Overview [top]

In December 2003, Goss International Corporation received a $10.5 million verdict against a Japanese printing press manufacturer for violations of the Antidumping Act of 1916.1 The Act was designed to punish foreign corporations that sell goods in the US at prices far below fair market value in an effort to harm US industries.2 What makes the Goss case significant is that it was the first case where a plaintiff recovered under the eighty-seven-year-old Act.3 This unprecedented decision brings US manufacturers one step closer to having a private cause of action against international companies who illegally dump goods in the US.

Traditional judicial interpretation of the Act left US producers virtually defenseless against importers who engage in unfair trade practices. Originally, courts refused to even interpret the Act as antidumping legislation, instead holding that it was an antitrust statute. 4 Additionally, courts required proof that defendant acted with the express intent to injure a US industry. They were unwilling to infer the requisite intent from the nature of the defendant's actions.5 Because of the Act's rigid intent requirement it was felt that the Act was "difficult, if not impossible" to enforce.6

However, over the last two decades there has been a renewed interest among US manufacturers in the Act's potential as a tool for protecting American industries from an onslaught of international goods. The courts have fanned this interest by shifting their focus from the legislative history of the Act to its actual text.7 It is now well established that the Act is not limited to its antitrust application; it is interpreted as having an antirust aspect and a protectionist/antidumping aspect. In December 2003, this new approach culminated in the Goss decision.8

The Goss case was not only unique because of its verdict. It was founded upon unusually strong evidence of the defendant's express intent to damage a US industry.9 It was this explicit evidence that differentiated the plaintiff's claim from all other claims brought under the Act during the previous eighty-seven years. This is significant because Goss does not appear to signal a shift in the court's interpretation of the Act. The Act's intent requirement remains a formidable obstacle to prosecution.

If the Antidumping Act of 1916 is to continue its ascent from irrelevancy, courts must take a fresh look at the level of intent required by the Act. This article will present the history of the 1916 Act and briefly detail the evolution of its interpretation by the courts. It will then be argued that a more liberal reading of the Act's intent requirement is both vital to protecting US manufacturers and justified by the inherent anticompetitive nature of dumping under-priced goods into a foreign market.

The 1916 Act [top]

Text [top]

The text of the Antidumping Act of 1916 defines dumping as "[importing and selling items in the US] 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 . . . ."10 Such dumping is prohibited by the Act if it is done with the requisite intent:

That such act or acts be done with the intent of destroying or injuring an industry in the United States, or of preventing the establishment of an industry in the United States, or of restraining or monopolizing any part of trade and commerce in such articles in the United States.11

The Act provides not only a criminal punishment for any violation, but it also allows any person harmed by a violation of the Act to sue for treble damages.

Legislative History [top]

Early interpretations of the 1916 Act were significantly influenced by the Act's legislative history. When Congress passed the Act, it intended to help protect the US economy from an anticipated flood of cheap European goods after the end of World War I.12 Democrats controlled Congress and there was a Democratic President at the time. The Democratic Party was outspoken in its support of free trade.13 Despite this, the Act was passed and signed into law with little debate. This led many to argue that despite the Act's protectionist language, it was intended to be pro-consumer, anti-trust legislation.14

1921 Act-a Response to the 1916 Act's Failures [top]

Not long after enacting the 1916 Act, Congress realized that the Act was not performing as planned.15 In 1921, Congress enacted a second Antidumping Act that attempted to circumvent the problems that plagued the 1916 Act.16 First, the 1921 Act eliminated the intent requirement. To bring a cause of action under the 1921 Act, all that had to be proven is the dumping of goods and a resulting injury.17 Second, the 1921 Act provided no private cause of action. The United States Government was awarded the damages of any successful claim under the amendment.18 The 1921 Act remains in effect to this day (as part of the Tariff Act of 1930) and is a key element of modern day United States trade legislation.19

The Evolution of the 1916 Act [top]

The evolution of the 1916 Act encompasses three distinct eras. From its original interpretation as an antitrust statute of little import, the 1916 Act has evolved into a potentially useful tool for US manufacturers seeking to combat illegal trade. However, under its current reading the Act remains impractical. Most plaintiffs do not possess evidence of their competitors express intent to harm a US industry.

1916 - 1992 [top]

During the majority of its existence, the Antidumping Act of 1916 has largely been seen as an antitrust statute of little or no significance.20 This was the interpretation applied in 1980, in Zenith Radio.21 Zenith was one of the first reported cases to mention the 1916 Act.22 The defendants were a number of Japanese companies who were being sued under the Act for allegedly dumping electronics into U.S markets. In its analysis, the court meticulously detailed the legislative history of the Act and concluded that the Act was intended to be an antitrust statute designed to protect consumers. The Court expressly denied that the Act was intended to provide any protection to US manufactures.23 As antitrust legislation, the court interpreted the Act to require "predatory intent".24 Because the Act was a criminal statute, it was subject to strict limits on the plaintiff's rights of discovery. This made the task of establishing predatory intent extremely difficult.25 These almost impossible proof standards help explain why the Act was mentioned in only a single reported decision before the 1970s.26

1992 - 1997 [top]

In 1992, Helmac offered the first evidence that the Antidumping Act of 1916 could prove to be a useful weapon in protecting US manufacturers from harmful trade practices.27 In Helmac, a case involving a Canadian lint-brush importer, the Court held that the Act did not have to be "interpreted consistently with the antitrust statutes in all situations."28 Instead, the Act's intent requirement could be satisfied by something less than predatory intent. Although Helmac did not end with a prosecution, it was a significant decision because it opened the door for a protectionist interpretation of the Act, which would be expanded and further defined throughout the 1990s.

The protectionist aspect of the 1916 Act was expanded in 1997, by Geneva Steel.29 Geneva Steel directly attacked Zenith's interpretation of the Act, holding that "there is no need to resort to means of secondary interpretation such as legislative history" since the Act is complete on its face.30 Geneva Steel then went on to define what has become the modern interpretation of the 1916 Act. By the text of the Act, it must be proven that the defendant possessed one of five possible intents:31

1) The intent to destroy a United States industry

2) The intent to injure a United States industry

3) The intent to prevent the establishment of a United States industry

4) The intent to restrain trade and commerce in the subject market

5) The intent to monopolize trade and commerce in the subject market

Geneva Steel characterized these last two forms of intent as the traditional antitrust definitions of "predatory intent." However, the court defined the first three forms of intent as protectionist measures designed to aid US manufacturers.32 This interpretation was an express rejection of the legislative history approach that the Zenith court had applied.33 By focusing on its actual text, Geneva Steel expanded the Act well beyond its traditional role as antitrust legislation.

1997 - present [top]

After the decision in Geneva Steel, the guideposts of the modern reading of the Act are well defined. Additionally, the present era is distinguished by the fact that potential plaintiffs now have a successful 1916 Act claim that they can reference. The $10.5 million verdict in Goss illustrated that courts will enforce the Act under the right circumstances.

Yet, because of the unique facts of the case, Goss is actually a reminder of how unmanageable the Act's intent requirement still is. Goss is atypical of the common antidumping case in two ways. First, Goss International had managed to obtain evidence showing that the defendant, TKS, Ltd., had attempted to cover up a sale it had made to a US newspaper company at a price below fair market value. Goss had also acquired a communication between TKS officers discussing plans "to put Goss out of business" though aggressive pricing strategies.34 There will be few situations where a manufacturer will possess such explicit evidence of a rival's intent. Secondly, because of Goss's large market share, the court held that "Goss was the United States industry [for newspaper presses]."35 Therefore, any intent to injure or destroy Goss could be construed as intent to injure or destroy a United States industry. Most companies harmed by dumping don't occupy such a dominant role in their industry. Although Goss is a landmark conviction, it does not make the Antidumping Act of 1916 much more practical as a private cause of action for US manufacturers.

The Impact of the Goss Verdict [top]

Though Goss may not have revolutionized the 1916 Act the way Geneva Steel did, it is significant for other reasons. First, the verdict will encourage other US companies to pursue potential claims. Under the 1921 Act, companies who wish to seek action against an importer need twenty-five percent of the industry to have signed on to their petition. Additionally, the penalties imposed by a successful claim are collected by the US Customs Service through future duties; the injured parties receive no direct benefit.36 This approach gives US manufactures little incentive to even bother pursuing claims against "hit-and-run" importers who dump a large supply of under-priced goods into the US markets over a short period of time, and then vacate the market before any proactive remedy can be enforced against them.37 This is why the 1916 Act could be significant. It gives domestic manufacturers the right to recover an amount proportional to the harm they suffered.

Second, now that a claim has been prosecuted under the 1916 Act, the threat of treble damages may make some companies hesitate before engaging in illegal dumping. In this manner, the Goss verdict may have some short-term influence. However, it will take more than a single prosecution for the Act to serve as a meaningful deterrent.

Finally, the Goss decision gives US manufacturers another weapon to use in pre-trial negotiations, and may lead to more out-of-court settlements for bigger sums. Companies facing charges under the 1916 Act may be more willing to negotiate a settlement now that prosecution has proven to be possible.

Standing on its own, the Goss decision will most likely not have a significant impact in the courtroom. This is because the case was distinctive not in the judicial approach, but in its fact pattern. Its most notable influence will probably be the fact that it can be used as a bargaining tool by manufacturers who claim to have been harmed by illegal dumping. Yet, even this may be short lived. If the courts continue to demand that the plaintiff show that the defendant acted with the explicit intent to injure a US industry, it will likely be a long time before another 1916 Act claim is successful.

Justifications for an Expanded Interpretation of the 1916 Act's Requisite Intent [top]

The Antidumping Act of 1916 has the potential to be a powerful weapon against illegal trade. The threat of treble damages (as opposed to the compensatory duties imposed by the 1921 Act) and a private cause of action could significantly deter the illegal dumping of goods into US markets. The courts' overly strict interpretation of the Act continues to stifle its effectiveness. However, the Act does not have to remain ineffective. There are compelling justifications for the court to begin inferring the requisite intent from the nature of the defendant's conduct.

Making the Act Relevant [top]

When interpreting the intent requirement of the 1916 Act, courts should follow two guidelines: 1) Since the act has been deemed to be complete on its face with respect to the intent requirement, they should not inquire into secondary sources, such as the Act's legislative history.38 2) Since the judiciary should always assume Congress acted with a purpose, they should interpret the act broadly enough so as not to render it irrelevant.39 It took eighty-one years and the decision in Geneva Steel before the first of these guidelines was recognized. It seems that both the Act's critics and the courts are still quick to disregard the second.40

This is not to say that just because a court construes a statute to require a high level of intent, it has made that statute irrelevant. Obviously, the decision in Goss demonstrates that the 1916 Act is enforceable. However, the comments of those who have analyzed the Act show that there has been a willingness to disregard it.41 Perhaps this comes from a continued refusal to truly ignore early interpretations of the Act which were based on legislative intent, despite the fact that courts now agree that the Act's legislative history is irrelevant.42 If the Act truly is complete on its face, it is difficult to see the basis for the courts' overly strict interpretation of the specific intent requirement.

The Inherently Anticompetitive Nature of Dumping Goods in a Market [top]

While arguing against the Act as a protectionist measure, the defendants in Geneva Steel noted that if the Act were to be construed as having a protectionist aspect (which it subsequently has been) the requisite intent could be easily inferred by the nature of competition: "Any corporate pricing strategy inevitably will be accompanied by an intent to 'injure' other firms." The court rejected this assumption, stating that the Act "in no way criminalizes normal competition."43 Yet, both the defendant's argument and the court's response ignore the other critical elements of the Act that require more than "normal competition" for a prosecution, even if intent is allowed to be inferred.

In addition to proving the requisite intent, a plaintiff must also prove that the defendant was selling the product in the US markets "at a price substantially less than the actual market value or wholesale price of such articles" in the defendant's home market.44 If the courts were to infer intent from the pricing strategies of companies dumping goods in the US, they would not be punishing "normal competition".45 Instead, they would be punishing the anticompetitive practice of pricing a good substantially below its market price to take advantage of global disparities in production costs.46 It should be noted that such an approach to establishing anticompetitive intent is not unprecedented. In McGahee v Northern Propane Gas Co., the court held that a defendant selling below average total cost is circumstantial evidence of predatory intent.47

Suppliers of goods may argue that just because they sell goods in the United States for substantially less than what they could receive in their home market, this is not evidence of malicious intent. However, a closer look into the economics behind such practice casts this argument into doubt.48 Setting aside the required intent, in order for the 1916 Act to apply the defendant must have sold the item in the US at a price substantially less than the value of the item in the country where it was produced.49 The cost of bringing a product to market in the US will almost always be more than the cost of bringing it to market in the country where it was produced because of transportation costs.

So why would a company sell an item in the US for a price substantially less than it could get in its home market, especially when the cost of selling the item in the US is actually higher? There are two likely explanations.50 One is that the importer is attempting to injure its US competitors by pricing the goods below the price at which domestic manufacturers can compete. Importers are able to do this by taking advantage of production costs in foreign countries that are significantly lower than production costs in the US. An importer who engages in such an activity does so intending to injure the US market. A second explanation is that the importers are attempting to maintain an inflated price structure in their home market.51 By dumping excess goods in the US, they can get a return on the goods while maintaining inflated margins in the country where they were produced. Such a process demonstrates extreme indifference to the effect such action may have on US industries.

In either one of these scenarios, it is clear that there exists an implied intent to harm US industry. It is misleading to characterize the practice of dumping, regardless of the express intent of the importer, as "normal competition."52 Dumping is done for the benefit of the importer, to the detriment of the domestic market. Domestic manufacturers can never successfully compete against this activity.53 It is this fact that makes dumping inherently anticompetitive. Such an activity carries with it a level of purpose, which should be sufficient to establish intent under the 1916 Act.

Adopting an approach that allows the requisite intent to be inferred would not initiate a flood of antidumping cases; sufficient barriers to prosecution remain because of the Act's other requirements.54 These barriers would help ensure that unfair trade practices are punished without imposing any restraints on legitimate international competition.

Conclusion [top]

Despite the 1916 Act's dramatic evolution over the last two decades, US manufacturers still do not have an effective approach to pursuing private causes of action against illegal dumping. In the Act's current state, it is useful to US manufacturers in only the most egregious cases of unfair trade.

Nevertheless, judicial interpretation of the Act took a dramatic step forward when the Act's protectionist aspect was recognized. If the courts are going to continue to apply this reading, they should not interpret this protectionist aspect so narrowly as to make prosecution virtually impossible.55 Such an interpretation renders the protectionist element of the act immaterial. The court should avoid an interpretation of the Act that implies that Congress passed irrelevant legislation.56 To give relevance to this legislation, the courts must vacate their overly strict interpretation of the Act's intent requirement.

If the courts were to infer the requisite intent from the anticompetitive nature of dumping under-priced goods, they would give US manufacturers a viable tool for protecting themselves from unfair international competition. Such an interpretation would not harm genuinely competitive international trade or give rise to a rush of antidumping litigation. Even with a more liberal interpretation of the intent requirement, the other requirements of the 1916 Act pose obstacles that are sufficient to protect importers from frivolous suits by US manufacturers.57 Until courts begin inferring intent to injure US industry from the inherent anticompetitive nature of flooding a market with under-priced goods, the Antidumping Act of 1916 will be of little aid to US manufacturers.