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WT/DS162/R/Add.1 Page 51

alleged to constitute a violation of the 1916 Act, the United States notes that this would seem to be the case.  The same recoupment requirements that apply to Sherman Act Section 2 and primary line RobinsonPatman Act cases apply to the 1916 Act as well.185


The United States argues that, as a consequence, even a firm that possesses predatory intent and engages in predatory conduct would not be found to have violated the 1916 Act without proof, inter alia, that its predatory campaign is likely to succeed, because anti-competitive intent and conduct without a likelihood of success will not produce the anti-competitive effects which the 1916 Act is intended to prevent.  Thus, for example, mere incantations in internal memoranda of an intent to injure or destroy a United States industry are meaningless unless the defendant at issue actually has a reasonable expectation of recouping its losses within a particular relevant geographic market in the United States.  As the Supreme Court concluded in Brooke Group:

"Even an act of pure malice by one business competitor against another does not, without more, state a claim under the federal antitrust laws […] [a]lthough some of [the defendant's] corporate planning documents speak of a desire to slow the growth of the [generic cigarette] segment, no objective evidence of its conduct permits a reasonable inference that it had any real prospect of doing so through anti-competitive means."186


The United States notes that the first step in determining whether recoupment is likely both to be feasible and to occur is to establish the relevant geographic market within which the product at issue under the 1916 Act is sold.  Because the 1916 Act also requires a showing of price discrimination that is, that the allegedly predatory price charged within the United States is also substantially lower than the prices charged by the same firm in its home country the relevant geographic market must also be the market within the United States within which the lower prices are charged.  Recoupment will be possible only if this geographic area is in fact a relevant geographic market; that is, it is sufficiently insulated from competition from firms operating in other geographic areas so that a small but significant increase in prices within that area will not produce new entry sufficient to defeat the price increase.  The same standard is in general used to define relevant geographic markets under the Sherman Act, the Clayton Act, and the Federal Trade Commission Act.

185 At the request of the Panel, the United States further clarifies its position in this regard.  The United States notes that its statement that the Brooke Group predation requirement "would" be applied in all instances was really addressing whether there is a factual situation where the Brooke Group predation test would be inapplicable.  The United States meant to convey that it can think of no factual situation where the test would be inapplicable.  The United States has not taken a position on whether Brooke Group predation should be required under the 1916 Act as that is a matter for the courts to decide.  If a court were not to apply the Brooke Group predation test in a particular case, the United States cannot predict what the test would be.  However, the only other articulation provided by the courts is that the plaintiff must prove a specific intent and that standard has been described as virtually impossible to satisfy.  The United States further notes that there were almost no 1916 Act decisions taken after the Supreme Court’s 1993 Brooke Group decision until the recent Geneva Steel and WheelingPittsburgh decisions.  In those two cases, the courts made preliminary decisions not to require use of the recoupment test.  In 1995, a US federal court dismissed a 1916 Act claim for failure by the plaintiff to prosecute it, not reaching the merits of that claim (the United States refers to Geneva Steel, Op. Cit., footnote 2, referring to the case of Consolidated Inter. Automotive, Inc. v. Chen).  A recoupment test was applied by the Third Circuit in its 1986 In re Japanese Electronic Products III decision.  It was the recoupment test previously announced by the Supreme Court in the same case, not the later Brooke Group version of the test, which was based in large part on the high court's earlier Matsushita Electrical opinion.

186 Brooke Group, Op. Cit., p. 241.

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