE ANALOGUE TO ROBINSON-PATMAN
The harmonization of antitrust and trade law is essential for effective regulation Various experts have suggested methods for achieving this convergence This article posits that an international trade equivalent to the Robinson-Patman Act can address the conflicting interests of trade and antitrust law, ultimately safeguarding the interests of both American consumers and producers.
Application of An International Trade Analogue to Robinson-Patman
Congress must modify or replace the antidumping laws with a law modeled on the Robinson-Patman Act.
The proposal aligns with the antidumping framework, allowing the Commerce Department to apply the Robinson-Patman analogue similarly to current antidumping laws Under this statute, when a domestic industry suspects a foreign producer of dumping products in the U.S market, it can petition the Commerce Department Instead of conducting separate determinations for LTFV and injury, the Department will assess the foreign producer's conduct using established predatory-pricing tests from Sherman Act jurisprudence, which are also utilized in Robinson-Patman cases.
In line with existing trade policy, the proposed legislation does not allow for a private right of action Instead, the Commerce Department utilizes predatory-pricing tests to assess complaints related to dumping, with tariff assessments resulting from confirmed instances of product dumping.
The article discusses various proposals for reforming antidumping laws, highlighting suggestions to eliminate biases in dumping margin calculations and restrict the laws' application to concentrated industries It also mentions the idea of automatically expiring antidumping orders after a set period Additionally, there are recommendations to either abolish antidumping laws altogether or to combine effective provisions from the Trade Act of 1974 and the Tariff Act of 1930 into a unified approach for addressing unfair trade practices Lastly, it advocates for limiting antidumping remedies when the domestic industry involved is concentrated.
Several commentators have drawn comparisons between the Antidumping Act and the Robinson-Patman Act, highlighting key differences in their injury standards and the absence of defenses in the Antidumping Act Notably, Applebaum and Grace (supra note 133, pp 507-12) discuss these distinctions, while Davey (supra note 14, pp 8-19 to 8-21) further elaborates on the varying injury standards between the two statutes.
270 See supra note 95 and accompanying text.
To discourage abuse by concentrated domestic industries, remedies for antidumping cases could be linked to the concentration level of the complaining producer Professor Wood suggests that antidumping remedies should inversely correlate with the Herfindahl-Hirschman Index (HHI) of market concentration She proposes maintaining the current antidumping procedures, allowing for full tariffs where the HHI is below 1000, while progressively reducing tariffs for industries with higher HHIs Specifically, no tariffs would be permitted for industries with HHIs exceeding 4000, aiming to balance protection and competition in the market.
Significant Benefits Follow From Applying Robinson-
An international trade analogue to Robinson-Patman has several ad- vantages over the current Antidumping Act.
The proposed statute enhances the alignment between trade and antitrust policies by incorporating established predatory-pricing tests from Sherman Act jurisprudence This integration fosters consistency between trade law and normative economics, ensuring a more coherent legal framework.
A well-structured antidumping law based on the Robinson-Patman Act effectively balances the need to deter frivolous antidumping claims while encouraging legitimate trade actions against foreign predation Currently, the Robinson-Patman Act mandates a significant reduction in competition before any relief is granted, which helps prevent domestic industries from misusing antidumping laws for protection against foreign competition This framework is more advantageous than allowing private rights of action, especially those that offer treble damages to successful claimants Furthermore, the proposed legislation benefits domestic consumers by ensuring access to competitively priced goods and reduces costs for domestic producers reliant on imported intermediate goods.
The application of Robinson-Patman principles to antidumping cases effectively navigates jurisdictional challenges and foreign policy issues associated with predatory pricing claims against foreign defendants Significant barriers exist that hinder the enforcement of antitrust laws against foreign anticompetitive practices However, in trade proceedings, the Customs Department imposes a duty on imported commodities upon establishing a case of dumping, facilitating a more streamlined approach to addressing these concerns.
Finally, the proposed statute provides Robinson-Patman defenses-
In trade cases, defenses such as "cost justification," "meeting competition," and "changing conditions" allow the Commerce Department to effectively distinguish between legitimate claims of foreign predation and baseless allegations early in the process Historically, these defenses have been relevant in trade disputes, ensuring that U.S producers receive recognition and compensation only when they cannot sustain operations under marginal cost pricing.
274 See supra note 7 (discussing Senator Metzenbaum's pending proposal to amend the Antidumping Act of 1916, to create a private right of action for victims of predatory dumping by foreign producers).
For individuals seeking protection against foreign predatory practices, utilizing trade laws can effectively circumvent the jurisdictional challenges linked to the extraterritorial enforcement of antitrust laws.
277 See supra notes 98-111 and accompanying text.
278 See, e.g., 64K Dynamic Random Access Memory Components from Japan, USITC Pub 1862, Inv No 731-TA-270, at 17-18 (1986) (final) (imports found to have
Antitrust and trade law has unsuccessfully contended that importers should be allowed to compete with domestic producers without facing penalties for selling below fair value Presently, industries tend to prefer import relief proceedings over antitrust lawsuits against foreign competitors, as antitrust defenses are not applicable in these cases.
The Counterarguments Are Unpersuasive
Critics argue that the Robinson-Patman Act creates price inflexibility by preventing producers from maximizing profits across markets However, this criticism lacks merit, as current antidumping laws permit price discrimination between national markets while not offering the same defenses as Robinson-Patman Domestic producers seeking reform of antidumping laws have noted that these laws minimally deter international price discrimination, suggesting that Robinson-Patman does not impose additional rigidity on price movements beyond what is already established Furthermore, the potential for treble damages under Robinson-Patman may contribute to perceived price inflexibility, but the proposed law does not grant a private right of action for dumping, meaning such damages would not be applicable.
A significant criticism in antitrust discussions is the ongoing debate over whether costs should be classified as fixed or variable Courts often analyze this distinction by observing that true predatory pricing leads to increased output to meet the heightened demand generated by lower prices Consequently, the costs that rise due to this expanded output are classified as variable costs, as they are directly linked to the predatory price cut.
If the per-unit price of a good falls below the average of increased or variable costs, the price reduction could be deemed predatory Currently, distinguishing between fixed and variable costs in legitimate disputes may require jury evaluation, particularly when price cutting by a U.S producer has caused material injury.
279 See Applebaum, supra note 1, at 413.
280 See Marques Mendes, supra note 1, at 166.
281 See Hansen, supra note 83, at 1190-93.
282 See supra note 7 and accompanying text.
283 See Harry L Shniderman, The Robinson-Patman Act: A Critical Appraisal, 55 Antitrust L.J 149, 152 (1986).
284 See William Inglis & Sons Baking Co v ITT Continental Baking Co., 668 F.2d
286 See id The Inglis court also considered other factors, holding that, although
While Average Variable Cost (AVC) is typically a strong indicator of predatory intent, there are circumstances in which a company may need to sell below AVC Additionally, it is recognized that in specific cases, a firm could face liability for predatory practices even when selling below this cost.
2092 FORDHAM LAW REVIEW [Vol 62 instructions 28 7
Disputes over the classification of costs as fixed or variable are common in international trade, largely due to the socioeconomic differences among countries For instance, Japanese producers often perceive labor as a fixed cost due to the tradition of lifelong employment, whereas American producers view it as a variable cost To address these discrepancies, the Commerce Department could establish standardized definitions for fixed and variable costs, promoting consistency in price-cost tests during antidumping disputes.
Critics argue that proving a foreign producer's costs to demonstrate sales below average variable or marginal costs is challenging However, current antidumping laws empower the Commerce Department to conduct a detailed constructed-value analysis of a foreign producer's costs when there are insufficient sales in the exporting country to determine a home market price In contrast, antitrust courts frequently utilize different versions of the Areeda-Turner test.
Some experts suggest that proving predatory pricing is extremely challenging, especially considering the Supreme Court's emphasis on prices exceeding average variable costs (AVC) The Court's analysis centers on the anticipated outcomes that a rational firm would foresee from its pricing strategies.
287 Id at 1038 See also Kelco Disposal, Inc v Browning-Ferris Indus of Vt., 845 F.2d 404, 408 (2d Cir 1988) (concluding that jury could have reasonably characterized depreciation of heavy equipment as a variable cost), aff'd, 492 U.S 257 (1989).
288 See John H Jackson, Dumping in International Trade: Its Meaning and Context, in Comparative Study, supra note 136, at 21-22.
289 See Alan V Deardorff, Economic Perspectives on Antidumping Law, in Compara- tive Study, supra note 136, at 31-33.
290 See, e.g., Janich Bros., Inc v American Distilling Co., 570 F.2d 848, 858 & n.1 I (9th Cir 1977) (allocating categories of fixed and variable costs as a matter of law), cert. denied, 439 U.S 829 (1978); 3 Phillip Areeda & Donald F Turner, Antitrust Law 173-74
In 1978, a framework was established characterizing most costs as variable, excluding capital costs, certain taxes, and depreciation However, some courts have challenged this arbitrary classification For instance, in William Inglis & Sons Baking Co v ITT Continental Baking Co., the Ninth Circuit analyzed cost variations before and after output increases to assess their fixed or variable nature Similarly, the Sixth Circuit in D.E Rogers Assocs v Gardner-Denver Co rejected the Areeda-Turner classification, emphasizing that the variability of expenses cannot be determined without specific factual contexts.
291 See Galasso, supra note 220, at 413 & n.32.
The Areeda-Turner test simplifies the process of assessing low-priced foreign goods, offering a refreshing alternative to the complexities of determining less than fair value (LTFV) under the Antidumping Act.
294 See supra note 78 and accompanying text.
Economic analysis indicates that predatory pricing is uncommon due to its high costs and uncertain benefits, which can often be achieved through more economical methods According to Robert H Bork in "The Antitrust Paradox," the likelihood of predatory price cutting occurring is extremely low.
The court's ruling in Matsushita has sparked debate among commentators, who suggest that judicial perspectives often regard price cuts as procompetitive actions Many argue that cases of predatory pricing are frequently dismissed, as such practices are considered rare and seldom successful when they do occur Consequently, some experts believe that the Matsushita decision may signal the end of effective predatory pricing strategies in the marketplace.
Skepticism surrounding predatory pricing is not reflected in the case law, as the Supreme Court has recognized its existence since the Matsushita decision Efforts to outlaw predatory pricing may ultimately harm consumers more than if such attempts were abandoned.
296 Matsushita Elec Indus Co v Zenith Radio Corp., 475 U.S 574 (1986) (granting summary judgment for defendant in suit alleging conspiracy to eliminate competitors through below-cost pricing).
Cutting prices to boost business is fundamental to competition, and incorrect assumptions in antitrust cases can be detrimental, as they discourage the very behaviors that these laws aim to safeguard.
298 See id at 588-89 ("A predatory-pricing conspiracy is by nature specula- tive [T]here is a consensus among commentators that predatory-pricing schemes are rarely tried, and even more rarely successful.").
299 See, e.g., Brenda S Levine, Predatory Pricing Conspiracies After Matsushita In- dustrial Co v Zenith Radio Corp.: Can an Antitrust Plaintiff Survive the Supreme Court's
The Matsushita decision significantly elevated the standard of proof required to establish a predatory-pricing conspiracy, which in turn incentivized competitors to pursue predatory pricing tactics while simultaneously creating barriers for victims seeking legal recourse against such practices.
300 See, e.g., Irvin Indus., Inc v Goodyear Aerospace Corp., 974 F.2d 241, 245 (2d Cir 1992) (holding that defendant seller's bid, which was below reasonably anticipated AVC, was presumptively predatory); McGahee v Northern Propane Gas Co., 858 F.2d
In the case of 1487, 1496 (11th Cir 1988), the court reversed a summary judgment for the defendant, establishing that the test for predatory pricing requires the consideration of subjective evidence Additionally, it determined that average total cost should be used as the benchmark, above which no inference of predatory intent can be drawn.
490 U.S 1084 (1989); Kelco Disposal, Inc v Browning-Ferris Indus of Vt., 845 F.2d