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TDIs and Competition Policy: Antagonism or
Peaceful Co-Existence
Presentation at The Future of Trade Defence Instruments: Global Policy Trends and Legal
Challenges Conference.
François-Charles Laprévote
March 31, 2017
clearygottlieb.com
I. EU Trade Defense Law
and Competition Law:
Key Concepts
2
Introduction to EU TDIs
— History. Anti-dumping and competition law have similar origins
• US
• 1890 Sherman Act (antitrust) prohibited any restraint of trade or attempt to monopolize by groups or
individuals
• 1914 Clayton Act (antitrust) first captured concept of predatory pricing and price discrimination.
• 1916 Anti-Dumping Act framed in classic antitrust language – forbids every “combination, conspiracy, trust,
agreement or contract … intended to operate in restraint of lawful trade”; concept of predatory intent
observed in “intent of destroying or injuring an industry in the United States”.
• EU
• 1957 Treaty of Rome (EEC): Specific goals included balanced trade and fair competition.
• Chapter on Competition Rules specifically considers both competition policy and dumping practices (Article
85 – rules applicable to enterprises; Article 91 – dumping)
— In practice, both systems have diverged, especially on price discrimination.
3
Implementation of Antitrust and Trade Defense –
Divergences
Anti-Dumping
Antitrust
Substantive/procedural concepts
Only the Basic Anti-Dumping
Regulation and the Guide on How
to Draft AD Complaint
Very detailed – numerous
guidelines, working documents
Timeframe
15 months
No limitations besides rules on
statute of limitations
Cooperation with authorities
No obligation to cooperate but
Article 18 - “facts available”
Parties obliged to cooperate –
refusal may lead to fines
Decision-making process
Member States have power to
reject Commission proposal
Both Commission and national
authorities may investigate;
“Consultation” with national
authorities purely advisory
Judicial Review
Imposition of duties subject to
limited review
Antidumping policy also
constrained by WTO anti-dumping
agreement
Fines subject to full judicial review
4
Influence of Competition Concepts in EU
AD policy
5
The Union interest test
— Union interest test (Article 21, Basic Anti-Dumping Regulation) is a precaution taken by the EU to
restrict the use of AD measures. It contains competition elements:
1.
All interests at stake must be examined
2.
Those interests must be balanced against each other – special consideration of “the need to eliminate the trade
distorting effects of injurious dumping and to restore effective competition” (competition defense)
— “Competition defense” has been raised in many cases by users, importers and exporters who argue that
imposition of AD measures:
• Might lead to monopolistic or oligopolistic position of the industry
• Might reduce number of supply sources in EU by driving one or more exporters out of business
• Euroalliages. To reject a challenge against refusal to renew duties, GC considered the “artificially high level” of
prices resulting from imposition of measures, that had placed users at competitive disadvantage.
• In other cases, competition-inspired arguments rejected by EU institutions; Bicycles – “temporary
inconvenience” of higher prices generated by AD measures was less significant than negative consequences to
jobs and activity
6
When Competition Invoked to Justify AD Measures
Commission uses these arguments to defend imposition of AD measures:
— Addressing market distortions. Prioritizing longer-term goal of restoring fair competition over
consumers’ short-term price benefits.
— Counterfactual scenario resulting in greater price increase. Refraining from imposing duties
would lead to exit of EU producers from the market and ultimately result in less competition.
— Dumped imports serve exclusionary purpose. In Television camera systems, Commission
interpreted the dumping as a strategy to drive competitors out of the market.
— AD duty not necessarily passed to end consumer. Sometimes there is no evidence that duties will
be passed on, and, when product is a raw material, price is only small fraction of cost of the finished
product. The duty therefore will likely not be passed on.
— AD duty also benefits alternative importers. Restoring fair market conditions can also benefit
alternative supply sources like non-dumped imports.
— Potential entry. Commission considers potential entrants to mitigate risk that competition could be
reduced by imposition of measures.
— Efficiencies. Elimination of economically viable undertakings in order to ensure survival of one with
higher production costs cannot be justified as aim is to enable a correct allocation of resources.
— Effect on users. Commission considers impact on users’ ability to continue obtaining supplies.
(Poudres spheriques)
7
Possible “abuse” of competition concepts in AD decisions
— Applying “monopoly” or “dominant position” concepts to entire industries, sometimes composed of
myriad exporters; e.g. “the monopoly of Chinese imports”.
— Despite that, no detailed analysis of possible collusion or coordination between exporters and/or EU
industry.
— Circular reasoning: says nothing on whether AD measures likely to decrease competition further
(through duopoly) or otherwise.
— Debatable counterfactual scenarios
• Crystalline silicon. Failing to impose duties would leave consumers with only 1 source of supply of modules.
8
Circumvention and Absorption
— Circumvention. Circumvention procedures often at odds with competition objectives:
• Less stringent requirements to launch a procedure compared with AD investigation (not necessary to demonstrate
measures supported by majority of industry; not subject to WTO AD agreement)
• Requirements to launch procedure less stringent than AD investigation: not necessary to demonstrate measures
supported by majority of industry; not subject to WTO AD Agreement.
• Results only in imposition of initial dumping duty even if duty is higher than dumping margin
• Not subject to Union interest test – no assessment of competition conditions
— Absorption. Purpose is to “absorb” (refrain from passing on) impact of duties on customers.
• Parallels considerations of “sacrifice” in competition cases
• Conduct considered predatory if it entails a “sacrifice” (loss) for the dominant undertaking, that it suffers
deliberately.
• Wanadoo Interactive. Sacrificed short-term profitability for vigorous penetration of the market.
9
Lesser Duty Rule and Market Economy Test
— Lesser duty rule. Allows partial compensation of anti-competitive effects of AD proceedings
• Prevents consumer from paying additional surcharge for EU industry inefficiencies (if normal value lower than
non-injurious price level)
• Level of duty should be set at the lowest rate, (comparing dumping margin and injury margin, i.e. difference
between export price and non-injurious price level)
• Attempts to remove only distortion of competition from dumping and not to completely close market to exporters.
— Market economy test. Article 2(7)(c) Basic Regulation.
• Exporters from non-market economies (NMEs) are subject to special treatment
• Exporters from NMEs have to demonstrate they meet ME criteria and if not, normal value of the product
determined based on price/cost from an “analogue country”.
• ME criteria connected to competition concerns: decisions on prices, costs, are response to supply and demand, and not result of
state interference; absence of distortions on production costs and financial situation of the company.
— China. NME status at WTO “expired” on December 11, 2016.
•
New Regulation (2016/0351) contains “new” methodology has been proposed and is still awaiting decision from Parliament.
•
No more list of countries that would automatically be NMEs (in existing regulation, China is listed as an NME)
•
The term “NME” is not used – instead, term is “significantly distorted markets”
10
Impact of AD on Antitrust and Merger
Control
11
Do AD cases facilitate cartels?
— Theory: AD measures may reduce number of sellers on market and deter non-cartel members from
attempting to enter.
• E.g. Ferro-silicon cartel in Europe and US used AD duties to eliminate competition from five third-country
importers.
— Certain features of the AD procedure may favor collusion:
• Rules on support by EU producers.
• Exchanges of sensitive information among competitors.
• Signaling behavior.
• Price undertakings
12
Overlaps Between Periods of Cartels and
Anti-Dumping Duties
PRODUCTS
PERIOD
OF
CARTEL
PERIOD
OF
ANTIDUMPING
DUTIES
Sodium gluconate
1987-1995
2010-2015
PRODUCTS
PERIOD
OF
CARTEL
PERIOD
OF
ANTIDUMPING
DUTIES
Seamless pipes and
tubes, of iron or nonalloy
steel or steel
1990-1999
Candles, tapers and the
like/ Candle waxes
1993-1998;
1997-2002
2000-2005;
2006-2011
2009-2014;
2011-2016
1992-2005
2009-2014
Carbon and graphite
Graphite electrode
systems/ Graphite
electrodes
Specialty graphite
1988-1999
1992-1998
1993-1998
2004-2009
1993-2002
1996-2001
1996-2002
2000-2002
2000-2005
Carbonless paper
Coated fine paper
1992-1995
2011-2016
Chloroprene rubber
(CR)
Rubber chemicals
Synthetic rubber (BR
and ESBR)
Synthetic rubber
(NBR)
SBS thermoplastic
rubbers
Dynamic random access
memories (DRAM)
1998-2002
1990-1995;
1993-1997
Television and
computer monitor
tubes
Cathode-ray color
television picture tubes
1996-2006
2000-2005
Flat glass
Solar glass
2004-2005
2014-2019
Citric acid
1991-1995
2008-2013;
2015-2020
Video tape reels/ Video
tapes in cassettes
Professional video tapes
Refrigeration
compressors
Refrigerators (side-byside)
compressors
1999-2002
2004-2007
1989-1994;
1991-1996
2006-2011
2008-2010
13
Anti-Dumping and Abuse of Dominant Position
— Case T-5/97, Industrie des Poudres Sphériques, para 213:
“ recourse to a remedy in law and, in particular, participation by an undertaking in an investigation conducted by the
community institutions cannot be deemed, of itself, to be contrary to Article 86 of the Treaty. In the present case, the
anti-dumping procedure aims to re-establish undistorted competition in the market in the interest of the
Community[…] To assert that mere recourse to such a procedure is, of itself, contrary to Article 86 of the treaty
amounts to denying undertakings the right to avail themselves of legal instruments established in the interest of the
Community” (emphasis added)
— Does this entirely exclude an abuse based on anti-dumping proceedings?
14
Anti-dumping and merger control
— Impact of anti-dumping duties on competitive assessment:
• Market definition – e.g. Bluestar/Elkem
• New/ potential entry: Osram/Sunny World
— Anti-dumping and remedies – Ajinomoto/Orsan
15
Conclusion and Recommendations
— There is a real need for improvement, both on substance and procedure, in coordinating both AD and
competition policies.
— Gradual policy alignment:
• Assessing impact of measures on competition in systematic manner rather than on request from parties
• Increasing use of economic tools
• Systematically taking into account structure of market, in terms of supply (to measure risk of dominance) and
demand (to determine countervailing power of customers)
• Exercising caution in use of procedures that may result in anti-competitive outcomes, e.g. absorption,
circumvention, price undertakings.
• Additional sanctions for abuse of AD procedures in cartelization context?
— More radical improvement at the international level:
• Harmonizing competition law with AD mechanisms (or removing them) with other countries
• Using FTAs as a possible avenue for negotiating interaction between trade defense and competition laws.
16
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