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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 ChughNational Law School of India University

Bangalore


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ANTI-DUMPING AND COMPETITION LAW: INDIAN

PERSPECTIVE

CHAPTER 1

1. Introduction p.5

Meaning of dumping p.5

Rationale for dumping p.6

Meaning of Anti-dumping p.6

Justification of Anti-dumping p.7

CHAPTER 2

2. Anti-Dumping Law: An Overview p.8

Anti-Dumping Law with specific reference to WTO and Anti-Dumping Agreement p.8

International Perspectives: Application of Anti-Dumping Law in US 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 p.27

Competition Act, 2002 (India) - Brief Introduction p.27

Competition law and Anti-Dumping Law Areas of Overlaps and Conflicts p.30

(a) Conflict between Competition law and Anti-Dumping Law p.30

(b) Overlaps between Competition Law and Anti-Dumping Law p.32

CHAPTER 4

4. Criticism of Anti-Dumping Law and its effect on Competition p.39


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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 thedomestic 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

1Rai Sheela, Dumping and Anti-dumping

2 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 whilecharging 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 antidumping 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. Anti-

dumping 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.

3R.K Gupta, , Safeguards,Countervailing and Anti-Dumping Measures Against Imports and Exports-Commentary, Cases and

Text, Academy of Business Studies, New Delhi, 1998, p 824

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 consumerexploitation 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. Anti-

dumping 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 countrieshave 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 anti-

dumping 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 anti-

5

The 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.


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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

6In 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,

7See Richard J.Pierce, Jr., Anti-dumping as a means of facilitating Cartelization, 725, 67 Antitrust L.J.

8Article 3.5.

9Article 6.


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the Agreement clarifies the role of dispute settlement panels in disputes relating to anti-

dumping 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, domesticindustry 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

10Article 11

11Article 2

12Article 5

13Article 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 intereststandard 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

14Article 5.8

15Article 16

16Article 17

17See Joseph E. Pattison, Antidumping and Countervailing Duty Law, 1-30 Vol. 3 (West Group 1999).

18Article 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-labor-

intensive 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 Round2. 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.

19Dumping 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 anti-

dumping measure may not be imposed unless it is determined, pursuant to an investigation

conducted in conformity with the procedural requirements, that:

20Explanation (c) to Section 9-A (1)

21Explanation (b) to Section 9-A (1)

22Explanation (a) to Section 9-A (1)

23Rule 2 (b)

24Rule 2 (d)

25Black`s Law Dictionary, 518 ( 7

thEdn,, West Publishing Co.)


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1. There is existence ofdumped imports;

2. There is material injury to a domestic industry; and

3. There is a causal linkbetween 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 Anti-

dumping duty is imposed on a non-discriminatory basis, applicable to all imports of such

26Supra note 8

27Rule 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

28Rule 19

29Rule 24

30Rule 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

31Explanation to Rule 5 (3)

32Rule 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 theprovisional 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

33Rule 15

34Rule 13

35Rule 21

36Section 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 Commerce 39 on

behalf of the domestic industry.40After examining the accuracy and adequacy of the evidence

37 Rule 3 (1)38

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, currentregulations give the Central Government the authority to designate this responsibility to a specific governmentofficial. Currently, the Ministry of Commerce is charged with administering Indias antidumping law. The taskis specifically handled by the Directorate General of Antidumping and Allied Duties within the Ministry ofCommerce.


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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

40An 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 50percent of the total production of such products produced by those producers who either support or oppose thepetition.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 PeoplesRepublic 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 non-

market 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

43Like 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 anti-

dumping 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 thisis 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) Shoulddominant 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 Anti-

dumping 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 ofinternational 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 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.pdf45Cadot Oliver, Grether Jean-Maries and Melo de Jaime, Trade and Competition Policy: Where do we stand? Journal ofWorld 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 anti-

competitive 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.

46N Gregory Mankiw and Phillip L Swagel, Antidumping: The Third Rail of Trade Policy, Foreign Affairs, July/August2005, available online: http://www.foreignaffairs.org/20050701faessay84408-p0/n-gregory-mankiw-phillip-l-

swagel/antidumping-the third-rail-of-trade-policy.html47 For instance, Shanker Singham, A General Theory of Trade and Competition - Trade Liberalisation and CompetitiveMarkets, 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

49When 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 200250

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. 71952 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, supra54

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.

55For a description of the different types of dumping, see Barfield, supra.

56Ibid.

57 As the Clinton administration stated in a br ief 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


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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

58OECD glossary of terms.

59OECD 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 t

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