ANTIDUMPING AND COMPETITION LAW: INDIAN PERSPECTIVE

RESEARCH PAPER

SUBMITTED TO:

Ms. Renuka Jain Gupta

DIRECTOR (ECO) COMPETITION COMMISSION OF INDIA

SUBMITTED BY:

NAVEEN CHUGH NATIONAL LAW SCHOOL OF INDIA UNIVERSITY BANGALORE

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ACKNOWLEDGEMENT

At the outset, I would like to thank my supervisor Ms. Renuka Jain Gupta, Director (Eco), Competition Commission of India, for being a guiding force throughout the course of this submission and being instrumental in the successful completion of this project report without which my efforts would have been in vain. She has been kind enough to give me her precious time and all the help which I needed. I am immensely thankful for the strength that she has endowed me with. I would also like to express my heartfelt gratitude to the other staff of Competition Commission of India, for being immeasurably accommodating to the requirements of this humble endeavor.

Naveen Chugh National Law School of India University Bangalore

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ANTI-DUMPING AND COMPETITION LAW: INDIAN PERSPECTIVE

CHAPTER 1 1. Introduction
Meaning of dumping Rationale for dumping Meaning of Anti-dumping Justification of Anti-dumping p.5 p.5 p.6 p.6 p.7

CHAPTER 2
2. Anti-Dumping Law: An Overview Anti-Dumping Law with specific reference to WTO and Anti-Dumping Agreement International Perspectives: Application of Anti-Dumping Law in US p.8 p.8 p.12

Anti-Dumping Law in India: Institutional Arrangement and Existing Administrative Mechanism p.16 Investigation Process followed by Ministry of Commerce in Anti-Dumping Petitions p.23

CHAPTER 3
3. Interface between Anti-Dumping Law and Competition Law Competition Act, 2002 (India) - Brief Introduction Competition law and Anti-Dumping Law Areas of Overlaps and Conflicts (a) Conflict between Competition law and Anti-Dumping Law (b) Overlaps between Competition Law and Anti-Dumping Law p.27 p.27 p.30 p.30 p.32

CHAPTER 4
4. Criticism of Anti-Dumping Law and its effect on Competition p.39 Page 3 of 52

CHAPTER 5
5. Few Instances of Anti Dumping & Competition with reference to India p.44

CHAPTER 6
6. Suggestions & Conclusion p.47

BIBLIOGRAPHY

p.49

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I. INTRODUCTION
Dumping, is a pricing practice where a firm charges a lower price for exporting goods than it does for the same goods sold domestically. It is said to be the most common form of price discrimination in international trade. Dumping can only occur at places where imperfect competition and where the markets are segmented in a way such that domestic residents cannot easily purchase goods intended for export. It is a subtle measure of protection which comes under the non-tariff barriers and is product and source specific. Antidumping duties were initiated with the intention of nullifying the effect of the market distortions created due to unfair trade practices adopted by aggressive exports. They are meant to be remedial and not punitive in nature. A harmful to the domestic producers as their products are unable to compete with the artificially low prices imposed by the imported goods. As a method of protection to the domestic industries, anti dumping duties are thus levied on the exporting country which has been accused of dumping goods in another country. As the antidumping duty is only meant to provide protection to the domestic firms in the initial stages, as per the international laws, the antidumping legislations may last for a maximum period of five years. Antidumping measures are of two kinds:1

Antidumping duty: This is imposed at the time of imports, in addition to other customs duties. The purpose of antidumping duty is to raise the price of the commodity when introduced in the market of the importing country.

Price undertaking: If the exporter himself undertakes to raise the price of the product then the importing country can consider it and accept it instead of imposing antidumping duty.

1. Meaning of Dumping
1. The Concise Oxford Dictionary defines the term dumping as to sell (excess goods) to a foreign market at a low price

2. Haberler2 defined dumping as the sale of goods abroad at a price which is lower than the selling price of the same goods at the same time in the same circumstances at home, taking account, of differences in transport costs.
3. Dumping of goods in the most common economic sense means to send goods unsalable at a high price in the home market to a foreign market for sale at a low price, to keep up the price at home and to capture a new market.3
1 2

Rai Sheela, Dumping and Anti-dumping Haberler, Gottifried Von, The Theory of International Trade with its Application to Commercial Policy. Translated by Alfred Stonier and Frederic Benham. P. 300, New York: Macmillan, 1937.

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1.1 Rationale Behind Dumping: An Economic Perspective

Dumping occurs when firms start using price discrimination as a strategy for profit maximisation. The conditions mandatory for dumping to take place are:

Presence of an imperfect market where price discrimination between markets is possible. (Because in imperfect market firms are price setters not price takers).

Segmented markets where there is no arbitrage easily possible between markets.

Only if the above two conditions are satisfied is it profitable for the exporting firm to engage in dumping. For any firm, price discrimination in favour of exports is more common because the share of exports is usually lesser than the domestic demand. In the export market, individual firms have lesser monopoly power and hence choose to keep prices lower in foreign markets while charging higher prices for domestic markets. This can also be explained through the price elasticity of demand for goods. In areas where the demand is price inelastic, producers tend to charge a higher price. This is said to be the case in domestic markets. In foreign markets, price elasticity of demand is elastic and hence prices are low. Thus, if there is high elasticity on export sales than on domestic sales, firms will dump.

2. Meaning of Anti-Dumping
Moving on as to what is anti-dumping, it can be fined as a protective device available to the states against vicissitudes associated with the free trade. In the recent years a large number countries have become frequent users of anti-dumping. Many of the heaviest anti-dumping users are countries who did not even have an anti- dumping statute a decade ago.4 The traditional users continue to make use of these measures with more vigour by targeting new users. Anti-Dumping duties were introduced by the developed countries to protect their industries against the low priced imports. Developing countries supported the inclusion of the provision relating to anti-dumping duties under GATT because they wanted to levy of anti-dumping duties to be under international regulation. Antidumping measures are not only legal but they are also flexible in usage. Further, anti-dumping duties can be presented not as protection but as encounter against unfair competition.

R.K Gupta, , Safeguards,Countervailing and Anti-Dumping Measures Against Imports and Exports-Commentary, Cases and Text, Academy of Business Studies, New Delhi, 1998, p 82 4 T.P Bhat, Globalisation of Anti-Dumping and its Impact, Foreign Trade Review, 2003, Vol.38, Issue No. 2, pp 54-90 at p.54

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2.1 Justifications for antidumping duty

In free trade, firms are allowed to charge different rates in different markets. The result would be that firms would charge lower prices in foreign markets and higher prices in domestic markets, leading to material injury to the domestic producers. Had price discrimination taken place by a monopoly firm within one economy, the government would have intervened to stop consumer exploitation by enforcing an Act similar to the MRTP Act, in India. Hence, in the international context, it is the antidumping duty that protects the domestic producers initially and consumers in the long run. The duty is justified because in case of many industries the start up period is long and start-up costs are also high. Once these firms are forced out of the market as a result of dumping by exporters, it is very difficult for them to restart when the same exporters raise prices. Usually, the intentions of charging such low prices to foreign consumers is to be able to wipe out the domestic industries and eventually acquiring monopoly power in the foreign market (i.e. using predatory pricing). Thus it is on this ground that the anti dumping duties have been justified. The main intension is to protect the domestic industries.

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II. ANTI DUMPING: AN OVERVIEW 1. Anti-Dumping Law with specific reference to WTO and Anti-Dumping Agreement 1.1 Introductory
GATT/WTO was established with the objective of promoting free trade. Barriers to free trade may be tariff barrier or non-tariff barrier. Tariff regimes are easy to administer and simple to understand. Non-tariff measures involve intricate issues and are governed by various WTO agreements. Antidumping is one of the most frequently used non-tariff measure. WTO rules allow the member countries to opt for anti-dumping measures with specific stipulation. Article VI of the GATT, 19945 deals about antidumping. Further there is also Agreement to give effect to Article VI which contains provisions which must be strictly followed when conducting anti-dumping investigation. If a country today has anti-dumping legislations, it must be consistent with the agreement. The practices and procedures in actual investigation must conform to the agreement. Today large numbers of countries have become frequent users of anti-dumping measures. Anti-dumping has unique combination of political and economic manipulability. During the last fourteen years of WTO, the use of antidumping has become rampant that it is criticized as threatening to limit the market access achieved under GATT/WTO trade negotiations over the last fifty years or so. On the one hand there is fear that anti dumping measures are used for protectionist purpose. On the other hand, many support it because it can be used as encounter against unfair trade practices.

1.2 Historical Background Anti-dumping rules started to develop in the early part of this century with the adoption of legislations firstly by Canada in 1904, New Zealand in 1905, Australia in 1906 and United States in 1916, which were later subjected to quite a few amendments. In 1921 the United Kingdom also enacted its first anti-dumping legislation. Notwithstanding these developments anti-dumping remained a relatively infrequent instrument until well after the advent of the GATT, despite the fact that Article VI of the 1947 GATT provided the basic conditions for adopting anti-dumping measures. In the immediate post-war period only South Africa, Canada and Australia were the only countries using anti-dumping as an important trade instrument. During the Kennedy Round of trade negotiations, discussions took place for the, first time on Article VI of the GATT in order to secure more standardized approach to antiThe contracting parties recognize that dumping, by which products of one country are introduced into the commerce of another country at less than the normal value of the products, is to be condemned if it causes or threatens material injury to an established industry in the territory of a contracting party or materially retards the establishment of a domestic industry.
5

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dumping. This in turn led to the Agreement on Implementation of Article VI of the GATT which, in turn formed the basis for the first European Community anti-dumping legislation adopted in 1968. Subsequent trade rounds have more precisely dealt with the rules and procedures that WTO members are expected to adhere to in implementing their anti-dumping legislations although even now the WTO members are allowed certain leeway in their behaviour. 1.3 Dumping With Specific Reference to GATT Dumping is said to occur when the goods are exported by a country to another country at a price lower than its normal value. A product is being considered as being dumped if the export price of the product from one country to another is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country. Opinions may differ as to whether or not this practice, per se, constitutes unfair price competition. Anti-dumping is a measure to rectify the situation arising out of the dumping of goods and its trade distortive effect. Thus, the purpose of anti-dumping duty is to rectify the trade distortive effect of dumping and re-establish fair trade. The use of antidumping measure as an instrument of fair competition is permitted by the WTO. Anti-dumping, in common parlance is understood as a measure of protection for domestic industry. However, anti-dumping measures do not provide protection per se to the domestic industry. It only serves the purpose of providing remedy to the domestic industry against the injury caused by the unfair trade practice of dumping.6 Often, dumping is mistaken and simplified to mean cheap or low priced imports. However, it is a misunderstanding of the term. Dumping implies low priced imports only in the relative sense (relative to the normal value), and not in absolute sense. Import of cheap products through illegal trade channels like smuggling does not fall within the purview of anti-dumping measures. Ironically, the use and importance of anti-dumping law is inversely related to the prevalence and efficacy of free trade agreements. As free trade agreements have reduced tariffs and outlawed most import quotas, anti-dumping cases have increased dramatically. Over the last fifty years, the average tariff level has fallen from 40 percent to 3.9 percent, and 43 percent of goods are now exempt from all tariffs. Over the same period of time, the number of successful anti-dumping cases
In fact, anti-dumping is a trade remedial measure to counteract the trade distortion caused by dumping and the consequential injury to the domestic industry. Only in this sense, it can be seen as a protective measure. It can never be regarded as a protectionist measure; See Handbook on Anti-Dumping, Ministry of Commerce, Government of India(visited July 11, 2003). This View, However, is subject to challenge.
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filed in the United States alone has increased a staggering 2500 percent.10 This powerful inverse relationship between free trade agreements and antidumping actions is easy to explain. As domestic market participants around the world lose access to their traditional protectionist weapons tariffs and import quotas they find that they have only one protectionist weapon left an anti-dumping action. That weapon is at least as potent as the traditional weapons. As a result, market participants use it liberally and with great success.7 1.4 WTO and Anti-Dumping Agreement The Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (hereinafter referred to as the Agreement) governs the application of antidumping measures by Members of the WTO. The provisions of the Agreement were first negotiated during the Kennedy Round (1967) and later substantially revised during the Tokyo Round (1979) of GATT negotiations. Anti-dumping measures are unilateral remedies which may be applied by a Member after an investigation and determination by that Member; in accordance with the provisions of the Agreement, that an imported product is dumped and that the dumped imports are causing material injury to a domestic industry producing the like product. The Agreement sets out rules for the conduct of anti-dumping investigations, including initiation of cases, calculation of dumping margins, the application of remedial measures, injury determinations, enforcement, reviews, duration of the measure and dispute settlement. The Agreement applies to trade in goods only. Trade in services is not covered by this agreement. The Agreement provides for the right of contracting parties to apply anti-dumping measures, i.e. measures against imports of a product at an export price below its normal value (usually the price of the product in the domestic market of the exporting country) if such dumped imports cause injury to a domestic industry in the territory of the importing contracting party.8 In particular, the Agreement provides for greater clarity and more detailed rules in relation to the method of determining that a product is dumped, the criteria to be taken into account in a determination that dumped imports cause injury to a domestic industry, the procedures to be followed in initiating and conducting anti-dumping investigations,9 and the implementation and duration of anti-dumping measures.10 In addition,
7 8

See Richard J.Pierce, Jr., Anti-dumping as a means of facilitating Cartelization, 725, 67 Antitrust L.J. Article 3.5. 9 Article 6.

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the Agreement clarifies the role of dispute settlement panels in disputes relating to antidumping actions taken by domestic authorities. On the methodology for determining that a product is exported at a dumped price, the Agreement adds specific provisions on such issues as criteria for allocating costs when the export price is compared with a constructed normal value and rules to ensure that a fair comparison is made between the export price and the normal value of a product so as not to arbitrarily create or inflate margins of dumping.11 The Agreement strengthens the requirement for the importing country to establish a clear causal relationship between dumped imports and injury to the domestic industry. The examination of the dumped imports on the industry concerned must include an evaluation of all relevant economic factors bearing on the state of the industry concerned. The Agreement confirms the existing interpretation of the term domestic industry. Subject to a few exceptions, domestic industry refers to the domestic producers as a whole of the like products or to those of them whose collective output of the products constitutes a major proportion of the total domestic production of those products.12 The Agreement establishes procedures on how anti-dumping cases are to be initiated and how such investigations are to be conducted. Conditions for ensuring that all interested parties are given an opportunity to present evidence are set out. Provisions on the application of provisional measures, the use of price undertakings in anti-dumping cases, and on the duration of anti-dumping measures have been strengthened. The Agreement lays the sunset provision under which anti-dumping measures shall expire five years after the date of imposition (or the most recent review), unless a determination is made by the authorities that, in the event of termination of the measures, dumping and injury would be likely to continue or recur.13 A new provision requires the immediate termination of an anti-dumping investigation in cases where the authorities determine that the margin of dumping is de minimis (which is defined as less than 2 per cent, expressed as a percentage of the export price of the product) or that the volume of dumped imports is negligible (generally when the

10 11

Article 11 Article 2 12 Article 5 13 Article 11; See Terence P. Stewart & Amy S. Dwyer, WTO Antidumping and Subsidy Agreements 65 (Kluwer Law International 1998).

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volume of dumped imports from an individual country accounts for less than 3 per cent of the imports of the product in question into the importing country).14 The Agreement calls for prompt and detailed notification of all preliminary or final antidumping actions to a Committee on Anti-dumping Practices.15 The Agreement will afford parties the opportunity of consulting on any matter relating to the operation of the agreement or the furtherance of its objectives, and to request the establishment of panels to examine disputes.16 From many perspectives, the most significant feature of the WTO anti-dumping framework is its dispute settlement procedure, which greatly strengthens the ability of national governments to challenge anti-dumping actions by other member nations.17 One controversial omission in the Agreement is the public interest requirement. There can be a situation where dumping and injury have been proved, but the gains to the consumers from lower prices more than outweigh the losses suffered by the producers. The public interest standard stipulates that the imposition of duties should be made only if it is in the interest of the community. For a public interest clause to be effective the term public interest should be given a clear operational definition and the factors that might form a test for public interest should be clearly stated. Further, it is important that this clause is looked into at the same time when injury to producers is established. Incidentally, In the EU Basic Regulation on Anti-dumping, community interest clause has been given a mandatory status,18 while there is no such requirement under the Indian law. 2. International Perspectives: US Anti-Dumping Law 2.1 Introductory The antidumping and countervailing-duty laws provide protection to domestic firms from import competition. U.S. antidumping law is a tangled and confusing subject because U.S. law and procedures have changed substantially over time. U.S. antidumping law was once a reasonably close approximation of a prohibition on predatory pricing of imports; it served as a complement to antitrust law, which prohibited predatory pricing by domestic firms. Over

14 15

Article 5.8 Article 16 16 Article 17 17 See Joseph E. Pattison, Antidumping and Countervailing Duty Law, 1-30 Vol. 3 (West Group 1999). 18 Article 21, Council Regulation, 384/96; See Sebastian Farr, EU Anti-dumping Law: pursuing & Defending Investigations (Palladian Law Publishing 1998).

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the years, antidumping law and antitrust law have evolved in different directions, so that now the United States treats similar pricing practices differently depending on whether the product being sold is domestically produced or imported. Predatory pricing, as the term is currently used, refers to the practice of intentionally selling a product at a loss in order to drive competitors out of business, thereby establishing increased market power that allows one to raise prices above competitive market levels and increase profits. It is one of a number of unfair competitive practices that the Sherman Antitrust Act has been interpreted to prohibit. Early court decisions, however, ruled that acts committed in other countries were beyond the jurisdiction of the Sherman Act. Among other things, this interpretation effectively ruled out most Sherman Act prosecutions of predatory pricing of imports.

The Antidumping Act of 1916 specifically applied to the practice of pricing imports substantially below their normal market value with the intent of destroying, injuring, or preventing the establishment of an industry in the United States. Over time, antidumping policy and antitrust policy have diverged strikingly. Antidumping law and policy have evolved along a path of ever-increasing protection for U.S. firms from imports and decreasing concern for consumers and the economy as a whole. Antitrust law relating to predatory pricing, at least in recent decades, has taken a path of increasing concern for consumers and the economy as a whole and decreasing concern for firms suffering intense competition. Antidumping law no longer acts primarily against predatory pricing. It acts against international price discrimination (sales at a lower price in the United States than in the home country of the exporter) and sales below cost, regardless of whether the sales are predatory or not Yet, the relevant provisions of the antitrust laws prohibit only predatory pricing; they do not prohibit selling below cost or price discrimination analogous to that prohibited by the antidumping laws except in cases where it is predatory. This difference is important. Predatory pricing is detrimental to economic welfare because it leads to monopolies, which cause economic inefficiency and raise concerns about social equity. It seldom occurs, however, because it is rarely a profitable strategy and is usually not possible. By contrast, nonpredatory price discrimination and sales below cost generally provide net benefits to the country receiving the lower price, and both are relatively common. Moreover, seldom do cases of price discrimination or selling below cost have anything to do with predatory pricing. Countervailing-duty laws provide for added duties on imports that have been subsidized by the government of the exporting country. They date from before the turn of the century. But unlike the antidumping laws, these laws have not changed in character
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over time, though they have become more inclusive. The first such U.S. law covered only imports of sugar, A later law covered all dutiable imports, and a later revision expanded coverage to include both dutiable and nondutiable imports.

Over the years since World War II, U.S. tariffs have steadily declined in accord with agreements reached in successive rounds of negotiations to liberalize the General Agreement on Tariffs and Trade (GATT). This decline has resulted in increasing competition for domestic firms from imports. For industries suffering from such increased competition, U.S. trade law provides two forms of assistance: trade adjustment assistance and protection under the Section 201 escape clause.1 Trade adjustment assistance consists of training, employment services, job search and relocation allowances, and other forms of aid to displaced workers in industries adversely affected by increased import competition. The Section 201 escape clause provides temporary protection from imports to provide breathing room for domestic industries to adjust to increased competition. It contains several restrictions designed to ensure that the protection it provides is used only for such temporary adjustment purposes-not for permanent protection--and only when the adjustment costs are large and the cost of the protection to the economy and the national interest is not large.

In the case of industries unable to become competitive with imports (such as unskilled-laborintensive industries), temporary breathing room for adjustment may be better than no protection at all, but it is not what the industries really want. Anything short of long-term protection would force painful contractions on them that trade adjustment assistance will not completely ameliorate. Further, those industries want protection from imports that cause any injury, not just those that cause substantial injury, and they would rather such protection be automatic, without regard to any harm it might cause to the rest of the economy or to the national interest generally. Consequently, they have found the escape clause to be inadequate.

As the antidumping and countervailing-duty (AD/CVD) laws became more inclusive and protection under them became easier to obtain, industries more and more frequently were able to obtain better protection, and to obtain it more easily, under these laws than under the escape clause. Gradually, many groups came to view the laws as an alternative to the escape clause for uncompetitive industries and for those industries unable to meet the stringent criteria that the escape clause sets for the protection it provides. As more people accepted this view, the laws and the procedures for administering them-especially the antidumping law and
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procedures-began to evolve in the direction of serving this more general protective purpose more effectively. From the point of view that the purpose of AD/CVD laws is to prevent, punish, and offset predatory pricing, subsidies, and other unfair practices relating to U.S. imports, many of the legal provisions and procedures that have evolved-especially those used for calculating dumping margins-are biased against foreign exporters (and against U.S. consumers of foreign goods). From the point of view that the AD/CVD laws should offer more general protection for domestic industries from troublesome import competition, these same provisions and procedures appear more reasonable, even if a bit ad hoc, and they have been quite effective.

2.2 How the law currently function in US The antidumping law, and to some extent the countervailing-duty law, are now a fairly general source of protection from foreign competition. In practice, the main hurdle to an industry seeking protection under the AD/CVD laws is to demonstrate that it has been injured by the imports, not that the imports are dumped or subsidized. Such injury is what the Section 201 escape clause is designed to address. However, the degree of injury that must be demonstrated in AD/CVD cases is less than that for Section 201 cases. As a result of this and other factors, the Section 201 escape clause is now seldom used. It is generally easier for an industry to obtain protection under the AD/CVD laws. The Department of Commerce found that there was dumping or subsidies in 89 percent of the cases that came before it from 1980 through 1988. Using the AD/CVD laws as a general source of protection from imports has several disadvantages. First, the AD/CVD laws do not have the restrictions that the Section 201 escape clause has to ensure that protection is granted only temporarily for the purpose of aiding adjustment and only in cases where the benefit to the protected industry outweighs the harm to the rest of the country in terms of economic, foreign policy, and security interests. Protection under the AD/CVD laws is permanent for all practical purposes and is given without regard to the effects on the rest of the economy and foreign-policy and national security concerns. Permanent protection of industries is almost always detrimental to the economy and is contrary to the basic thrust of U.S. trade policy since World War II, which has supported the elimination of trade barriers by ail countries.

Second, other countries have begun to follow the U.S. lead. They are using antidumping laws to protect their industries, and many of them are targeting U.S. exports in retaliation for U.S.
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use of antidumping laws against them. As a result, although support for U.S. antidumping law and procedures among import-competing firms remains strong, sentiment against them is rising in the growing community of U.S. exporting and importing firms.

Third, even in those cases in which the protection is deemed desirable, the AD/CVD laws sometimes provide inadequate protection. They apply only to imports of the product in question from particular countries or firms and not to all imports of the product from any source. Therefore, they can be, and sometimes are, circumvented either by the firm on whose products the duties are imposed or by the impersonal workings of the international market. As a result, the United States has had to devote considerable attention in recent years to modifying the AD/CVD laws to make them apply to upstream dumping, downstream dumping, dumping routed through third countries, and various other routes by which AD/CVD orders have been circumvented.2

Finally, with increasing globalization, it is becoming less clear which firms should be identified with which country. (This problem applies to other forms of protection as well as to the AD/CVD laws.) Increasingly, firms located in foreign countries and wishing to export to the United States are actually U.S. owned or partially U.S. owned. Also increasingly, domestically located firms that could be protected by trade laws are foreign owned or partially foreign owned. Such situations can make it unclear which countries are benefited or harmed most by protection granted by the AD/CVD laws.

3. Anti-Dumping in India: Institutional Arrangement & Existing Administrative Mechanism 3.1 Legal framework of anti dumping in India 1. The principle of imposition of anti-dumping duties was propounded by the Article VI of General Agreement on Tariffs & Trade (GATT) 1994 Uruguay Round 2. Indian legislation in this regard is contained in Section 9A and 9B (as amended in 1995) of the Customs Tariff Act, 1975 3. Further regulations are contained in the Anti-Dumping Rules [Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995]
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4. The Designated Authority for conducting investigations pertaining to Anti-Dumping issues and on basis thereof, for forwarding its recommendations is the Ministry of Commerce, Government of India. 5. The responsibility for Imposition and Collection of duties as imposed /recommended by the Adjudicating authority is imposed upon the Ministry of Finance, Government of India. Section 9A of the Customs Tariff Act, 1975 (hereinafter referred to as the Act) as amended in 1995 and the Customs Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 (hereinafter referred to as the Rules) framed thereunder form the legal basis for anti-dumping investigations and for the levy of anti-dumping duties. These are in consonance with the WTO Agreement on anti-dumping measures. These rules form the legislative framework for all matters relating to dumping of products, which include the substantive rules, rules relating to practice, procedure, regulatory mechanism and administration. 3.2 Substantive Rules Dumping19 means export of goods by one country/territory to the market of another country/territory at a price lower than the normal value. If the export price is lower than the normal value, it constitutes dumping. Thus, there are two fundamental parameters used for determination of dumping, namely, the normal value and the export price. Both these elements have to be compared at the same level of trade, generally at ex-factory level, for assessment of dumping. Normal value is the comparable price at which the goods under complaint are sold, in the ordinary course of trade, in the domestic market of the exporting country. If the normal value can not be determined by means of the domestic sales, the following two alternative methods may be employed to determine the normal value: Comparable representative export price to an appropriate third country.

19

Dumping means export of goods by one country/territory to the market of another country/territory at a price lower than the normal value.

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Constructed normal value, i.e. the cost of production in the country of origin with reasonable addition for administrative, selling and general costs and reasonable profits.20

The export price of the goods allegedly dumped into India means the price at which it is exported to India.21 It is generally the CIF value minus the adjustments on account of ocean freight, insurance, commission, etc. so as to arrive at the value at ex-factory level. The margin of dumping is the difference between the normal value and the export price of the goods under complaint.22 It is generally expressed as a percentage of the export price. Domestic industry means the domestic producers as a whole engaged in the manufacture of die like article and any activity connected therewith or those whose collective output of the said article constitutes a major proportion of the total domestic production of that article except when such producers are related to the exporters or importers of the alleged dumped article or are themselves importers thereof in which case such producers may be deemed not to form part of domestic industry.23 Like article means an article which is identical or alike in all respects to the article under investigation for being dumped in India or in the absence of such article, another article which although not alike in all respects, has characteristics closely resembling those of the articles under investigations.24 In regard to injury to the domestic industry, the industry must be able to show that dumped imports are causing or are threatening to cause material injury to the domestic industry.25 Material retardation to the establishment of an industry is also regarded as injury. The material injury or threat thereof cannot be based on mere allegation, statement or conjecture. Sufficient evidence must be provided to support die contention of material injury. An antidumping measure may not be imposed unless it is determined, pursuant to an investigation conducted in conformity with the procedural requirements, that:

20 21

Explanation (c) to Section 9-A (1) Explanation (b) to Section 9-A (1) 22 Explanation (a) to Section 9-A (1) 23 Rule 2 (b) 24 Rule 2 (d) 25 Black`s Law Dictionary, 518 ( 7th Edn,, West Publishing Co.)

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1. There is existence of dumped imports; 2. There is material injury to a domestic industry; and 3. There is a causal link between the dumped imports and the injury.26 The basic requirement for determination of injury is that there is an objective examination, based on positive evidence of the volume and price effects of dumped imports and the consequent impact of dumped imports on the domestic industry such as decline in sales, selling price, market shares, profits, production etc. The establishment of the causal link between the dumping and injury to the domestic industry is a sine qua non for imposition of anti-dumping duty. The causal link is generally explained in terms of volume and price effects of dumping. The volume effect of dumping relates to the market share of the domestic industry vis--vis the dumped imports from the subject country while with regard to the price effect, it has to be considered whether there has been a significant price under cutting by the dumped imports as compared with the price of the like product in India, or whether the effect of such imports is otherwise to depress prices to a significant degree or prevent price increase which otherwise would have occurred to a significant degree. The relief to the domestic industry against dumping of goods from a particular country is in the form of anti-dumping duty imposed against that country, which could go up to the dumping margin. Such duties are exporter specific and country specific. Under the WTO arrangement, the national authorities can impose duties up to the margin of dumping i.e. the difference between the normal value and the export price. The Indian law also provides that the anti-dumping duty to be recommended/levied shall not exceed the dumping margin. An anti-dumping duty imposed under the Act unless revoked earlier remains in force for 5 years from the date of imposition. The Designated Authority is empowered to review the need for the continued imposition of the anti-dumping duty, from time to time. Such a review can be done suo motu or on the basis of request received from an interested party in view of the changed circumstances.27 Anti-dumping duty is a source-specific duty i.e. imposed only against dumped imports Antidumping duty is imposed on a non-discriminatory basis, applicable to all imports of such

26 27

Supra note 8 Rule 23 (1)

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articles from whatever sources found dumped and causing injury to domestic industry except in the cases from those sources from which price undertaking has been accepted.28 The WTO Agreement as well as the Indian law provides that the injured domestic industry is permitted to file for relief under the anti-dumping as well as countervailing duties. However, no article shall be subjected to both countervailing and anti-dumping duties to compensate for the same situation of dumping or export subsidization. 3.3 Practice and Procedure One objective of the procedural requirements is to ensure transparency of proceedings, a full opportunity for parties to defend their interests, and adequate explanations by investigating authorities of their determinations. The extensive and detailed procedural requirements relating to investigations focus on the sufficiency of petitions to ensure that merit less investigations are not initiated, on the establishment of time periods for the completion of investigations, and on the provision of access to information to all interested parties, along with reasonable opportunities to present their views and arguments. Additional procedural requirements relate to the offering, acceptance, and administration of price undertakings by exporters in lieu of the imposition of anti-dumping measures. The Rules also provide for the timing of the imposition of anti-dumping duties, the duration of such duties, and obliges Designated Authority to periodically review the continuing need for anti-dumping duties and price undertakings. It is also provided that India may, at its discretion, take anti-dumping actions on behalf of and at the request of a third country, which is a member of the World Trade Organization.29 The anti-dumping proceedings are initiated based on an application made by or on behalf of the concerned domestic industry to the Designated Authority in the Department of Commerce for an investigation into alleged dumping of a product into India. Under the Rules a valid application can be made only by those petitioners/domestic producers who expressly support the application, and account for more than 25% of total domestic production of the like article in question.30 The application is deemed to have been made by or on behalf of the domestic industry, if it is supported by those domestic producers whose collective output constitutes more than fifty- percent of the total production of the like article produced by that portion of
28 29

Rule 19 Rule 24 30 Rule 5 (2)

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the domestic industry expressing either support for or opposition as the case may be, to the application.31 However, such producers may exclude those who are related to die exporters or importers of the alleged dumped article or are themselves importers thereof. In other words, a domestic producer who is related to the exporter or importer of die dumped article or is himself an importer thereof may not be treated as part of the domestic industry even if he files or supports an anti-dumping petition. The interested parties to an anti-dumping investigation include: 1. The domestic industry on whose complaint the proceedings are initiated; 2. The exporters or the foreign producers of the like articles subject to investigation; 3. The importers of the same article allegedly dumped into India; 4. The Government of the exporting country/countries. 5. The trade or business associations of the domestic producers/importers/user industries of the dumped product.32 As a rule, the Designated Authority initiates the proceedings for anti-dumping action on the basis of a petition received from the domestic industry alleging dumping of certain goods and the injury caused to it by such dumping. However, Rule 5(4) provides for suo motu initiation of anti-dumping proceedings by the Designated Authority on the basis of information received from the Collector of Customs appointed under the Customs Act, 1962 or from any other source. In such circumstances, the Authority initiates the antidumping investigation on its own without any complaint/petition filed in this regard provided the Authority is satisfied that sufficient evidence exists as to the existence of dumping, injury and causal link between the dumped imports and the alleged injury. After initiation of the suo motu investigation the same procedure, as the one based on a petition as mentioned in the Rules, is followed. The remedy against dumping is not always in the form of anti-dumping duty. The investigation may be terminated or suspended after the preliminary findings if the exporter concerned furnishes an undertaking to revise his price to remove the dumping or the injurious

31 32

Explanation to Rule 5 (3) Rule 2 (c)

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effect of dumping as the case may be. No anti-dumping duty is recommended on such exporters from whom price undertaking has been accepted.33 An interim relief in the form of a provisional anti-dumping duty, pending the finalization of investigation proceedings, can also be provided to the affected domestic industry. Such provisional duty not exceeding the margin of dumping may be imposed by the Central Government on the basis of the preliminary finding recorded by the Designated Authority. The provisional duty can be imposed only after the expiry of 60 days from the date of initiation of investigation and will remain in force only for a period not exceeding 6 months, extendable to 9 months under certain circumstances.34 If the final duty levied is less than the provisional duty which has already been levied and collected, the differential amount already collected as provisional duty shall be refunded. If the final duty imposed is more than the provisional duty already imposed and collected, the difference shall not be collected. If the provisional duty is withdrawn, based on the final findings of the Designated Authority, than the provisional duty already collected shall be refunded.35 Anti-dumping duty can also be levied on a retrospective basis in case: there is a history of dumping which caused injury or that the importer was, or should have been aware that the exporter practices dumping and that such dumping would cause injury; and the injury caused by massive dumping of an article imported in a relatively short time which in the light of the timing and the volume of imported article dumped and other circumstances is likely to seriously undermine the remedial effect of the antidumping duty liable to be levied. However, the anti-dumping duty cannot be levied retrospectively beyond 90 days from the date of issue of notification imposing duty.36 3.4 Regulatory Framework Anti-dumping, anti-subsidies & countervailing measures in India are administered by the Directorate General of Anti-dumping and Allied Duties (DGAD) functioning in the Department of Commerce in the Ministry of Commerce and Industry and the same is headed by the Designated Authority. The Central Government may, by notification in the Official Gazette, appoint a person not below the rank of a Joint Secretary to the Government of India
33 34

Rule 15 Rule 13 35 Rule 21 36 Section 9A (3)

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or such other person as that Government may think fit as the Designated Authority.37 In India, there is a single authority DGAD designated to initiate necessary action for investigations and subsequent imposition of anti-dumping duties.38 The Designated Authority is a quasi-judicial authority notified under the Customs Act, 1962. A senior level Joint Secretary and Director, four investigating officers and four costing officers assist the DGAD. Besides, there is a section under the DGAD headed by the Section-Officer to deal with the monitoring and coordination of die functioning of the DGAD. The Designated Authoritys function, however, is only to conduct die anti-dumping/anti subsidy & countervailing duty investigation and make recommendation to the Government for imposition of anti-dumping or anti subsidy measures. Such duty is finally imposed/levied by a Notification of the Ministry of Finance. Thus, while the Department of Commerce recommends the Anti-dumping duty, it is the Ministry of Finance, which levies such duty. The law provides that an order of determination of existence, degree and effect of dumping is appealable before the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) a judicial tribunal. It reviews final measures and is independent of administrative authorities. This is consistent with the WTO provision of independent tribunals for appeal against final determination and reviews. No appeal will lie against the preliminary findings of the Authority and the provisional duty imposed on the basis thereof. The appeal to the CEGAT should be filed within 90 days 4. Investigation process followed by the Ministry of Commerce in Antidumping Petitions 4.1 Legal Procedures Any interested party may file an antidumping petition with the Ministry of Commerce39 on behalf of the domestic industry.40After examining the accuracy and adequacy of the evidence

37 38

Rule 3 (1) Though the WTO Agreement does not require the authorities for dumping and injury determination to be distinct and separate, national practices in this respect van`. Generally, while the developing countries have single authority to deal with both dumping and injury, developed countries like the US, Canada and the EU have elaborate anti-dumping machinery; Supra note 4 at 64. 39 Although the Central Government is officially charged with administering Indias antidumping law, current regulations give the Central Government the authority to designate this responsibility to a specific government official. Currently, the Ministry of Commerce is charged with administering Indias antidumping law. The task is specifically handled by the Directorate General of Antidumping and Allied Duties within the Ministry of Commerce.

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in the petition, the Ministry undertakes an investigation into whether foreign products are imported at a price lower than the normal value, and whether those imports are causing or threatening to cause material injury to the domestic industry. In special circumstance, the Ministry may self-initiate an investigation without having received an antidumping petition if it has sufficient evidence of dumping, injury and a causal link between the two. The Central Government imposes antidumping duties on the basis of the findings by the Ministry. To determine whether the foreign products are imported at a price lower than normal value, the Ministry calculates the dumping margin as the difference between a weighted average normal value and a weighted average export price to India, or the difference between individual normal values and individual export prices on a transaction-to-transaction basis over the period of investigation. In special circumstances, the Ministry may compare a weighted average normal value to prices of individual export transactions to India. The Ministry determines the normal value using one of four methods. Whenever possible, the normal value is calculated using the sales price in the exporting countrys home market. However, if there is an insufficient quantity of sales in the exporting countrys domestic market, the weighted average sales price is below the weighted average unit cost, or the volume of sales below unit cost during the investigation period is more than 20 percent of the total sales being used to determine normal value, the Ministry calculates the normal value using one of the two alternative methods.41 The Ministry may calculate a constructed normal value using the exporting countrys cost of production plus a reasonable amount for selling, general and administrative costs and profits, or use the prices of sales from the exporting country to a selected third country. For non-market economy countries, the Ministry determines the normal value using either the sales price or constructed value in a selected market economy country, or the price from a selected market economy country to a selected third country which may include India.42

40

An antidumping investigation may be initiated if domestic producers who support the petition account for at least 25 percent of total domestic production of the like product and have collective output of more than 50 percent of the total production of such products produced by those producers who either support or oppose the petition. 41 The unit cost is defined as production costs plus selling, general and administrative costs. 42 Non-market economy countries include Albania, Armenia, Azerbaijan, Belarus, Peoples Republic of China, Georgia, Kazakstan, North Korea, Kyrghyzstan, Moldova, Mongolia, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan and Vietnam. Due to the changing economic conditions in Russia and in the Peoples Republic of China, if there is sufficient evidence that market conditions prevail for any firm under investigation, normal values for these firms are calculated on the basis of the principles set out for market economies.

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If none of these methods are possible, the Ministry may calculate the normal value for a nonmarket economy using the adjusted sales price of the like product in India, or using any other reasonable basis.43 The Ministry generally calculates a separate antidumping margin for each supplier. However, if any interested party fails to provide authentic, necessary information within the time limit, or it is difficult to verify the provided information, the Ministry may make its determination on the basis of facts available, which includes the information submitted in the petition or submitted by interested parties. When the number of suppliers or products involved in the investigation is too large, the Ministry may select a sample of suppliers or products for the investigation using statistical sampling methods based on information available at the time of selection or by choosing those suppliers or products with the largest import volumes. The Ministry calculates the dumping margin for those firms not in the sample using a weighted average of the dumping margins calculated for those suppliers selected for the investigation. When determining whether the foreign imports are causing or threatening to cause material injury to the domestic industry, or materially retarding the establishment of an industry, the Ministry considers the volume of dumped imports, the effect of the dumped imports on prices of the like product in Indias market, and the consequent effect of the dumped imports on domestic producers. To examine the impact of the dumped imports on domestic industry, the Ministry evaluates the magnitude of the margin of dumping and all relevant economic factors and indices including natural and potential decline in sales, profits, output, market share, productivity, return on investments, inventories, employments, wages, and growth in the domestic industry. The Ministry also examines the other factors to ensure that the injury caused by these other factors is not attributed to the dumped imports. These factors include the volume of goods imported at a normal value, contraction in demand or changes in the pattern of consumption, competition between foreign and domestic producers, developments in technology, and the export performance and productivity of domestic producers. Following its preliminary investigation, the Ministry makes a preliminary determination on dumping and injury and issues a public notice. The Central Government then imposes a provisional duty not exceeding the margin of dumping on the basis of preliminary determination by the Ministry. Provisional antidumping duties usually remain in force for a period of no more than six month; in some cases, they may be extended by the Central Government for up to nine
43

Like products are defined as goods that are identical or alike in all respects to the goods under investigation or which have characteristics closely resembling those goods.

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months. If an exporter promises to revise its price immediately and stop exporting at the dumped prices, the Ministry may suspend or terminate the antidumping investigation without applying provisional antidumping measures. The Ministry must also inform the Central Government of the acceptance of an undertaking and issue a public notice. If the exporter fails to uphold the undertaking agreement, the Ministry must inform the Central Government of such violation and recommend imposition of provisional duties. Following a provisional affirmative determination, the Ministry continues its investigation on the margin of dumping and injury. Before giving its final findings, the Ministry informs all interested parties of the essential facts under consideration which will likely form the basis of its decision. Within one year from the date of initiation of the investigation, or in exceptional circumstances eighteen months, the Ministry must make a final determination regarding injury and the value of antidumping duties, submit its final findings to the Central Government, and issue a public notice on its finding. Within three months of the date of publication of final determination by the Ministry, the Central Government may publish a notification in the Official Gazette imposing antidumping duties not exceeding the margin of dumping determined by the Ministry. The antidumping duty or undertaking agreement is usually lifted after five years unless revoked earlier. Upon request received from interested parties or on its own initiative, the Ministry periodically reviews the need for continuance of antidumping duty or undertaking and determines individual dumping margins for new suppliers in the exporting country who did not export the product to India during the original period of investigation. If it is concluded in a review that the removal of the antidumping duties would be likely to result in the continuation or recurrence of dumping and injury, the Central Government may extend the period of imposition of antidumping duty for a further period of five years. An appeal against the order of antidumping determination or review can be filed with the Appellate Tribunal within ninety days. Every appeal must be heard by a Special Bench consisting of the President of the Appellate Tribunal and no less than two other members, which must include one judicial member and one technical member. A Bench can exercise and discharge the powers and functions of the Appellate Tribunal. If the members of the Bench differ in opinion of any issue, the decision is made according to the opinion of the majority; if the members are equally divided, the President can either give an opinion himself or refer the case to one or more of the other members of the Appellate Tribunal and the decision is based on the opinion of the majority of those members.

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III. Interface between Anti-Dumping Law and Competition Law 1. Competition Act, 2002 (India): Brief Introduction The Preamble of the Competition Act, 2002 provides that : An Act to provide, keeping in view of the economic development of the country, for the establishment of a Commission to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto. The Act provides a very wide mandate for the Competition Commission of India to enforce. Apart from it rather broad objective, the Act contains provisions which have rather become standard in the competition jurisdictions all across the globe. These are the provisions relating to anti-competitive agreements, abuse of dominant position and regulation of combinations. In the respect of anti-dumping law the provisions relating to abuse of dominant position and anti-competitive agreements assume importance. In respect of dominant position it is pertinent to note that whereas dominance is not frowned upon by the Competition Act, 2002 abuse of dominance is certainly frowned upon by the legislation. Another significant feature in the context of these provisions of the Act is that anti-co mpetitive agreements and abuse of dominance are to be prohibited by the orders of the Commission whereas the mergers are to be regulated by the orders of the e of Commission. This difference in law is of immense significance. Whereas the former two prevent enhancement of consumer welfare the latter drives economic growth. Hence, the distinction has been maintained. 1.1 Section 4 of Competition Act In respect of abuse of dominant position, Section 4(2) enlists the circumstances when an enterprise shall be considered to be abusing its dominant position. It states: (2) There shall be an abuse of dominant position under sub-section (1), if an enterprise,(a) directly or indirectly, imposes unfair or discriminatory(i) condition in purchase or sale of goods or service; or (ii) price in purchase or sale (including predatory price) of goods or service; or

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(b) limits or restricts(i) production of goods or provision of services or market therefor; or (ii) technical or scientific development relating to goods or services to the prejudice of consumers; or (c) indulges in practice or practices resulting in denial of market access; or (d) makes conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts; or (e) uses its dominant position in one relevant market to enter into, or protect, other relevant market. 1.2 Abuse of Dominant Position One of the most vigorous users of the predominant international trade defence measure, i.e. antidumping duty, India has an unenviable and unfortunate reputation for extreme protectionism being afforded to its domestic industries through the use of anti-dumping investigations and duties. Anti-dumping as an international trade defence measure is by definition protectionist of the Indian market and is based on the following three touchstones: (i) that there is a significant difference between the normal value of a commodity or product and the price at which it is exported to India; (ii) that the difference between the normal value and the export price to India greater than certain tolerances is per se evidence of dumping; (iii) if this dumping causes or is likely to cause injury to the domestic industry, antidumping duties would be levied. The effect of anti-dumping duty usually renders the export of the product to India economically unviable. Now, the touchstone of competition law is to avoid an appreciable adverse effect on a relevant market. Quite naturally, the availability of competing products, whatever their source, provides wider and more economic options to consumers in the relevant market for a product. Let us consider a practical example. Two dominant Indian manufacturers of a product jointly have in excess of half of the domestic production of the product. Under the rules, a petition
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for imposition of antidumping duties can be filed by the two as being representative of the domestic industry in India. Let us assume that a few smaller domestic players and exports to India by foreign entities constitute the rest of the supply of the product to the market in India. There is no substantive ideological divergence between anti-dumping law and competition law on the acceptability of the dominant nature of these petitioners. Nothing in competition law disapproves dominance itself as long as it is good. But in case the anti-dumping investigation takes place. This investigation will determine as to whether the users of the product manufactured by the two dominant companies in the market will be left with a reduced choice and constrain them to purchase willy-nilly from the two dominant companies. The nature of anti-dumping proceedings, the costing method usually resorted to by the petitioners, and the reluctance of foreign exporters to disclose sensitive costing information most often means that establishing a proper normal value and that there is no difference between the normal value and the export price to India is not possible. The result? An overwhelming majority of the recommendations of the antidumping authority are to impose anti-dumping duties, and thus, knock exporters out of the Indian market. Repeatedly, hapless user-consumers of the products have vigorously protested against the imposition of antidumping duties on the basis that the same constitutes handing over complete control of the market to a few big domestic industries who, according to them, then proceed to carefully control production volumes, manipulate market prices, refuse to deal, and indulge in whole slew of practices that are blatantly anti-competitive under the competition law. Added to this is the provision under the anti-dumping rules for an exporter to India to provide an undertaking to the authority that it will not sell the product to India at anything under a certain price-surely a prime instance of state-sponsored price-fixing. The Competition Commission should track prices and trends for dominant domestic producers after they have succeeded in obtaining anti-dumping duties on foreign exports. And of course, the suffering user-consumers now have a potentially powerful ally in the New Competition Regime, to whom they are free to complain. But most importantly in the case of our two dominant manufactures and there anti-dumping proceedings several questions arise. (1) Should dominant enterprises be permitted to use the antidumping mechanism to create a pedestal from which to unleash abuses of their dominance? (2) And last but not least, would not some aggrieved consumers be entitled to file a complaint before the Competition Commission that an order imposing antidumping duties has resulted in abuses of dominant position and that the commission ought to take steps to redress the market balance?
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2. Competition law (antitrust) and antidumping law Areas of Conflicts and Overlaps

2.1 Conflict between anti dumping law and competition law The very conflict that both the laws pose to have is in terms of goals which the respective laws seek to achieve on one hand the goal of competition law is to promote competition, it attaches sanctions to only such price discrimination which adversely affect competition in markets; even if that implies that some competitors may be harmed in the process. On the other hand antidumping law while addressing price discrimination does not take into account competition concerns and its stated goal is to protect domestic industry and in fact ends up as an instrument to protect competitors. Thus it seems to be in direct conflict with Competition Law. Competition and antidumping laws were initially thought to be complementing each other. Over the years however, this position has changed. First, competition laws have widened their reach to include conduct of firms who are outside the jurisdiction, which affect the national market. Second competition law has evolved much faster than anti-dumping laws. From concepts of law to the economic analysis - there has been a sea change in the concepts and their application (Chicago School Knoff) in the realm of competition. By contrast Antidumping laws have evolved within the shackles of the WTO Agreement and have become a protectionist tool in several jurisdictions, with the result that in some extreme instances it impairs competition rather than promotes it. Indeed now the ultimate objectives are quite different with competition law aimed at protecting consumers interests and antidumping law designed to safeguard firms businesses. Still, the two sets of laws were originally meant to complement each other, and they are intended to act upon the same market distortion.44 Some commentators have even argued that the two laws can sometimes work at cross purposes as competition laws are aimed at curbing the market power of domestic producers, whereas antidumping law attempts to use market power in order to shift rents away from foreigners.45 Antidumping laws were initially enacted to address the situation of international price predation and were considered as extension of competition laws. However over the years the focus of antidumping law seems to have changed and
44 45

Ian Wooton and Maurizio Zanardi, Trade and Competition Policy: Antidumping versus Anti-Trust available at: http://homepages.strath.ac.uk/~hbs03116/Research/Trade%20and%20Competition%20Policy%20Final.pdf Cadot Oliver, Grether Jean-Maries and Melo de Jaime, Trade and Competition Policy: Where do we stand? Journal of World Trade, Vol. 34, No. June, pp 1-20.

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antidumping laws as they exist today do not seem to be concerned with the issue of predatory pricing. To this extent it can be said that antidumping law no longer addresses competition related concerns and since it seems to attach sanctions to every instance of international price discrimination which can be shown to cause injury to the domestic industry, it could very well be in conflict with competition law. While competition laws are primarily aimed at protecting and promoting competition in markets, antidumping laws are aimed at remedying the injury to the domestic industry which may arise due to dumping. It can be concluded that the modern antidumping laws of today in essence provide for protection of competitors. While both competition and anti-dumping laws originated with the same objective (e.g. the Antidumping law of 1916 in the USA which was clearly meant to address competition concerns arising out of the practice of transnational price predation) the objectives surrounding the use of antidumping laws have since evolved and modern antidumping practice has come to actually facilitate the kind of unfair and anticompetitive behaviour it was intended to prevent.46 Several authors have commented on the divergence of antidumping laws from their original objectives.47 The evolution in its objectives has resulted in a change in the way that antidumping laws are being used and has consequently changed their ultimate effect on the market and on competitive conditions. For example, while the objectives behind earlier antidumping laws ensured that healthy price competition between corporations was encouraged as long as predatory pricing was avoided, today the mere presence of increasingly protectionist antidumping laws has resulted in a change in the economic behaviour of firm48 wherein instead of profit maximization through healthy price competition, firms choose to seek protection or undertake steps that are more likely to lead to the imposition of an antidumping duty on imports. On the other hand, competition laws continue to encourage price competition within firms in a market as long as it does not result in predatory pricing, with a view to maximizing consumer welfare and protecting the conditions of competition. In other words, the change in the objectives for which antidumping and competition laws are being used today has also in some instances changed their interaction from complementary to conflicting.

46

N Gregory Mankiw and Phillip L Swagel, Antidumping: The Third Rail of Trade Policy, Foreign Affairs, July/August 2005, available online: http://www.foreignaffairs.org/20050701faessay84408-p0/n-gregory-mankiw-phillip-lswagel/antidumping-the third-rail-of-trade-policy.html

47

For instance, Shanker Singham, A General Theory of Trade and Competition - Trade Liberalisation and Competitive Markets, Cameron May, 2007. 48 Ibid.

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2.2 Overlaps There is also a tendency to confuse competition law and antidumping law and to regard them as if they are the same.49 No doubt, the two concepts interrelate and also often do interface.50 However, they do differ, both practically and conceptually. While competition law is concerned with ensuring that the activities of business undertakings do not damage the competitive process, antidumping laws target allegedly unfair trading practices of foreign companies accused of exporting (or dumping) products into other countries at prices below the cost of production, or below the price charged in domestic or third markets.51 As a commentator remarked, while competition and antidumping laws come from the same family tree, the two diverge widely. In the modern era, while competition law concentrated on the pursuit of economic efficiency, addressing problems associated with concentrated economic power, antidumping law was intended to create a politically popular form of contingent protection that bears little, if any, connection to the prevention of monopoly. The political constituency for antidumping law is not an antimonopoly constituency, but one for the protection of industries facing weak markets or long term decline.52 As has also been argued, the unfairness to which antidumping law is directed prices that are too low is generally seen in competition law as evidence of the proper working of the competitive process, and as a phenomenon beneficial to the consumers whom competition law fundamentally protects.53 More succinctly, competition law favours a dynamic, ever changing market of robust competitors; antidumping favours a more static model of the market to protect investors and workers from changes generated from abroad.54

Despite these underlying differences between competition and antidumping laws, there are types of dumping which if they occur, could definitely be dealt with under the competition laws because they have the characteristics of anticompetitive behaviour. These are

49

When the then D.G. of the Bureau of Public Enterprise (BPE) was speaking about the intention of the BPE/NCP to work towards the introduction of competition law in Nigeria, he justified it in terms of the need tp prevent Giant foreign corporations dumping their projects on Nigerian market. In fact , he justified it on the need to protect indigenous industries. See, Nigeria: Legal plans for competition law, Legal Brief Africa, Issue no.6, 9 December 2002 50 See Peter D. Ehrenhaft, Is Interface of Antidumping and Antitrust Laws Possible? (2002) The George Washington Intern ational Law Review, vol. 34, No. 2, p. 363. 51 See Claude Barfield, Antidumping Reform: Time to Go Back to Basics Barfield, (Oxford, Blackwells Publishing, 2005), p. 719 52 See AO Sykes (1998), Antidumping and Antitrust: What Problems Does Each Address?, in RZ Lawrence (ed.), Brookings Trade Forum: 1998 (Washington, DC: Brookings Institution) cited in Barfield, supra. 53 Peter D. Ehrenhaft, supra 54 Ibid.

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predatory dumping, and strategic dumping,55 both variants of market power dumping. Thus, although competition laws and antidumping laws serve historically different functions and address different constituencies, in some aspects they do intermingle. There have therefore been calls in some quarters for antidumping laws to be replaced altogether by competition laws and measures,56 though these calls are roundly rejected in some quarters too.57 It should also be noted here that sometimes, antidumping measures could actually, though unintendedly, be employed in a way that they would go contrary to the rules of competition. It is possible for inefficient local companies to respond to legitimate foreign competition, not by increasing the efficiency of their operations, but by persuading their governments to restrict foreign competition. The weapon of choice here tends to be antidumping law since these companies, having powerful connections, are able to make their governments utilise the authority offered by the WTO Antidumping Agreement of 1994 to impose arbitrary and punitive tariff measures on the threatening goods and services, and that would effectively scuttle the foreign competition. This is an unwelcome irony that individuals and interest groups who are committed to competition should watch out for and guard against.

Issues regarding the areas of overlap with Specific Reference to India (i) Predatory Pricing By definition, antidumping law does not seem to be concerned with the issue of price discrimination taking the form of predatory pricing. However inherent in the definition of dumping (export of a product at a price less than its normal value is the possibility that antidumping law may end up capturing the instances of international price predation. To the extent that antidumping rules are helpful in capturing the .instances of predatory pricing, it can be said that there exists a clear overlap between antidumping and competition law. It is important therefore to analyze whether there exists any parallel between the way predatory pricing is defined and addressed under competition law with the definition of dumping (which may also capture instances of predatory pricing) as under antidumping law.
55
56

For a description of the different types of dumping, see Barfield, supra.

Ibid.

As the Clinton administration stated in a brief to a WTO trade and competition policy working group: If the antidumping laws were eliminated in favour of competition laws or modified to be consistent with competition principles, the problems which the antidumping rules seek to remedy would go unaddressed, World Trade Organisation (1998),Communication from the Uniyted States to the Working Group on the interaction between Trade and Competition, WT/WGTCP/W/88 (Geneva, Switzerland,28 August), cited in Bartfield, supra

57

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(a) Predatory Pricing and Dumping- The Essential Differences Under competition law predatory pricing is understood as a deliberate strategy, adopted usually by a dominant firm, to drive competitors out of the market by setting very low prices or selling below the firms incremental costs of producing the output (often equated for practical purposes with average variable costs) with intent to eliminate competition or eliminate competitors. Once the predator has successfully driven out existing competitors and deterred entry of new firms, it can raise prices and earn higher profits.58 The definition of predatory price under competition law therefore has three constituent elements, all of which must necessarily be satisfied before any sanction can be imposed: (i) the firm alleged to b selling at predatory price should be in a dominant position in the relevant market; (ii) the sale must be at prices below a certain measure of cost (usually average variable cost); and (iii) it should be with the intent to reduce competition or eliminate competitors. Dumping is a type of international price discrimination, wherein an exporter sells an article at prices lower than those charged to domestic buyers, taking into account the conditions and terms of sale. As per the definition of dumping as contained in the WTO Antidumping Agreement (as well as the national antidumping legislations in the subject countries), the limited requirement for dumping to be condemned and sanctions to be attached against is that, the export price of the product alleged to be dumped should be less than the price at which it is sold in the domestic market of the exporting country (normal value) and that it should cause material injury to the domestic industry for the like product in the importing country. Thus antidumping law is neither concerned with the requirement of dominance nor intention, unlike competition law wherein both these factors are as important conditions as the instance of price discrimination.

(b) Implication of Predatory Pricing under Competition Law: Under competition law predatory pricing is understood as a deliberate strategy, adopted by a dominant firm, with an intent to drive competitors out of the market by setting very low prices or selling below the firms incremental costs of producing the output (often equated for practical purposes with average variable costs) with a view to eliminate competition or eliminate competitors. Once the predator has successfully driven out existing competitors and deterred entry of new firms, it can raise prices and earn higher profits.59 In India, the
58 59

OECD glossary of terms. OECD glossary of terms.

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Competition Act, 2002 defines predatory pricing as the sale of goods or provision of services, at a price which is below the cost, as may be determined by regulations,60 of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors.61 The definition of predatory pricing is defined in most jurisdictions is similar and mirror the definition under the Competition Act, 2002, i.e. sale of goods or provision of services at a price below the average variable cost, with a view to reduce competition or eliminate competitors. The definition of predatory pricing under competition law therefore envisages the fulfillment of three conditions before any sanctions can be imposed against it:

First, the enterprise indulging in such a practice should be in a position of dominance; Thereafter, the sale of goods or provision of services shall be at a price below a relevant measure of cost (usually average variable cost of production of goods or provision of services); And finally the enterprise alleged to be indulging in predatory pricing shall do so with the intent to reduce competition or eliminate competitors.

(c) Implication of Predatory Pricing as under Antidumping Law: Antidumping law does not specifically address the issue of predatory pricing. Instead what antidumping law seeks to address is the issue of price discrimination between two different geographic markets, evidenced by a higher normal value as compared with export price. Antidumping law is therefore concerned only about the price at which the product alleged to be dumped is sold in the two markets (domestic market of the exporting country and export market) and not directly about the cost of production of the product or intent behind the discrimination. Thus, it is reasonable to conclude that antidumping law, as it is applied today does not directly concern itself with predatory pricing. However, notwithstanding the absence of any express provision to capture the instances of predatory pricing; antidumping laws may to the extent that the normal value is below the total cost of production it is not in the ordinary course of trade and thus dumped captures the instances of predatory pricing. It is in this limited situation when the export price is lower than the normal value and at the same time also lower than the fixed and variable cost of production that
The Draft Competition Commission (Determination of cost of production) Regulations provide that the reference to cost in the definition of predatory pricing is to average variable cost the Competition Commission of India determines otherwise. 61 Under the Competition Act, 2002, predatory pricing has to be by a dominant enterprise in the relevant market.
60

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antidumping law can be said to address the issue of predatory pricing and to this extent therefore there exists a distinct overlap between antidumping and competition law. The two laws however differ vastly while addressing this conduct. Under competition law for sanctions to be attached to predatory pricing, two more conditions need to be satisfied , viz. The enterprise indulging in price predation is in a dominant position and it does so with the intent to eliminate competition or competitors. Whereas antidumping law is not concerned about the relative size of the exporter or the intent with which it is exporting at lower prices, and as long as it can be established that the dumped product causes injury to the domestic industry, sanctions can be attached. Thus it can be said that even though antidumping law may by default address instances of price predation, international price discrimination does not necessarily imply exports at a price below costs of production.62

(ii) Price Discrimination Both antidumping and competition law63 seek to address the issue of price discrimination. Antidumping law seeks to address all those forms of price discrimination, which cause or are likely to cause material injury to the domestic industry. Competition law on the other hand seeks to address only such price discrimination, which is unfair or discriminatory (including predatory) in nature and has an appreciable adverse effect on the market.

(a) Price Discrimination under Competition Law: Under competition law only such price discrimination, which adversely affects competition in markets and thus has negative consumer welfare impacts, is prohibited by competition statutes. Under competition law such price discrimination is usually referred to as unfair or discriminatory pricing and a particular instance of price discrimination does not (per se) attract sanctions if it can be shown that it is adopted to meet competition and does not affect the conditions of competition in an adverse manner. This requirement therefore involves an examination into welfare effects of the price discriminatory conduct. Certain instances of price discrimination such as predatory pricing have been assumed to affect competition negatively and cannot be justified on the grounds that they have been adopted to meet competition.

62

P. A. Messerlin and P K M Tharakan, The Question of Contingent Protection The World Economy, 1999, vol. 22, issue 9, pages 1251-1270 63 Competition law has a broader domain and regulation of price discrimination is one of the constituent elements of competition laws.

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(b) Price Discrimination under Antidumping Law: In antidumping law price discrimination is synonymous with dumping. Jacob Viner64 defined dumping as price discrimination between national markets. In international trade dumping is said to occur when the sale of products for export is at prices lower than those charged to domestic buyers, taking into account the conditions and terms of sale. The phenomenon of dumping takes place when a firm sells a product abroad at a price, which is below its fair value.65 According to Article VI,66 GATT 1994, a product is said to be dumped when its export price is less than its normal value, that is, less than the sale of a like product in the domestic market. The effect of the instance of price discrimination under antidumping is examined with the narrow parameters of injury only to the domestic industry and once dumping and injury have been established, then the examination does not take into account broader economic concerns, such as consumers interest, the interests of other users of the product and the like whilst imposing an antidumping duty.67 With regard to the practice of antidumping law in India, it is noted that though consideration of public interest in an antidumping investigation is not mandatory, but in limited instances even notwithstanding the positive recommendation by the Designate Authority/ Ministry of Commerce, the Ministry of Finance has not imposed antidumping duties and this may be due to public interest considerations.68 The process however is neither formal nor transparent.

(c) Overlaps in the Manner in which Antidumping and Competition Law Address the Issue of Price Discrimination: Under competition law the definition of price-discrimination is much broader and extends to unfair or discriminatory price in purchase or sale of goods or provision of services. It could take various forms, such direct or indirect, static or dynamic, etc. One of the forms of price discrimination that competition law specifically addresses is predatory pricing, which is defined as selling a product at prices below the incremental cost of producing the output.
Viner J, Dumping: A Problem in International Trade, 1922. Devault James, The Administration of US Antidumping Duties: Same Empirical Observations, 13 World Economy, 75, (1990) 66 a product is said to be dumped when its export price is less than its normal value, that is, less than the sale of a like product in the domestic market. 67 However to the limited extent that antidumping rules in India as well as other countries such as USA prescribe the lesser duty rule (i.e. if a duty lesser than the margin of dumping is sufficient to remedy the injury to the domestic industry then the antidumping duty should be the lesser of the two), which inherently take account of consumer interest to some extent. Further the EC law on antidumping by expressly providing for community interest test takes account of consumer interests also before imposing antidumping duty on a product. 68 National Board of Trade, Sweden, The Use of Antidumping in Brazil, China, India and South Africa Rules, Trends and Causes 2005. In the Newsprint case the Ministry of Finance did notify the recommendation of the Ministry of Commerce and in Met Coke the recommendation was partly imposed
65
64

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Antidumping law on the other hand is concerned with only one type of price discrimination, i.e. dumping. It does not specifically address the issue of predatory pricing. Instead what antidumping law seeks to address is the issue of price discrimination between two different geographic markets, evidenced by a higher normal value as compared with export price. Antidumping law is therefore concerned only about the price at which the product alleged to be dumped is sold in the two markets (domestic market of the exporting country and export market) and not about the cost of production of the product and whether it is exported at a price below a relevant measure of cost or not. Thus strictly speaking antidumping law does not concern itself with predatory pricing. However, notwithstanding the absence of any express provision to capture the instances of predatory pricing; antidumping laws may to the extent that the exports are made at prices below the average variable cost (and assuming that the normal value is higher) capture the instances of predatory pricing.

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IV. CRITICISM OF ANTIDUMPING LAWS AND ITS EFFECT ON COMPETITION Despite the growing popularity of anti-dumping actions, the theoretical underpinning for antidumping actions has been criticized almost universally by economists and scholars. Antidumping theory holds that price discrimination is an undesirable practice whereby predatory exporters attack markets by shipping at unfairly low prices, driving local competitors out of business, and accumulating monopoly or oligopoly power. Anti-dumping duties, under this theory, are necessary to counteract predatory price discrimination by exporters. Economists, academics and government organizations roundly criticize this justification for anti-dumping duties, for a variety of reasons, discussed below. From the point of view of economics, there is no reason to support any anti-dumping law, since price differentiation across markets is a legitimate and a perfectly rational, sensible and legitimate profit-maximization action. Under this line of argument, there is no justification for condemning certain export prices simply because they happen to be lower than prices in other markets. Domestic price discrimination i.e., differences in pricing between one countrys domestic regional markets, normally is not penalized. There arguably is no economic reason for treating international price discrimination any more harshly by imposing dumping duties. Of the different categories of dumping,69 only predatory pricing dumping and most instances of strategic dumping raise overall welfare concerns. Yet, these two forms of dumping pertain largely to the theoretical realm, as most anti-dumping cases in the real world do not involve dumping as defined by these two categories.70 Indeed, in todays trade environment, characterized by increasing competition among a variety of export suppliers from different countries, predatory pricing practices arguably are futile because market domination and monopolistic pricing are not attainable. Economists, therefore,
There can be several categories of dumping. Market expansion dumping is when a firm exports at a price lower than the one in the domestic market. Another type of dumping, cyclical dumping occurs when firms, facing a downturn in demand, sell at a price that is below the so-called full cost but that allows the firm to recover marginal variable costs. Here, price discrimination may or may not occur, as firms might sell at the same low price in both the domestic and export markets. Companies operating in a large protected market and able to benefit from substantial economies of scale will face lower costs than their foreign competitors and, on this basis, may incur in strategic dumping. The final category of dumping, predatory-price dumping, takes place when a firm sells exports at a price that is low enough to induce competitors to exit the market in the importing country. Subsequently the export companies charges a higher price to recoup the losses it underwent with the goal of driving out competitors; See Jose Taraves de Araujo, Jr., Anti-dumping in the Americas, 9, OAS Trade Unit Studies, 2001 70 A study by the OECD found that anti-dumping law does not distinguish between legitimate market strategies and anticompetitive monopolization, and that less than ten percent of antidumping cases initiated even involved potential monopolizing dumping. Trade and Competition: Frictions after the Uruguay Round, International Trade and Investment Division, Organization for Economic Cooperation and Development, 1996
69

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generally take the view that frequent use of anti-dumping action cannot be justified as necessary to prevent predatory pricing.71 Another common criticism of anti-dumping measures is that they do not afford effective assistance to the domestic industry they are intended to protect. Because of the expansion of international suppliers, a complainants failure to target all possible suppliers could mean that anti-dumping duties against only some suppliers, even if significant, would merely divert the source of exports to non-targeted countries, without an appreciable price effect in the import market. Moreover, uncompetitive industries are more likely than others to receive protection, and are not likely to benefit from it in the long term. The anti-dumping protections often come at a substantial cost to consumers. They protect producers at the expense of consumers, which results in higher prices, lower quality products, less consumer choice and a general lowering of the standard of living for the vast majority of people. Anti-dumping measures also destroy more jobs than they create.72 The costs to the economy of anti-dumping measures are significantly higher than the benefit to the protected domestic industry. Overbroad anti-dumping duties may curtail importation of products not even produced by domestic companies. The burden and damage to consumer industries dependent on the imported product can be significant and can outweigh any benefits to the upstream complainant industry. The anti-dumping laws are ambiguous and vague. Producers never know by which standard they will be held accountable because there are so many standards. Anti-dumping rules have been implemented and applied by national authorities in an unfair manner, both procedurally and substantively. For example, an OECD study concluded that anti-dumping measures can be abused for protectionist purposes.73 Despite the liberalizing changes agreed upon during the Uruguay Round negotiations and adopted in the WTO Anti-dumping Agreement, the study found that anti-dumping procedures can still serve as a protectionist tool. The way anti-dumping laws are structured, domestic producers can enlist the help of government to

71 72

See Michael Cartland, Antidumping and Competition Policy, 289, 28 Law & Poly Intl Bus. See Robert w. McGee, Anti-dumping Laws as protectionist Trade Barriers: The Cask for REPEAL, 45, The Dumont Institute for public policy research, Policy Analysis, 1996. 73 See Trade and Competition: Frictions after the Uruguay Round, International Trade and Investment Division, Organization for Economic Cooperation and Development, 1996

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prevent foreign competition even when there has been no dumping. The law allows producers to unethically use anti-dumping measures as weapons to batter the competition. From the point of jurisprudence also, anti-dumping is not justified. From a rights standpoint, anti-dumping laws prevent consenting adults from entering into- contracts at a mutually agreed upon price. Anti-dumping laws cannot be justified by any theory of liberal democracy. They are not utilitarian because they do not result in providing the greatest good for the greatest number. Indeed, they provide good for the minority i.e. producers at the expense of the greatest number i.e. consumers. They reduce rather than enhance social cooperation and harmony. They violate rights. Even redistributionists would argue against them because they redistribute income in the wrong direction from the poor and middle classes to the rich.74 It has been argued that imposition of antidumping duties makes little economic sense as it is sort of protection provided to domestic industry against competition from outside rather than action against unfair trade. Economists argue that dumping is a natural phenomenon and is not necessarily unfair as considered under the WTO Antidumping Agreement (as well as the domestic antidumping legislations in the subject countries). From an economic point of view there are two preconditions for a firm in which it can engage in international price discrimination: 1. The firm should have a strong monopolistic - or at least oligopolistic - position in its home market. 2. The firm should be protected from foreign competition in its home market by natural or artificial barriers to trade. When these two conditions are met, it is quite natural for firms to dump and is not necessarily unfair practise on the part of the exporting country. Therefore, there does not seem to be any economic justification for antidumping rules that condemn all sales of exports at prices lower than home-market price. Besides the political-economic consideration of protections of the domestic industry there does not seem to be any other plausible reason for continuing with antidumping laws. Authors like McGee argue that mere existence of antidumping law on statute books encourages foreign suppliers to increase their prices, since by doing so it may be possible to avoid triggering an antidumping action. The mere threat of an antidumping action chills price competition, since foreign suppliers will hesitate to compete too aggressively on price for fear
74

For a detailed discussion on jurisprudential aspect of anti dumping laws, see supra note 49.

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of triggering an antidumping investigation. But no matter how hard they try to avoid such an action, they are not able to totally eliminate the possibility of an antidumping investigation even if they sell their product for the same price worldwide because exchange rate fluctuations can make it appear that they are selling in foreign markets for prices that are below domestic market prices.75 Also an anti-dumping petition or a threat of petition itself could induce voluntary export restraints by exporting firms, thereby resulting in decreased competition. It has also been stated that the mere existence of antidumping laws also makes it possible for domestic producers to charge higher prices than would otherwise be possible. Thats because antidumping laws make it dangerous for foreign competitors to engage in aggressive price competition. As a result, domestic producers can raise their prices with little fear of being underpriced by foreign suppliers.76 Thus existence of antidumping law hurts competition both ways, one by forcing exporters to sell at higher prices and other by providing the domestic producers the freedom to charge higher prices than what would be otherwise possible. Thus inherently antidumping law can be said to be protectionist because it benefits domestic producers at the expense of consumers by limiting foreign competition and is thereby in direct conflict with the objectives of competition law. Very often firms misuse antidumping laws by initiating frivolous investigations. This has the effect of raising the cost of doing business for the exporters, apart from leading to efficiency losses. The cost of participating in the investigation process may be very high (in terms of legal fees, time and resources allocated for preparing for the investigation etc.) which raises the cost of doing business. Moreover, studies have shown that once an antidumping investigation is initiated it invariably results in imposition of antidumping duty.
77

Thus virtually any case that is initiated stands a

good chance of getting protection under antidumping laws.78

Lacunas or Shortcomings related with enforcement of anti dumping laws First, under current anti-dumping rules national authorities are allowed to exercise enormous discretion. Since the criteria for determining the export price and the normal value are neither stringent nor specific, the importing country can determine incidents of dumping at will. This

McGee Robert W., Antidumping laws as weapons of protectionism: case studies from Asia, Working paper, January 2008, College of Business Administration, Florida State University.
76

75

Ibid.

77

See, the Chapter on Antidumping in India, in The use of Antidumping in Brazil, China, India and South Africa- Rules, Trends and Causes- study by National Board of Trade, available online: htto://www.kommers.se 78 Agarwal Aradhana, Antidumping law and practice: an Indian perspective Working Paper 85, ICRIER, April 2002.

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implies that small changes in methodological rules could yield important advantages for domestic firms contesting dumping cases. Furthermore, there are no specific criteria to determine material injury. In addition, there is no generally accepted mechanism to examine the causal relationship between dumping and injury. Therefore, poor performance by domestic firms in the related domestic industries may easily be attributed to the dumped products during economic recession. Also the standing requirement for the domestic industry to successfully petition for antidumping investigation is such that it lends itself to the protection of inefficient domestic industry. This is more apparent in the case of India.

Second, the definition of dumping is so mechanical that the motive of dumping is not considered. A firm is likely to be subject to an anti-dumping investigation automatically if it exports a product at a price lower than the normal value in the home market, regardless of whether there is a predatory intent or not. As a consequence, duties could be imposed on low but justified pricing. In contrast, most competition laws and policies regulate only the price discrimination with the predatory intent to drive competitors out of the market.

Third, price undertakings (if used instead of antidumping duties) may induce price cartels, which would hinder fair price competition. Anti-dumping rules allow exporters to avoid antidumping actions if exporters agree to raise their prices. While such agreements are a means of suspending ongoing or imminent anti-dumping cases, they can be used to promote anticompetitive behaviour. Specifically, such rules may promote cartelization, reflecting the interests of certain producers in the importing country who seek further protection.

Thus the antidumping rules may because of its shortcomings and the way in which they are enforced give rise to anti-competitive practise and thus may pose conflict with the objectives of competition law.

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V. Few Instances of Anti- Dumping and Competition with reference to India 1. Imposition of anti-dumping duty Centre considers anti-dumping duty on polypropylene In an attempt to protect the domestic polypropylene (PP) industries, the government is recommending a provisional anti-dumping duty on PP imported from Saudi Arabia, Oman and Singapore. This follows an appeal by Reliance Industries, supported by Haldia Petrochemicals Ltd. (HPL), the only two producers of PP in the country. As a result of this duty, the companies from these countries selling the product cheap in India will be discouraged. The appellant Reliance Industries figures among the top eight PP producers in the world and the company holds a 70 percent share of the domestic market and caters to three percent of global consumption of PP. The government justifies the imposition of the duty on the ground that imports from the subject countries have increased in absolute terms as well as in relation to total imports, total demand and total production in India. Moreover, the market share of the duopolistic domestic industry has come down, while the demand has increased. Despite increase in demand, the prices of the domestic industry have been suppressed hence there is significant underselling from these countries. However, the local processing industry is apprehensive of the proposed duty as it will lead to a significant price rise of the raw material (PP); in some cases the price may rise to almost double as the amount of duty is almost equivalent to the international market price. PP is used as a raw material in a variety of industries, including packaging, woven sacks for cement, fertilisers, sugar and various consumer items such as house ware, auto components, pipes, water tanks, furniture, and medical appliances. Most of the units associated with processing are small and medium enterprises (SMEs) and there is a fear of hurting them in case of price rise in the domestic market. Food for thought: The above case illustrates trade distortions allegedly caused by the unfair trade practice (UTPs) of dumping (by foreign companies) in case of PP. Remedies in the form of levy of anti-dumping duty to make the playing field more level and protect domestic industries are also illustrated. However, the duty is being opposed by the domestic end-user industry on the ground that the move will increase the price of the raw material. Most of the manufacturers using PP as raw material are SMEs. And they are at the mercy of a domestic duopoly. The question arises, will not the imposition of anti-dumping duty have an adverse implication for SMEs who are already struggling for survival due to the intensified global competition? Trade liberalisation and use of tariffs to protect domestic consumers are to be used to promote competition and not stifle it by using non-tariff measures such as anti dumping.
2. China accused of predatory pricing tactics

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In a protest against Chinese business tactics, Indias small and medium enterprises have warned that they were hurt by typical Chinese predatory pricing intended to drive rivals out of the business so that Chinese companies could capture the Indian market and then raise prices to more normal values. To deal with the situation, they are urging the government to step up the pace of its anti-dumping investigations and impose tougher safety and quality checks to protect Indian companies from cheap Chinese goods. A survey conducted by Federation of Indian Chambers of Commerce and Industry (FICCI) highlighted that majority of small and medium-sized manufacturers (SMEs) had suffered a serious erosion of their Indian market share over the past year, because of cheaper Chinese products. It is also estimated that Chinese imports were 10 to 70 percent cheaper than comparable Indian products. The bite was felt by companies in a range of sectors, including processed food, light engineering, building materials and heavy engineering, chemicals and textiles. Already, Indian manufacturers face serious competitive disadvantages in comparison with China, including poor infrastructure and rigid labour laws that perversely discourage companies from growing and instead promote inefficient fragmentation. Even if these disadvantages are removed, Indian companies will not be able to fight a Chinese price mechanism of an artificial nature that targets specific industries and wipes them out. Looking at the high rise in imports of Chinese toys, Government announced a six-month ban on the import of Chinese toys. However, the ban was lifted after two months, when Beijing threatened to take the issue to the World Trade Organisation (WTO). Food for thought: The fact that India needs to protect its industry from alleged unfair competition from China has been debated and accepted for a long time now. It has been felt that China is, by no means, a fair trading partner and is capturing Indian market at a very fast pace through anticompetitive trade practices such as predatory pricing. Predatory pricing involves pricing products below cost with the intention of acquiring market. The intention is to recover the losses through future price increases. As a control measure, India is using various antidumping and safeguard measures. It is a matter of research whether the influx of cheaper Chinese products into India (as well as in other developing countries) is motivated by predatory pricing or it is simply vigorous price competition by Chinese firms. Consequently, this has resulted in lower production costs and hence lower prices against which Indian firms are unable to compete. Are the Chinese exports prices lower than those of the same products being sold at home? An important issue in such cases is the time taken for anti-dumping investigations. In India, it takes 10 to 12 months which is more than enough for Chinese firms to damage the Indian industry. The issue in this situation is how to ensure quick action, particularly in case of China?

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3. Indonesian CTV picture tubes attract dumping duty

The Finance Ministry of India has slapped anti-dumping duty of US$21.76 per unit on imports of 14-inch cathode ray colour television (CRT) picture tubes from PT LP Displays Indonesia. The duty is being levied for five years from March 2009 onwards. Notably, colour picture tubes account for 40-45 percent of television production cost. Given that the monthly capacity of the domestic tube industry is short of a million pieces or significantly less than the domestic market size for colour TV, the mentioned high cost share has significant implications for the welfare effects of antidumping duty. The revenue department has also advocated levy of anti-dumping duty on colour television picture tubes sized 15, 20, 21 and 29 inches
Food for Thought

The important question which needs to be addressed in this regard is whether the Indonesian picture tube producer is providing unfair competition to domestic producers in the Indian market. Unfair competition can arise from subsidies from the Indonesian government, predatory behaviour by the Indonesian producer or exclusive agreements with dealers. If these or similar factors are not present, the mentioned import is not the result of anticompetitive action. Instead, the antidumping duty can be construed as anti-competitive. One of the results of such anti-competitive action (anti-dumping duty) would be higher input cost for domestic manufacturers of colour television sets, irrespective of whether they buy the picture tubes domestically or from Indonesia, resulting in higher consumer prices for television.
4. Definitive dumping duty on phosphoric acid from Korea

Following the petition filed by Gujarat Alkalies & Chemicals Ltd., and Solaris Chemtech, the Finance Ministry of India has levied anti-dumping duty of US$221.64/tonne on phosphoric acid from South Korea. The duty shall be applicable for five years from June 22, 2010.
Food for Thought

The moot question that needs to be answered in this regard is whether the South Korean phosphoric acid producer is granting unfair competition to domestic producers in the Indian market. Unfair competition can arise from subsidies from the South Korean government, predatory behaviour by the Korean producer or exclusive agreements with dealers. If these or identical factors are not present, the mentioned import is not the result of anti-competitive action. Instead, the anti-dumping duty can be interpreted as anti-competitive. Possible outcome of dumping duty in such a case may be increased input cost for domestic producers of the user industries like pharmaceutical applications, beverages, calcium phosphate etc. resulting in higher consumer prices of the finished products.

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VI. SUGGESTIONS & CONCLUSION The political economy argument is the strongest argument in explaining Indias current antidumping actions. Such actions have given protection to highly concentrated industries. Dominants producers lobby and litigate antidumping cases. In the process, they incur huge expenditure sacrificing economic efficiency. Besides, since most cases are in the intermediate products markets higher prices may be having adverse effects throughout the economy. One may therefore conclude that antidumping policy that is designed to ensure fair competition and improve economic efficiency may in fact reduce them. To minimise the manipulation of the law for protectionist purpose and to limit discretionary powers of the authorities, more explicit rules should be developed and definitions of different concepts used in the process should be given clearly and the procedure of determining dumping should be made more transparent. It may however be noted, that further fine-tuning and refining of the antidumping policy is not the answer to prevent its misuse. Scholars argue that the antidote is Competition policies. It is proposed to substitute anti-dumping law through Competition Law, which erases the problem by its roots and does not distort the production through protection of noncompetitive domestic producers. The tension between competition and trade policy can be described as a conflict between two ideologically similar concepts with differing views as to means of achieving the same goal. The enforcement of competition law in trade cases is of particular importance since it limits the risk that domestic producers may use the threat of initiating action under domestic trade remedies law or otherwise lobbying protection in order to induce foreign exporters to enter into unlawful restrictive agreements. Efforts should be directed at integrating antidumping policy with the Competition law. The competitive merits of antidumping initiatives in that case will be evaluated by the Competition authorities, in Indias case the Competition Commission of India, with the Competition policies. This will result in the adoption of stricter criteria for determining predation in such cases and will prevent its misuse. Moreover, the injury standard for antidumping cases should also be brought closer to the antitrust standard, which takes into account the behaviour's effect on the competitive structure of the industry as a whole, rather than the material injury it causes to domestic firms. This however requires the implementation of comprehensive Competition policies and credible enforcement agencies. This has not been the case in India.

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Anti-dumping laws encourage bad economics, permitting back door entry for the protectionist regime for the benefit of non-performing and non-competitive domestic industry, at the cost of the consumer. Supreme Court in a recent judgement has observed that the purpose of anti-dumping laws is not protectionism in the classical sense. The underlying object is to maintain a level-playing field, which encourages healthy competition. The purpose of protection against the predatory pricing policy is undoubtedly noble, as it curbs an unfair trade practice. However, the existing regulatory framework for anti-dumping measures has miserable failed, permitting itself to be abused. The instances of 'predatory pricing' are rare. It would not be incorrect to say that the threat to domestic industry through 'predatory pricing' is more theoretical than real. To sum up: The first best option would be to abolish antidumping laws altogether. Governments must attempt to dismantle the antidumping mechanism and merge it with the Competition Law. While this would be preferable, it may not be feasible in practice to pursue it unilaterally. It could be pursued through bilateral agreement or in the context of plurilateral arrangements. Another option would be to follow a strict predation standard in investigating antidumping cases and limit the scope of antidumping to predatory cases alone. This requires a major revision of the definition of dumping and limiting the concept of antidumping to predatory pricing. The third option would be to introduce the public interest test. National anti-dumping authorities should consider whether the imposition of anti dumping duty serves the public interest. Public interest in this context would involve a multitude of factors, such as the interests of domestic producers that are affected by dumped imports, importers of the product, and domestic consumers. Article VI and the Anti-dumping Agreement protect only one interest, namely that of domestic producers. The imposition of anti dumping duty may, however, have a far-reaching effect on other interests in society, such as consumers of the product subject to the anti-dumping duty. In light of this, it seems reasonable to argue that there should be provision in Article VI or in the Antidumping Agreement that domestic anti dumping legislation contain the requirement that the public interest be considered when deciding whether to impose an antidumping duty. This would reintroduce competitive considerations into the antidumping process and change the general mode of practice of the national antidumping authorities. Contrary to antidumping laws supposed primary objective of protecting producers, the public interest clause is interpreted as covering user and consumer interests, thus causing the protectionist element of antidumping actions to decline.

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