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WT/DS162/R/Add.1 Page 50

Act, Robinson-Patman Act, 1916 Act and other violations of federal law.  During a series of decisions by the district court and the court of appeals in the years 1980-83, which are discussed above, the Sherman Act and 1916 Act claims were first dismissed by the district court for lack of evidentiary support and then reinstated by the Third Circuit.   The US Supreme Court then accepted the Sherman Act antitrust claims for review.  Those claims were based on the theory that defendants had conspired to monopolise the US market by using excess profits in the Japanese home market to launch a predatory pricing attack on the United States.

3.15

The United States notes that the Supreme Court reversed the court of appeals and remanded, stating that the plaintiff had not developed any credible proof of an illegal conspiracy to monopolise.  The Supreme Court held that claims under the Sherman Act for conspiracies or attempts to monopolise through predatory low pricing could only be established by proof that such prices were below some appropriate measure of costs as well as evidence of a realistic expectation of recouping prior losses through future monopoly rents.180  

3.16

The United States recalls that the court of appeals was ordered to consider its prior orders in the In re Japanese Electronic Products II case in light of the Supreme Court's decision.  On remand, the Third Circuit dismissed the plaintiffs' 1916 Act claims upon the basis that, like the Sherman Act claims, there was no evidence of the possibility of recoupment.  The court reasoned that "[s]ince the Sherman Act conspiracy charge failed in the Supreme Court, our holding on the Antidumping [1916] Act conspiracy claim must fail with it."181   

3.17

The United States notes that the Supreme Court's decision in Matsushita Electrical actually laid the groundwork for the high court's decision in Brooke Group182 some 7 years later.  In Brooke Group, the Supreme Court re-examined the so-called "primary line"183 price discrimination provisions of the Robinson-Patman Act and held that proof of both sales at prices below an appropriate measure of cost and the likelihood of recoupment were required in order to establish the requisite predatory pricing needed to create primary line liability.  In doing so, the Supreme Court relied heavily upon its decision in Matsushita Electrical.  

3.18

The United States submits, therefore, that, in In re Japanese Electronic Products III, the 1916 Act claims were dismissed by the court of appeals based upon the same predatory pricing/recoupment standards that were established for the Robinson-Patman Act by Brooke Group some years later.184 The Supreme Court's 1986 Matsushita Electrical decision was and remains a foundation of US antitrust jurisprudence on predatory pricing issues.

3.19

In response to a question of the Panel regarding whether the predatory pricing recoupment test of Brooke Group would be applied in all instances of international price discrimination which are

180 The United States refers to Matsushita Electrical Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574 (hereinafter "Matshushita Electrical").  The United States notes that the Supreme Court reiterated this standard that same year in another antitrust case, Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104 (1986), where it decided, according to the United States, what constitutes proof of injury to competition in the Clayton Act context of mergers and acquisitions.   

181 In re Japanese Electronic Products III, Op. Cit., pp. 48-49.

182 Brooke Group Ltd. v. Brown & Williamson Tobacco Corporation, 509 U.S. 209 (1993) (hereinafter "Brooke Group").

183 The United States recalls that "primary line" price discrimination refers to adverse effects upon direct competitors of the defendant seller, while "secondary line" price discrimination refers to adverse effects upon competitors of the defendant seller's favoured downstream customers.

184 In re Japanese Electronic Products III, Op. Cit., pp. 4849.

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