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WT/DS162/R/Add.1 Page 95

3.1

Japan contends that a Robinson-Patman defendant that has engaged in price discrimination has available several affirmative defences.  In contrast, no defences are provided to 1916 Act defendants.  The Robinson-Patman defences include:

(a)

"cost justification", i.e. the price difference can be based on differences in the cost of manufacture, sale, or delivery where those differences result from differing methods or quantities in the sale or delivery of products to various purchasers317;

(b)

"changing conditions", i.e. price changes are permitted in response to changing conditions affecting the market for, or marketability of, a product (e.g. deterioration of perishable goods, obsolescence of seasonal goods, distress sales, outdated or damaged goods)318; and

(c)

"meeting competition", i.e. a seller may reduce its prices to meet an equally low price of a competitor319.320

3.2

Thus, according to Japan, even where a plaintiff has met the Robinson-Patman Act's stricter pleading and proof requirements, a defendant still can avoid liability simply by establishing any of these defences.  In stark contrast, a 1916 Act defendant has no such escapes available.  If the plaintiff meets the comparatively loose pleading and proof requirements, the defendant is liable under the 1916 Act.  The provision by the United States of affirmative defences to domestic but not to foreign price discrimination defendants, is inconsistent with Article III:4 of the GATT 1994.

3.3

The United States concedes that the 1916 Act, on its face, does not specifically authorize any defences.  The RobinsonPatman Act, on the other hand, allows three principal defences:  a "meeting competition" defense, a defense based upon "changing market conditions", and a "cost justification" defence.321  The defences are designed to ensure that pricing differentials employed for procompetitive reasons are not prevented or discouraged.  Nevertheless, these differences do not undermine the conclusion that the 1916 Act accords no less favourable treatment to foreign products than the RobinsonPatman Act accords domestic products because these defences are inherent in the 1916 Act's requirement that an intent to injure, destroy, or prevent the establishment of an industry in the United States or to restrain or monopolise any part of trade and commerce must be proven.

3.4

The United States asserts that, in a 1916 Act case, any evidence which would support the RobinsonPatman Act defences would be equally and directly relevant to determining whether the showing of the requisite predatory intent can be made in the first place.  Thus, as Professor Hawk recognized in his treatise on US and EC competition laws, while the 1916 Act does not expressly

317 Japan refers to 15 U.S.C. § 13a (1997).

318 Japan refers to 15 U.S.C. § 13(a) (1997).

319 Japan refers to 15 U.S.C. § 13(b) (1997).

320 In addition, Japan notes that under long-standing court decisions, two other affirmative defences are available to a defendant in a Robinson-Patman case.  There is the judicially recognized "availability defense," according to which it is not an act of price discrimination for a seller to offer two prices, one normal and the other reduced on certain reasonable terms being met, where both prices are realistically available to the allegedly disfavoured customer.  Japan refers to, e.g., Boise Cascade Corp. v. Federal Trade Commission, 837 F.2d 1127, p. 1163 (D.C. Cir. 1988).  There also is the judicially recognized "functional discount" defence, according to which sellers are permitted to use price differentials to compensate certain classes of customers (e.g., wholesalers) for distributional services they perform.  Japan refers to, e.g., Texaco, Inc. v. Hasbrouck, 496 U.S. 543, p. 561 (1990).

321 The United States refers to 15 U.S.C. 13(a),(b).  

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