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論文とエッセイ（日本語） Theses and
Essays (in Japanese)
仮想マガジン「インターネット評論」試作号（日本語）INTERNET
REVIEW (Trial Issue) (in Japanese)
情報革命についてのエッセイとゴシップ（日本語）
Essays and News on Information Revolution (in Japanese)
Theses and Essays (in English)
Presented at the General Assembly of the Asia-Pacific Lawyers' Association Held in Beijing, China on April 20, 1990 (revised on May 20, 1998)
Index
Introduction
1. Prologue
1.1. History of Japanese TV Market
1.2. A Multi-Prong Fork
2. Unitary Conspiracy to Dump
2.1. District Court -- Lack of Standing
2.2. Court of Appeals -- Conspiracy Possibly To Be Found
by a Jury
2.3. Supreme Court -- Lack of Economic Motives
2.4. Court of Appeals on Remand -- Defendants Win
3. Dumping -- Bad Dumping and Not-So-Bad Dumping
4. MITI Statement -- Government Compelled Price-Fixing
5. Epilogue
Chronology
Notes
Trade conflicts between the U. S. and Japan have a long history. Two nations were in conflict, among others, in textiles in the 1950's, in transistor radios in the 1960's, in steel and television receivers (TV's) in the 1970's, and in automobiles and semiconductors in the 1980's, in which Japanese industries always took the role of an exporter and their U. S. counterparts of a threatened domestic industry.
Since the 1980's, the issues raised in those U. S.-Japan trade conflicts have gradually changed from specific to general, from economic to cultural. The Market-Oriented, Sector-Selected ("MOSS") negotiations in the early 1980's grew into the Structural Impediments Initiative ("SII") talks in the early 1990's. A symposium on the (different) Concepts of Fairness in International Trade was held in Tokyo in 1988. The so-called "Revisionist" writers have gained popularity in the U. S. by proposing a confinement policy against Japan where they believed market principle did not work.
In addition to the political and sometimes cultural-moral campaigning against government policies and business behaviors of foreign nations, U. S. industry has used various legal tools, among which are antidumping and countervailing duty measures under Title 7 of the Tariff Act , 'escape' clause under Section 201 of the Trade Act, deterrence measures against foreign trade policies under Section 301 of the Trade Act and, more recently, intellectual property laws of various kind including Section 337 of the Tariff Act and Section 133 of the Customs Regulation.
This report describes a lawsuit fought for eighteen years between U.
S. and Japanese TV manufacturers, in which all of the above legal tools were
used, with their final resolution directly derived from the very essence
of free market economy.
Japanese market for monochrome TV's entered its first booming stage in 1957 when people wanted to watch the Imperial Wedding on TV. It grew steadily to reach the saturation point in the early 1960's. Its growth remained stagnant throughout the 1960's while gradually shifting to the transistorized, portable models for youth and for additional family use until quickly replaced by color TV's in the early 1970's.
Color TV's first appeared in industry statistics in 1964 when Tokyo Olympic was held. The market for color TV's grew twofold every year until it finally caught up with monochrome sales in 1967. In the first half of the 1970's, a series of technological breakthrough occurred in Japan: As a result of strong demands for smaller TV sets reflecting Japan's smaller housing spaces, vacuum tubes were entirely replaced by transistors and then by IC's, making fully automatic assembly possible. This did not occur in the U. S. As a result, export of Japan-made small TV's to the U. S. grew rapidly to fill this technological gap.
There was a clear trend those years in the structure of Japanese consumer electronics market -- the so-called distribution "channeling" ("keiretsu-ka"). Japanese consumer electronic manufacturers had achieved a huge supply capacity by the early 1950's through a series of stock issuance on the one hand, and consumers had a strong desire for the so-called "three holy appliances" -- clothes washing machines, refrigerators and TV's, on the other.
There was a difficult problem to be solved by the manufacturers -- the narrow and long distribution pipelines connecting huge supply and huge demand. Manufacturers "pushe-sold" their products to their primary wholesalers and the latter resold them to the secondary and sometimes to the tertiary wholesalers to obtain necessary cash to pay to the manufacturers. The last wholesaler in this line also "push-sold" their products to small mom-and-pop retailers. The payment between each distribution stage was made mainly through promissory notes. It was when consumers had just learned the taste of "play now, pay later" lifestyle and retailers could not resist their customers' demand for monthly installment plans that required too huge a capital for small retailers to afford. The retailers who could not settle their promissory notes in time had to "dump" their merchandise below purchase price to pawn shops or money lenders. This started a vicious cycle in which retailers and wholesalers went bankrupt one after another and the "dumped" products reappeared in the discount market further depressing their profitability.
In an attempt to break this bottleneck, manufacturers took the following measures in the 1960's: They took over (or, more correctly, could not but take over) the primary wholesalers, skipped the secondary and tertiary wholesalers (who later became large discount retailers in Akihabara area), tried with marginal success to control retailers in good location through loyalty rebates and non-price subsidies, and bought up retailers' credits to their customers resulting from monthly installment. This economic process was called the distribution "channeling". Matsushita was most successful in this process and "Matsushita Shops" was the largest loyal retailer group in Japan. This has become a heavy burden to Matsushita in the 1980's when consumers turned to large discount stores away from mom-and-pop stores with higher price. Sony went the other way -- direct marketing and, sometimes, consignment.
In 1957, an organization named "Market Stabilization Council" formed by consumer electronics manufacturers to negotiate with retailers' joint buying groups adopted a "Nine Codes of Conduct for Market Stabilization," against which Japan Fair Trade Commission ("JFTC") issued a formal cease and desist recommendation. Manufacturers accepted the recommendation and abolished the codes.
In 1966, JFTC started an investigation against six consumer electronic manufacturers (other than Sony) in the price-fixing conspiracy charge. A JFTC Examiner Panel submitted its draft of decision to the Commission and the manufacturers objected.
According to the JFTC draft of decision, six TV manufacturers formed a "Tenth Day Group" consisting of their product planning managers, a "Palace Group" consisting of their officers in charge of TV's and an "Okura Group" consisting of their presidents. Tenth Day Group is alleged to have agreed upon the suggested retail price of each color TV model and other two groups intervened as necessary.
Manufacturers argued in their objection that suggested retail price is not a price but a mere numerical indication of the quality of a TV model and that a price-fixing conspiracy cannot be found absent any evidence of a conspiracy to fix rebates corresponding to the difference between suggested retail price and actual retail price. In 1977, the Commission decided to discontinue the investigation without any finding of fact or conclusion of law.
Meanwhile, under strong political pressures from the U. S. TV manufacturers threatened by the growing export of Japan-made monochrome TV's, Ministry of International Trade and Industry ("MITI") directed Japanese TV manufacturers to conclude a so-called "Check-Price Agreement" for TV's destined for the U. S., an executive tool also used in its export restriction of transistor radios a decade before,
In compliance with the MITI direction, manufacturers and exporters concluded in 1963, under the Export-Import Trading Law, their first Manufacturers' Agreement and Export Association Regulation, respectively, that were subsequently renewed year by year until abolished in 1973, also under another MITI direction, in the midst of international monetary crisis.
Although there were considerable differences year by year, the Manufacturers' Agreements had provisions generally as follows (Manufacturers' Agreement for January through June, 1971):
Article 8. The parties to the agreement shall not propose or contract to sell, or deliver the goods to the importers at the prices below those stipulated in Table 2..
| Product Identification | Screen Size | Domestic Selling Price (Yen) | |
| Tube-type | Monochrome | 18" | 20,272 |
| 15" through 14" | 18,176 | ||
| 12" through 10" | 14,681 | ||
| 9" and below | 14,322 | ||
| Color | 18" | 62,215 | |
| 15" through 14" | 51,728 | ||
| Transistor-type | Monochrome | 12" through 10" | 19,573 |
| 9" through 7" | 18,526 | ||
| 6" and below | 18,176 |
Export Association Regulation generally provided as follows (Export Association Regulation for 1971):
(Prices)
Article 6. The Association member intending to export TV's to the U. S. shall notify their FOB price to the Association in advance. As regards the TV's to which the Manufacturers' Agreement applies, the Association member shall notify to the Association in advance their FOB price that is the domestic selling price provided therein plus reasonable handling charge and commission. The Association shall notify said prices to MITI without delay.
Article 10. No Association member shall export TV's at the price below that which has been notified to the Association. No Association member shall contract an export agreement that may have an effect to reduce the said price, including without limitation, by way of subsequent discount.
(Five-Company Rule)
Article 5. The Association member intending to export TV's to the U. S. shall register the name of the parties to which such TV's are being sold. The number of such parties shall be no more than five
Article 9. No Association member shall contract export agreement with the
parties other than those registered under Article 5.
In contrast to a trend towards vertical integration, inter-brand competition was very intense and the gap between manufacturers' suggested retail price and actual retail price exceeded 20% in 1970 according to a survey conducted by the JFTC. In 1970, a consumer group opened a campaign against TV manufacturers alleging that the export price of a color TV model was nearly as half as the price of its domestic counterpart (the "Double Price Problem"). Electronic Industries Association counter-argued the allegation with little success saying that such criticism was without merit because consumer groups were comparing an export FOB (actual wholesale) price with its domestic suggested retail price (1).
Those economic processes were regarded by the U. S. competitors as a symptom of a dumping -- price difference due to low price elasticity of demand and entry barriers (2).
In 1968, the U. S. Electric Industries Association filed a complaint against the TV's imported from Japan under U. S. Antidumping Act of 1921 (currently Title 7 of the Tariff Act of 1930), that has developed into one of the largest and the longest antidumping investigations in history. The Department of Treasury (currently Department of Commerce) and the Tariff Commission (currently International Trade Commission) found dumping in 1970 and 1971, respectively, and the former issued an order for suspension of tariff assessment.
Since that time and until 1978, importers heard nothing from the Department of Treasury in response to their periodical data submissions, except a notification that the first-year antidumping duty was approximately one million Dollars for the total TV's imported from Japan. The import of TV's from Japan increased consistently without any further notification from the Department of Treasury for antidumping-duty liquidation or for verification.
In March 1978, the Department of Treasury notified importers that the information theretofore submitted by importers was insufficient, that the Treasury therefore adopted the "best information available" approach, and that as the result it would regard the taxable value under the Japanese Commodity Tax Law as the surrogate for the Foreign Market Value ("FMV") under the Antidumping Act of 1921. The Japanese commodity tax rate for a TV set was 15% of its ex-factory price. Aware of the difficulty of determining the ex-factory price, the Japanese Commodity Tax Law provided an alternative of 67% of the suggested retail price in lieu of the ex-factory price, and most manufacturers adopted this alternative. Importers resisted the Treasury formula vehemently because they found that the formula would lead to a dumping duty amounting to 400 million Dollars for the period from 1971 through 1978.
In the midst of the turmoil, the U. S. Trade Agreements Act of 1979 took effect implementing the new antidumping code under the GATT Tokyo Round Agreement, and the Department of Commerce replacing the Department of Treasury reached a settlement with each importer in 1980 in the amount of approximately 76 million Dollars in total for the entire preceding period. A U. S. trade association sued the Department of Commerce before the Court of International Trade ("CIT") and won a partial victory in obtaining a preliminary injunction against the settlement, but the Commerce Department finally won on the merit and the settlement was fully implemented. The investigation is still pending for the remaining period until the present time reflecting the bureaucratic rigidity in international trade matters (The Uruguay Round Agreement Act of 1994 implementing the WTO Agreement adopted a '5-year sunset' approach only to the newly initiated antidumping investigations).
There was another problem relating to the Japanese commodity tax: In 1970, Zenith Radio Corporation filed a complaint alleging that the exemption of the Japanese commodity tax for export constituted a subsidy in violation of the U. S. Countervailing Duty Act. The finding by the Department of Treasury in 1976 in favor of the importers had first been overruled by the CIT but was finally affirmed by both the Court of Appeals for Federal Circuit and the Federal Supreme Court in 1983.
In September 1976, G. T. E. Sylvania filed a complaint against Japanese TV manufacturers under the U. S. Tariff Act Section 337 alleging a price-fixing conspiracy.
At the same time, an ad-hoc industry group named COMPACT (Committee to Protect American Color TV's) consisting of U. S. TV manufacturers and labor unions filed a Section 201 ("Escape Clause") complaint. In March 1977, ITC made a recommendation to the President to raise tariffs for TV's from Japan. Immediately after the ITC recommendation, the Special Trade Representative (currently United States Trade Representative) started a negotiation with MITI and reached an "Orderly Marketing Agreement" in May 1977, whereby color TV's imported from Japan were subject to an export quota of 175,000 units per year for the following three years, instead of higher tariffs. The export quota was implemented by a Manufacturers' Agreement and an Export Association Regulation under the Japanese Export-Import Trading Act.
Under the Orderly Marketing Agreement, both governments were obligated to make their further efforts to resolve the pending Section 337, countervailing and antidumping investigations. The Section 337 investigation was terminated as the result of a settlement reached among the parties, whereby Japanese manufacturers were obligated to report to the ITC their manufacturing cost per each inch-size category of color TV's for the subsequent five years.
Long before the expiration of these agreements, however, most Japanese
TV manufacturers moved their manufacturing plants to the U. S., and from
that time up to the present, no substantial import of TV's from Japan has
been recorded in customs statistics, except for certain specialty products
such as projection TV's or those with a very large screen.
In December 1970 (3), National Union Electric Corporation ('NUE'), a U. S. conglomerate in electronic appliances, filed a complaint before the Federal District Court of New Jersey against seven Japanese TV manufacturers -- Hitachi, Toshiba, Mitsubishi, Matsushita, Sanyo, Sharp, Sony and their Japanese trading and U. S. sales subsidiaries, alleging violation of Sections 1 and 2 of the Sherman Act, Section 2(2) of the Robinson Patman Act, Section 73 of the Wilson Tariff Act and the Antidumping Act of 1916. In September 1974, Zenith Radio Corporation, the second largest TV manufacturer in the U. S., filed a similar complaint before the Federal District Court for the Eastern District of Pennsylvania, and the former was merged to the latter the same year.
Although the latter expanded its claims to include Section 7 of the Clayton Act as an additional count, Sears-Roebuck and Motorola as additional defendants and transistor radios, tape recorders, stereos and electronic components as additional products, this paper will concentrate on the Sherman Act Section 1 and Antidumping Act of 1916, on the above seven Japanese TV manufacturers and on TV's. Plaintiffs sought a treble damage of at least 1.8 billion U. S. Dollars. A jury trial was requested.
The plaintiffs' allegations were complex and changed frequently depending upon the developments of the litigation. However, according to the plaintiffs' Final Pretrial Statement consisting of forty thousand pages of documents including expert reports and exhibits that was given a preclusive effect by the Judge, the plaintiffs' main charge was that the defendants had attempted to drive out the plaintiffs from the U. S. market by a unitary conspiracy to maintain Japanese price artificially high and at the same time to maintain U. S. price artificially low.
The Plaintiffs proposed the following evidences among others:
a. For alleged conspiracy to raise prices in Japan: The Recommendation Decision against the Market Stabilization Council in 1957 and the commencement of the JFTC proceedings against six Japanese TV manufacturers in 1966.
b. For alleged conspiracy to export to the U. S. at low price: The Check-Price Agreements (that provided the minimum export price for each TV model for the U. S. by inch size -- consisting of the Manufacturers' Agreements and the Export Association Regulations), and the so-called Five-Company Rules (that required registration of the importers in the U. S. to whom the TV's were to be sold -- Export Association Regulation), both of which existed for ten years from 1963 through 1973 under the Export-Import Trading Law.
c. For alleged dumping in the U.S: Findings of dumping under the Antidumping Act of 1921 by the Department of Treasury and the Tariff Commission in 1970 and 1971, respectively.
Plaintiffs did not assert that the above conducts alone had violated the Sherman Act and the Antidumping Act of 1916, but that the existence of a "unitary conspiracy" was inferred, having these fragmented conducts serve as prima facie evidence:
"Because the concert of action which violates the antitrust laws will so rarely be the subject of direct evidence, the Supreme Court has permitted broad latitude with respect to what inferences are permissible from the totality of the circumstances." 723 F. 2d. 238 (3rd Cir., December 5, 1983), at 304.
In 1975, motions to dismiss the case for lack of in-personam jurisdiction filed by Mitsubishi, Hitachi and Sanyo were denied. Another motion filed by Mitsubishi to dismiss the complaint for lack of subject-matter jurisdiction was also denied.
During the discovery on the merit conducted from 1976 through 1979, the case had developed into one of the largest antitrust litigation in the U. S., with several million pages of documents produced, several hundred interrogatories filed and answered, hundreds of depositions taken, hundreds of lawyers involved, three judges passed away and tens of millions of dollars spent mostly by the defendants.
One of the most strange interrogatories ever filed by the plaintiffs requested to identify any imperial member attended at the Palace Group. Plaintiffs apparently confused a commercial group regularly met at the Palace Hotel with the Imperial Meeting that decided to attack Pearl Harbor in 1941.
In 1980, the defendants requested a hearing on the admissibility of the evidences and expert opinions attached to the plaintiffs' Final Pretrial Statement, and Judge ruled in the defendants' favor, stating in essence as follows:
"The District Court ... held that major critical opinions presented in plaintiffs' experts' opinions were inadmissible, as the experts had created their assumptions, the market behavior in question, in ways that invaded the province of the fact finder and, moreover, their assumptions were based almost exclusively upon faulty underlying data (4)." 505 F. Supp. 1313, at 1313-1314.
In 1980, immediately after the evidentiary decision mentioned above, the defendants filed a motion for summary judgment on the alleged inference of violation of the Sherman Act. Dumping will be discussed later in this paper.
First, Rule 56 of the Federal Rules of Civil Procedure provides that either the plaintiff or the defendant can seek summary judgment without waiting for a trial. The Rule sets forth detailed rules concerning the burden of proof for both parties in the event a summary judgment motion is filed. According to those rules, the moving party must first show that there is no genuine issue as to any material fact, and then the other party must set forth specific facts showing that there is a genuine issue for trial, not resting upon the mere allegation or denial of his pleadings. Rules 56(c) and (e).
In 1981, Judge granted summary judgment in favor of the defendants as to all of the plaintiffs' claims, 513 F. Supp. 1100 (E. D. Pa. March 27, 1981, stating in essence as follows:
"[Plaintiffs'] claim rested on the inferences that could be drawn from [defendants'] parallel conduct in the Japanese and American markets, and ... any [such] inference of conspiracy was unreasonable, because (i) some portion of the evidence [i.e., Check-Price Agreements and Five-Company Rules,] suggested that [defendants] conspired in ways that did not injure [plaintiffs] [since alleged conspiracy was to raise price, injury cannot be found to the plaintiffs who are competitors to the alleged conspirators], and (ii) the evidence that bore directly on the alleged price-cutting conspiracy did not rebut the more plausible inference that [defendants] were cutting prices to compete in the American market and not to monopolize it. First National Bank of Arizona v. Cities Service Co., 391 U. S. 253, 1968 (5)." Summarized by the Supreme Court, L. Ed. 2d. 538, 106 S. Ct. 1348 (March 26, 1986), at 1352.
In 1983, the Court of Appeals for the Third Circuit reversed and remanded the summary judgment by the District Court. 723 F. 2d. 238 (3rd Cir., December 5, 1983). The Court of Appeals revived most of the evidences and expert opinions that the District Court had once decided as inadmissible. Although the District Court had fully exercised its own discretion with respect to the admissibility of the evidences and expert opinions, the Court of Appeals decided that the competency of experts should have been decided by a jury. As the result, the Court of Appeals concluded that the summary judgment was erroneous generally on the following ground:
"There is both direct evidence of certain kinds of concert of action and circumstantial evidence having some tendency to suggest that other kinds of concert of action may have occurred." 723 F. 2d 238, at 304-305. "[In viewing this direct and circumstantial evidence as a whole, there was a possibility that] a reasonable factfinder could find a conspiracy to depress prices in the American market in order to drive out American competitors..." Summarized by the Supreme Court, Id. at 1353.
The defendants petitioned for a writ of certiorari. Despite a common belief that the possibility for the Supreme Court to grant this type of interlocutory appeal was less than 10%, the Supreme Court granted it.
The decision by the Supreme Court was epoch-making in that economic motives were adopted as the standard for inferring an predatory pricing conduct. 475 U. S. 574, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (March 26, 1986). The decision was made by a narrow margin of 5 to 4. The opinion was written by Powell, J, joined by Burger, CJ, Marshall, Rehnquist and O'Connor, JJ, and the dissenting opinion was written by White, J, joined by Brennan, Blackmun and Stevens, JJ.
The Supreme Court adopted a standard as to the level of evidence required for maintaining the claim of predatory pricing that, "if the factual context renders [plaintiffs'] claim unplausible -- if the claim is one that simply makes no economic sense, [plaintiffs] must come forward with more persuasive evidence to support their claim than would otherwise be necessary." Id., at 1356. The Supreme Court made the following observations regarding the predatory pricing conspiracy:
"A predatory pricing conspiracy is by nature speculative. Any agreement to price below the competitive level requires the conspirators to forego profits that free competition would offer them. The foregone profits may be considered as an investment in the future. For the investment to be rational, the conspirators must have a reasonable expectation of recovering, in the form of later monopoly profits [appropriately discounted], more than the losses suffered... In a predatory pricing, the short-run loss is definite, but long-run gain depends on successfully neutralizing the competition. Moreover, it is not enough simply to achieve monopoly power, as monopoly pricing may breed quick entry by new competitors eager to share in the excess profits." Id., at 1357.
The Supreme Court recognized that the predatory pricing conspiracy itself is 'economically senseless' and 'self-deterring' except under an extremely unique situation.
"The alleged conspiracy's failure to achieve its ends in the two decades ... is strong evidence that such conspiracy does not in fact exist." Id., at 1359.
The Supreme Court remanded the case to the Court of Appeals stating that, "[i]n light of the absence of any rational motive to conspire, neither [defendants'] pricing practices, nor their conduct in the Japanese market, nor their agreements respecting prices and distribution in the American market, suffice to create a genuine issue for trial." Id., at 1361.
Then, the Supreme Court directed as follows:
"On remand, the Court of Appeals is free to consider whether there is other evidence that is sufficiently unambiguous to permit a trier of fact to find that the [defendants] conspired to price predatorily for two decades despite the absence of any apparent motive to do so. The evidence must 'tend to exclude the possibility that [defendants] underpriced [plaintiffs] to compete for business rather than to implement an economically senseless conspiracy. Monsanto Co. v. Spray-Rite Service Corp., 465 U. S. 752, 1984 (6).". Id., at 1362.
The Third Circuit Court on remand affirmed the summary judgment by the District Court with respect to all causes of action, stating as follows:
"We conclude ... that there is no evidence other than that upon which
we previously relied when we concluded that there were material fact issues
regarding the existence of a predatory pricing conspiracy in the American
market. The Supreme Court has already held this evidence is legally insufficient.
Therefore the summary judgment on the Sherman Act claims must be affirmed."
807 F. 2d. 44 (3rd Cir., December 12, 1986), at 48.
In March 1987, the plaintiffs petitioned for certiorari, which the Supreme
Court denied on April 24, 1987.
"Dumping is a price discrimination between purchasers in different national markets." Jacob Viner, DUMPING: A Problem in International Trade, 1923, 1966 ed.
"[Dumping] can be profitable ... in any circumstances in which price discrimination ... is remunerative. This will be true whenever price elasticities of demand differ in the two markets... If the ... demands for the products at home are relatively inelastic, their profit-maximizing prices will be high relative to either their marginal or their average incremental costs. The conclusion, then, is that in these circumstances and in the absence of countermeasures not only is it consistent with rationality to dump -- no other course of action will serve the exporters' interests more effectively." William J. Baumol, The Logic of a Dumping Conspiracy That Damages Competition -- A Report Submitted to the Court Attached to the Brief of Appellants on Remand, In Re Japanese Electronic Products Antitrust Litigation (3rd Cir., June 16, 1986).
As is clear from above definitions, dumping is an economic phenomenon and, in general, does not have an element of injustice. If there is any dumping to be accused of being unjust, it would be the price discrimination with an anticompetitive intent. In other words, it would be the market predation in which "[a monopolist,] by risking only a portion of [his] business,... threaten[s] the entire business of smaller rivals who are confined to the geographic area in which the selective price cut was made ..." Areeda & Turner, Antitrust Law (1963), Vol. 3, at 186-187.
A question arises whether there are antidumping laws of two different types in their legal nature: (1) one as a part of the antitrust law to suppress international price discrimination with anticompetitive intent and (2) one as a part of the trade law to protect domestic industries.
The present case answers this question: The court decisions on the Antidumping Act of 1916 are reported in the following sections:
The so-called Antidumping Act of 1916 (15 U. S.C. 72) provides in essence as follows:
"It shall be unlawful for any person importing ... any articles from any foreign country into the United States ... to sell ... such articles in the United States at a price substantially less than the actual market value or wholesale price of such articles ... in the principal markets of the country of their production ... Provided, that such act ... be done with the intent of destroying or injuring an industry in the United States ..." (Relief: criminal sanction and treble damages).
The opinion of the District Judge granting summary judgment in favor of' the defendants is summarized as follows:
The Antidumping Act of 1916 "was intended to complement the antitrust laws" (at 1197), particularly Section 2 of the Clayton Antitrust Act of 1914 which makes price discrimination in the domestic market unlawful; "The 1916 Act is not a protectionist act, but an antitrust act, and the purpose of antitrust acts is to foster competition (albeit fair competition) for the benefit of the consumer" (at 1242). 494 F. Supp. 1190 (1980).
During the arguments, both parties focused on which domestic model was to be compared with a particular export model. Under the 1921 Act, the Administration (the Department of Treasury before 1979 and the Department of Commerce thereafter) had a broad discretion in the determination of the domestic and export models. However, as stated previously, the purpose of the 1916 Act is different from that of the 1921 Act.
The plaintiffs, defendants and the court have agreed that the TV's intended for the Japanese market and those intended for the U. S. market have differences with respect to power supply voltage and frequencies for broadcasting, and there is no compatibility regarding the following three points: (1) consumer use, (2) consumer preference and (3) marketability.
Accordingly, the conclusion reached by the District Court is summarized as follows:
The meaning of "such articles" must be determined to have the same meaning as "of like grade and quality" in Section 2 of the Clayton Act. Unlike the 1916 Act, numbers of cases exist for the Clayton Act, and "of like grade and quality" means coincidence in the above three points. 494 F. Supp. 1190 (E.D.Pa., April 14, 1980). As stated previously, there is no dispute between the plaintiffs and defendants that the TV's intended for the Japanese and for the U. S. markets do not coincide on these three points. There are no models for the Japanese market which are of like grade and quality as the models sold in the United States. A genuine issue of material fact does not exist regarding this point. This satisfies the requirements for a summary judgment.
The Court of Appeals reversed the summary judgment by the District Court on the following ground:
"The technical differences at issue, measured as a matter of consumer utility, cannot explain a price differential, and thus the two products are ... comparable under the 1916 Act (at 326)... [As the plaintiffs' experts] concluded that 'defendants charged markedly lower prices for export products sold in the United States than they did for equivalent products sold in Japan',... an issue of material fact exists (at 327)". 723 F. 2d 319 (3rd Cir., December 5, 1983).
The Supreme Court reversed the Court of Appeals' decision and supported the summary judgment by the District Court generally on the ground that the plaintiffs' proof of the defendants' motive to conduct predatory pricing (therefore to dump) is insufficient. L.Ed.2d 538, 106 S. Ct. 1348 (March 26,, 1986).
In compliance with the Supreme Court decision, the Court of Appeals affirmed the summary judgment by the District Court. 807 F. 2d 44 (3rd Cir., December 12, 1986). In response to this, the plaintiffs' petition for writ of certiorari dated March 11, 1987, totally abandoned their conspiracy claims and, instead, focused on a single claim of alleged violation of the Antidumping Act of 1916.
The plaintiffs asserted that it was an abuse of authority by the Third Circuit Court to dismiss cause of action under the Antidumping Act of 1916 where no appeal on this count had been made by the defendants, and therefore, where no remand was issued by the Supreme Court. Also, with respect to the Court of Appeals' decision based on the absence of the motive to conduct dumping, the plaintiffs argued that the Court of Appeals had not examined the question whether the economic motive would be different in predatory pricing and in dumping.
However, as stated previously, the Supreme Court denied this petition on April 24, 1987.
The House Comprehensive Trade Bill, H.R.3, introduced during the first
session of the 100th Congress contained a proposal to amend the Antidumping
Act of 1916. The amendment proposed a novel type of private remedies for
injury resulting from dumping, which (1) had no criminal sanction (by which
it was intended to reduce the burden of proof for the plaintiff), and which
(2) permitted the use of the Foreign Market Value under the 1921 Act as
the surrogate for the "actual [home] market price" under the
1916 Act. The proposed amendment disappeared during the Conference review,
demonstrating the basic soundness of the U. S. Congress in not permitting
international trade policy to be controlled by private interests.
The present case has been generally regarded as a private lawsuit seeking relief from antitrust and antidumping law violations. However, in its undercurrent was a serious international law issue as to whether a court in one country could judge on another country's trade policies. The truth seems to be that, while the courts involved were fully aware of this point, they elected to circumvent the international aspect of the lawsuit and decided it solely as a private relief case.
First, the strongest evidences that the plaintiffs ever offered were the Manufacturers' Agreements and Export Association Regulations that existed from 1963 through 1973 under the Japanese Export-Import Trading Law (Law No. 299, 1952). These together were called the Check-Price Agreements, which primarily provided a minimum export price for each inch-size category of TV's to be exported to the United States. All TV manufacturers were parties to both. The latter contained the so-called Five-Company Rules that required registration of the importers in the U. S. and became a serious issue during the course of the litigation.
According to the plaintiffs' assertion, the Check-Price Agreements were price-fixing agreements and the Five-Company Rules were customer allocation schemes, both of which are illegal per se under Section 1 of the Sherman Act.
In response to the plaintiffs' assertion, the defendants referred to an official statement made by the Japanese Government that these agreements were compelled by the government and, therefore, that the principle of sovereign compulsion had released them from any and all civil responsibility. This is the so-called MITI Statement. Appendix to the defendants' Petition for a Writ of Certiorari to the United States Court of Appeals for the Third Circuit (June 7, 1984), at 8a ff.
The plaintiffs took the position that "MITI lack[s] the authority under Japanese law to compel Japanese companies to enter into the kind of arrangements .., and instead can only make non-binding recommendations." Summarized by the District Court, 513 F. Supp. 1100 (E.D.Pa., March 27, 1981), at 1194.
In answer to this, the MITI Statement confirmed that the Check-Price Agreements under the Export-Import Trading Law were actually compelled upon the industry based on the Export Trade Control Order (Cabinet Order No. 378, 1949) under the Foreign Exchange and Foreign Trade Control Law of Japan (Law No.228, 1949). Id., at 1193.
The MITI Statement was first delivered to the Federal District Court in Philadelphia via the Department of State as a document attached to the diplomatic note issued on April 25, 1975 by the Japanese Embassy in the U. S. In addition, an amicus curiai brief issued to the Federal District Judge from the Japanese Embassy dated July 11, 1980 stated as follows:
"The Ministry of International Trade and Industry ... [is] empowered and responsible for the detailed implementation of the basic trade policies of the Japanese Government ... [and] is empowered and authorized to act for the Government of Japan in making the statement." Id., at 1192.
The question is whether the American jury can examine the veracity of the content of an official statement made by a foreign government. The Summary Judgment by the Federal District Court dated March 27, 1981 avoided the conclusion, although it described in detail the assertions by both parties regarding the immunity under sovereign compulsion, and formulated its opinion focusing on the issue of circumstantial evidence in a summary judgment. 513 F.Supp. 1100 (E.D. Pa., March 27, 1981), at 1192.
The Court of Appeals' decision dated December 5, 1983, not only ignored the MITI Statement completely, but also stated as follows:
"It cannot be said with any degree of certainty that the minimum prices ... were in fact determined by the Japanese Government. It is possible to conclude that the government merely provided an umbrella under which the defendants gained an exemption from Japanese antitrust law, and fixed their own export prices....Clearly, therefore, a summary judgment in defendants' favor on the defense of sovereign compulsion would be improper." 723 F. 2d 238, at 314-315.
The defendants, in response to this, raised the following question in their certiorari petition:
"Whether a court of the United States may: (i) disregard the duly issued statement of a friendly foreign government attesting that certain export controls observed by its nationals were compelled by that government; (ii) permit a trier of fact to adjudicate the veracity of such an official government statement; or (iii) hold such government-mandated conduct to constitute or be a 'feature' of a conspiracy in violation of the antitrust laws of the United States". Petition for a Writ of Certiorari to the United States Court of Appeals for the Third Circuit (June 7, 1984), at i.
During the Supreme Court review of the defendants' certiorari petition, amicus curiai briefs were submitted from various governments (Japan, Korea, U. S., U. K., Canada, Australia and France). Id., at 6a ff. Of these, the one written by the Department of Justice of the United States dated June 17, 1985, the content of which was particularly thorough, concluded that the act of state doctrine has become the defense inherent to the Sherman Act and stated as follows:
"Comity among nations and among the respective branches of the Federal Government ... have led to the creation of the act of state doctrine as a principle of judicial abstention in resolving disputes concerning the validity of foreign sovereign acts... Nothing in the text or legislative history of the antitrust laws expressly creates a defense based on, or otherwise in terms discusses, considerations of comity or act of state... But those principles were uniformly recognized as a prominent part of the 'contemporary legal context in which Congress acted' when it adopted the Sherman Act." (p.17)
Also, the joint amicus curiai brief by the governments of four nations, U. K., Canada, Australia and France dated June 15, 1985, states in a more straightforward fashion as follows:
"The related doctrines of foreign sovereign compulsion and act of state are judicial acknowledgment of the fundamental principle of international law that a sovereign's exercise of its authority within its territory is not reviewable by the courts of another nation." (p.6)
The Supreme Court's decision of March 26, 1986 simply stated that the absence
of economic motive for the defendants is sufficient reason for remanding
the case, and therefore, the court would not reach the issue of sovereign
compulsion (106 S. Ct. 1348, at 1362); thus, it did not respond directly
to the defendants' basic question raised in their petition for a writ for
certiorari.
The TV case described above gives rise to three questions as to what their true resolutions were. The first question is on technology, the second is on pricing and the third is on governmental role.
As a result of the Orderly Marketing Agreement of 1978, most Japanese TV manufacturers moved their manufacturing facilities to the United States. Capital fled leaving labor behind. At a glimpse, this looks as if the Japanese TV industry was capitulated under American trade pressures. But it is not true. This was just the beginning of another story.
Japanese TV manufacturers, which had lost their second largest TV market -- the U. S. -- toward the end of the 1970's, laid off none of their labor forces. The vacancy was filled with another new technology -- Video Cassette Recorders ("VCR's"). This time, there was no American competitor who would complain about the import of VCR's from Japan.
What actually happened was this: During the depression caused by market saturation of monochrome TV's in the 1960's, Japanese manufacturers developed a new market for portable TV's with the assistance of then-developing semiconductor technology. Increased use of semiconductor devices in consumer electronics in turn stimulated the growth of semiconductor industry. There started a positive feedback between the two. Without IC's, there would have been no VCR's.
From the technological point of view, Japan's current lead in VCR's and in certain semiconductor technology was the inevitable result of the trade conflict on TV's between Japan and the United States.
The District Court and the Supreme Court decisions in the present case have established that it is the duty of a businessman to compete in price as far as it is rational. Trade between two national markets with different price-elasticity of demand necessarily entails an economic phenomenon called dumping. Such dumping is a necessary outcome of normal competition. Suppressing it makes domestic industry weaker and more dependent upon protection.
For the purpose of preserving normal competition, it is important to distinguish a bad dumping from a neutral dumping and to treat them separately: A bad dumping with predatory intent should be punished by criminal or punitive sanctions, but a neutral dumping as an economic phenomenon may best be counteracted by another neutral, economic measures such as U. S. Trade Act Section 201.
Although the sovereign compulsion issue was not fully resolved in the present
case, it is clear that the positive role of the government has become more
and more important in international trade. The balance of terror between
trade strategic weapons such as U. S. Trade Act Section 301 or EC Regulation
2641/84 (currently 3286/94) is so delicate that it may only be controlled
by government professionals neutral from local interests.
TV's:
_________Antidumping______________Countervailing___________Antitrust___________Section
337_______________Section 201
1968_ Complaint (EIA)
1970_ Affirmative Finding____ Complaint (Zenith)_____ Complaint (NUE)
1974________________________________________________________________Complaint (Zenith)
1976_ Negative Finding_______________________________________________________________ Complaint (Sylvania)___ Complaint
1977________________________________________________________________________________________Consent Orders_________ OMA
1978_ "BIA" Formula
1981_ Partial Settlements___________________________________ Decision (District Court)
1983_________________________________ CAFC Decision_________ Decision (3rd Circuit Court)
1986_______________________________________________________________ Decision (Supreme Court)
Semiconductors (for comparison):
_____ -------------------- Antidumping ----------------
___________64K DRAM________________ EPROM_________________ 256K+ DRAM__________
Section 337_______ Section 301
1985___ Complaint (Micron)_____ Complaint (Intel+)___ Complaint (DOC)______________________________ Complaint (SIA)
1986 ___Affirmative Finding ____ Suspension Agreements__________________________Complaint (TI)______Agreement (1)
1987_____________________________________________________________________________________________Settlements_______ Retaliation
1991______________________________________________________________________________________________________________________ Agreement (2)
1996______________________________________________________________________________________________________________________
Agreement Ends
1 The electronic industry of Japan in the 1960's described above is based on the author's own experience as a salesman for consumer electronic products in Tokyo area employed by Mitsubishi Electric, one of the defendant companies. However, certain economists suggested that the manufacturers might have conspired to accumulate supra-competitive profits on the one hand and might have formed the "Keiretsu" entry barriers on the other. Komiya, Takeuchi & Kitahara, "Industrial Organization of Japan -- Home Electronics", CHUUO KORON (Summer, 1971). This article was used by the plaintiffs' expert witnesses as a strong public-document evidence, infra.
2 In compliance with the obligations under the GATT which Japan joined in 1955, Japan quickly pushed forward its trade liberalization plan until its liberalization ratio reached 100% in 1963 for non-agricultural products. In 1964, Japan also joined the IMF Article 8 countries and abolished all remaining restrictions for foreign trade payment or transfer. Admitting that there was no more legal entry barrier into Japan, the plaintiffs could not but rely their predation theory upon the "Keiretsu" myth as a de facto entry barrier.
3 In 1970, the author was transferred to the Law Department of Mitsubishi Electric to handle those trade cases including the present lawsuit.
4 DePodwin Report: "What Dr. DePodwin has done is to step the shoes of the factfinder. ... There is in this no evident application of any economic expertise whatsoever. ... [H]e has done exactly what the jury is supposed to do. ... This is precisely the oath-helping conspicyologist defendants object so strenuously. It lends an unwarranted aura of scientific reliability to the arguments of plaintiffs' attorneys. .... It is therefore inadmissible. ... [I]t is plain that the 'analysis' undertaken in this section of the DePodwin report in no way resembles economic analysis." Yamamura Report: "Professor Kozo Yamamura's report ... is the most partisan. ... We should point out that Professor Yamamura's report is fraught with conclusory and flammatory rhetoric. In fact, Yamamura's presentation is even less helpful than DePodwin's, for he has done nothing but quote the documents directly. ... Professor Yamamura rather astonishingly quote verbatim for five and on-half single spaced pages from a publication which he neglects to identify, except by noting that it was written by Komiya et al.
5 In 1951, President Mosadeg of Iran nationalized the Anglo-Iranian Oil Company. The U. S. Department of Justice sued six international oil majors alleging that they had agreed to jointly boycott Iranian oil in retaliation. Meanwhile, a U. S. representative of Iranian Oil Company, Waldron, tried but failed to sell his oil to an independent U. S. oil company, Cities Service, because Gulf Oil, one of the six, offered Cities Service cheaper oil imported from Kuwait. Although Waldron sued seven companies including Cities Service for joint boycott, the latter filed a motion for summary judgment and the court granted it.
6 Monsanto received a complaint from its distributor for agricultural herbicides that another distributor, Spray-Rite, had been engaging in a discount operation. Monsanto then refused to renew Spray-Rite's distributorship for unrelated reasons. Spray-Rite sued Monsanto for Sherman Section 1 violation. The lower courts decided that the burden of proof for Spray-Rite was satisfied with the circumstantial evidence that Monsanto had cut Spray-Rite following a complaint by the competing distributor. The U. S. Supreme Court, while rejecting this inference, decided in favor of Spray-Rite saying that such direct evidence existed.