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WT/DS162/R/Add.1 Page 90

lowered to capture market share from a competitor could be sufficient evidence of an intent to injure; but, proving effect (and reasonable probability of recoupment) requires a complex economic inquiry into the competitive dynamics of the market in question.  Indeed, in Brooke Group, the plaintiffs had shown subjective intent, but not effect, and the Supreme Court ruled that the subjective proof, alone, is insufficient.


According to Japan, this distinction establishes that the United States is violating its national treatment obligation under Article III:4 of GATT 1994.


The United States notes that the need to prove the requisite intent under the 1916 Act has for more than 80 years made it virtually impossible to establish violations of the 1916 Act.  Thus, as the Tariff Commission stated in 1921:

"[The 1916 Act] is not workable, for the reason that it is almost impossible to show the intent on the part of the importer to injure or destroy business in the United States by such importation and sale."298

Similarly, in Geneva Steel, on which Japan relies extensively for other arguments, the district court noted that it may be "'nearly impossible' to prove the requisite intent given that evidence of normal pricing cuts […] would be insufficient to establish liability under the 1916 Act."299


For the United States it is clear from the history of litigation under the 1916 Act that the anticompetitive intent required to establish a violation of the Act is at least as difficult to prove as the corresponding anticompetitive intent required to establish the offences of monopolisation and attempted monopolisation under Section 2 of the Sherman Act.  Contrary to Japan's contention that the basis of the US position is that US courts "should or will" read predation into the 1916 Act, as shown above in the factual section, the courts that have considered the intent element of the 1916 Act have already read precisely those requirements into the statute.  As a factual matter, it is the US case law interpreting the 1916 Act that is dispositive in determining the nature of the 1916 Act.


The United States notes, moreover, that the case law indicates that it is even more difficult to establish that a particular defendant intended to destroy, injure, or prevent the establishment of an industry in the United States.  Thus, in Zenith II, the district court concluded that satisfying the 1916 Act intent requirement requires establishing that the defendant possesses a "specific, predatory, anticompetitive intent"; that is, an intent "to destroy competition".300


The United States points out that Japan's only response to this argument is to suggest that proving "intent to injure" under the 1916 Act is "easier to prove than the objective effect standard.  For example, a single internal memorandum stating that prices should be lowered to capture market share from a competitor could be sufficient evidence of an intent to injure […]."  Japan does not, however, provide any evidence or case analysis to support this suggestion.


The United States submits that, in fact, it is highly unlikely that any court would find such an internal memorandum to be particularly relevant to the intent issue under the 1916 Act.  In general, United States courts have been reluctant to rely on inflammatory statements at meetings or in internal memoranda as a basis for establishing predatory intent precisely because such statements are of little or no relevance if the individual or firm making them is not likely to succeed in the purportedly predatory campaign.  As the Supreme Court indicated in Brooke Group:

298 56 Cong. Rec. 346 (Dec. 9, 1919).

299 Geneva Steel, Op. Cit., p. 1220.  

300 The United States refers to Zenith II, Op. Cit., p. 259.

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