Anti-Dumping Law versus Competition Law: India

I. Introduction

Antidumping law: Unlike Canada and United States, India does not have a long history related to the implementation of anti-dumping laws. But now, India has been the world's top user of anti-dumping initiatives over the last decade. India has filed approximately 20% of all global anti-dumping cases, disproportionate to its 2% share of global imports. When India became a member of WTO, in 1995 after its introduction, India made certain amendments to the existing Customs Tariff Act, 1975. Under amendment Section, 9A and 9B were added. Instead of having separate legislation related to the Anti-dumping like the US, and Canada have, India does not have any such separate legislation. Sections 9A and 9B of the Customs Tariff Act, 1975 enable the government authorities to impose anti-dumping duty on the countries which dump their products in the Indian market and cause material injury to the domestic producers. Along with an amendment in the Customs Tariff Act, 1975, introduced the rules for the implementation of Sections 9A and 9B. These rules are known as the Customs Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles and For Determination of Injury) Rules, 1995. The amendments were introduced to bring the Custom Tariff Act in conformity with the provisions of Article VI of the GATT 1994, and the agreements on subsidies and countervailing measures. Simultaneously the Customs Tariff (Identification, Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995 and Customs Tariff (Identification, Assessment and Collection of Countervailing Duty on Subsidized Articles and for Determination of Injury) Rules, 1995 were also introduced after repealing the earlier Rules.

Competition law: Competition laws have a long history with traces that take back to the middle ages. According to various authors, competition laws were there in many European cities in the middle ages in the form of cartels, which were known as guilds. The developing countries started adopting competition laws more than developed countries. Mexico in 1917 and Argentina in 1923 adopted competition laws and became the first two developing countries to do so. While the countries like Chile, Brazil, and Colombia introduced competition laws in the 1960s. While India adopted the Monopolies and Restrictive Trade Practices (MRTP) Act in 1969 as the first competition law in India. Monopolies and Restrictive Trade Practices (MRTP) Act, 1969 regulated the trade competition in India till 1991. With the introduction of the Liberalization, Privatization, and Globalization (LPG) in 1991, the MRTP Act, 1969 was replaced by the Competition Act in 2002. With the enactment of this legislation, the focus of India changed from a planned economy to a market economy. This act promotes competition in India as well as economic efficiency in India. With the introduction of LPG, not only the domestic competition but also the competition in the international level market also increased. The objectives of the Competition laws are not uniform or the same around the globe, but there are only two common objectives which are ‘protect and promote competition in the market’ and ‘Consumer Welfare’. Other objectives vary from country to country and even within the country itself it changes over time. The objective of the Competition law depends on various factors such as the status of the industrial economy, the strength of political government, judicial powers, exposure to global competition, and many more

II. Relation between anti-dumping law and competition law

(A) Overview:

At present, most countries have adopted both competition and anti-dumping laws as national laws to achieve economic and political stability. The common objective of both these laws is to protect the market from unfair trade but in different ways. The main difference is that Anti-dumping laws regulate and concern only with trade and commerce at the international level, whereas Competition laws are incorporated as national laws in various countries to protect and promote competition within the country. Competition law focuses on strengthening competition in the market and protects the interest of the general public which is both consumers and producers. Anti-dumping legislation is present both at the international and national levels and for Competition law, there is no legislation at the international level. Certain provisions in anti-dumping legislation are legal there but illegal under competition law such as price undertakings and quantitative trade restrictions. Similarly, certain practices are legal under Competition law but are not acceptable under Anti-dumping law. Competition law is all about ‘price differentiation’ which is unjustifiable under anti-dumping law. Competition law allows the firms to take advantage of the opportunities and dynamic economic efficiency to the fullest of fair trade competition. Whereas Anti-dumping law only focuses on the protection of domestic producers and is less concerned about the economic efficiency as dumping is based on ‘predatory pricing. The basis of Anti-dumping laws incorporated under GATT was not only to safeguard the interest of the weaker member countries of WTO but also to secure the distribution of justice between developed and underdeveloped countries. But competition law ignores the ‘distributive justice’. The main principles of competition law are only to promote and protect competition in the market for which it prohibits all actions having an adverse impact on competition in the market. So the competition law gives more preference to the unrestricted free trade between market forces of demand and supply which is completely indifferent to distributive justice in the society. Competition law has gone beyond the anti-dumping laws by leaps and bounds in terms of its evolution. Initially, it was believed that anti-dumping law and competition law complemented each other. Competition law has taken those firms outside its jurisdiction which affects the domestic market into its ambit, whereas the roots of anti-dumping law can be traced back to WTO law. Anti-dumping regulations are also being used as a protectionist tool to prevent abuses of the industry. The prohibition of dumping on different economic and social grounds supports the jurisprudence behind the anti-dumping legislation. The principle of distributional justice, however, is the primary reason behind the establishment of anti-dumping legislation. In other words, the anti-dumping bill is aimed at achieving distributive justice. The goal of distributional justice is to maintain a balance between the varying degrees of power between the different states. This power disparity is important for anti-dumping law purposes as companies can choose to take advantage of these imbalances to give effect to distortions in trade. Here the antidumping laws attain paramount significance. Anti-dumping legislation supports the government's implementation of anti-dumping duty to reverse these inequalities in trade.

It makes anti-dumping a priority in the absence of common laws on competition law.² Despite the same, anti-dumping still retains its importance in the light of the fact that it was not politically viable to enforce international competition law.³ "While both competition and anti-dumping laws originated with the same objective (e.g. the Antidumping law of 1916 in the USA which was 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 facilitate the kind of unfair and anti-competitive behavior it was intended to prevent."⁴ The impact of anti-dumping legislation has led firms to opt to seek immunity from the enforcement of the anti-dumping duty to maximize income. Competition law, on the other hand, aims to encourage healthy market competition between firms as long as it is not predatory prices. The incremental progression of anti-dumping and competition law goals has resulted in both the collection of laws being contradictory, rather than complementary. Several scholars have noted that jurisprudence has achieved extraterritorial scope with the development of national laws. The anti-dumping legislation has thus outlived its usefulness.⁵ WTO agreement provides for the inclusion of such considerations, "The authorities shall provide opportunities for industrial users of the product under investigation, and for representative consumer organizations in cases where the product is commonly sold at the retail level, to provide information which is relevant to the investigation regarding dumping, injury, and causality."⁶In short, the principles of competition law do not deal with the matter relating to equal distribution of economic power in the country. There are various areas of overlapping and conflicts between the competition laws and anti-dumping laws. Such as:

• Objective
• Price discrimination
• Injury

(B) Objective:

Competition law: the objective of competition law is to use restrictive tools against abuse of the dominant position which also abusing of predatory pricing, along with anti-competitive agreements, mergers, and other illegal acts which restrict competition in the market. There are various other objectives of competition law that are subject to the jurisdiction, so it changes from one country to another. Certain differences are:

• Promotion of competition is a common objective along with the prevention of anti-competitive practices.
• Likewise, protection and promotion of consumers’ interests is also a common objective in almost all countries.
• Whereas, economic efficiency is not the objective of competition laws in certain countries like European countries and Australia.
• Few countries have public welfare of employees and producers etc., but the US and India are major exceptions to this objective.
• India is the only country that considers Competition Advocacy ad the objective of competition law in India, which is not mentioned in the legislation of any other country.

So the overall objective of the competition law of the country is to protect and promote competition along with consumer welfare by making the good quality products available to them at affordable prices while preventing anti-competitive practices.

Anti-dumping Law: even if there is uniformly internationally accepted legislation on anti-dumping that as Article VI of the GATT and Anti-dumping Agreement, still, there are few countries that enacted their national law based on these international legislations. The most common objective of the anti-dumping law is to provide a remedy for domestic production because of dumping. Besides this objective, only the European countries have public interest and consumer welfare in their national legislation which is not part of legislation in India.

(C) Price discrimination:

Price discrimination occurs when the price ratio for particular goods differs from the marginal cost ratio for the offered goods. The primary reason behind price discrimination is the exploitation of market surplus to increase their income.

Competition law: Under competition law, only those price discriminations are penalized which have adverse effects on competition in the market and have negative impacts on consumers. All price discrimination having negative impacts on the market and competition is referred to as ‘unfair pricing’ and punishable under competition law. So competition laws only address that price discrimination which is unfair to the competition in the market and has adverse effects on consumers. Under competition law, price discrimination is determined by the difference between the price at which the product is sold and the cost of production of the product. As the cost of production is used for the determination of dumping under anti-dumping law, in the case of competition law, the method of determining of cost of production is different and varies from country to country. In Indian Competition law, the average variable cost of the product is referred to as the cost of production.⁷

Anti-dumping law: Under anti-dumping law, dumping is defined as price discrimination between national markets.⁸ Except in cases of short-term dumping, in all other cases, all forms of price discrimination are penalized when causing injury to the domestic industry under anti-dumping law. In anti-dumping law, all kinds of price discrimination are used to determine whether the export leads to any injury to the domestic industry. It even ignored broader economic concerns such as consumer interests etc. by focusing only on price discrimination. Under anti-dumping laws, the term ‘price discrimination is not used as such instead of this the term ‘dumping’ is used. Anti-dumping laws address only those price discrimination that causes or are likely to cause material injury to the domestic industry. The degree of discrimination is known as dumping margin under anti-dumping law which is measured by calculating the difference between the normal value and export price of the product (here normal value is based on the cost of production and reasonable profit)⁹. But the term ‘cost of production is not given as such in anti-dumping law, but the anti-dumping agreement defines the term ‘per-unit cost of production as fixed and variable costs of production.¹⁰

(D) Injury

Appreciable adverse effect on competition analysis under Competition Law: When such 'discriminatory price' exists in market competition, then the Indian Competition Act considers it permissible as 'fair' or 'non-discriminatory.' As there are no provisions in the Act that specify how to assess if a 'price discriminatory' conduct is conducive to 'competition.' To assess this, it is likely that authorities in the particular market in India should examine the 'effect' of the alleged 'unfair' or 'discriminatory' pricing on the competition. The 'appreciable adverse effect on competition' requirement forms the touchstone of the Competition Act, 2002. Anti-competitive activities are assessed by maintaining specific factors until they can be deemed unlawful as they cause or are likely to cause 'serious adverse effects on competition' and these factors include:

• Creating barriers to potential business entrants;
• Removing foreign rivals from the market;
• Competition forestalling by hindering business entry;
• Accrual of consumer benefits;
• Improvements in the production or distribution of products or services;
• Promoting technical, scientific, and economic development through the manufacture or distribution of service delivery goods.

Injury analysis under the Anti-dumping Law: The action of ‘dumping’ attracts sanctions only if it can be proved to cause ‘injury’ to the domestic industry. The laws related to the practice of dumping resulting in injury to the domestic industry were enacted to provide ‘remedy’ in the situation of ‘injury’ to the domestic industry by punishment for such dumping as ‘unfair’ dumping. Anti-dumping duties can be imposed maximum to the extent of the ‘margin of dumping.’ Some countries such as India take this rule further, and if the injury margin is lower than the dumping margin, then duties will be levied only to the extent that it is sufficient to compensate for the ‘injury’. The determination of injury must be based on ‘positive evidence’ and involve an ‘objective examination’ of the following factors:-

• the dumped import volume;
• the impact on domestic market prices of similar products of the dumped imports; and
• the consequent effect of these imports on domestic producers of those goods.¹¹

Not even a single factor can be disregarded while investigating. Each investigation involves a unique set of facts and thus all the criteria as prescribed in the WTO AD Agreement and the domestic legislations shall be evaluated within the context of business cycles, conditions of competition, or the circumstances in which the market normally operates within the industry. While determining whether material injury to the domestic industry exists, all the factors as listed in Article 3.4 of the AD Agreement must be evaluated. While determining whether there is a material injury to the domestic industry, all factors set out in Article 3.4 of the AD Agreement must be assessed. Under anti-dumping regulation, the injury assessment is performed concerning a variety of criteria. Investigating economic factors such as a real or potential decrease in revenue, income, production, market share, efficiency, return on investment, capacity usage, cash flow, inventories, and growth helps to assess if the domestic industry is experiencing injury due or not for the like commodity.

1. Remedies Under the Two Laws:

Although anti-dumping law prescribes penalties in the form of anti-dumping duty or price undertakings on any activity that causes harm to the domestic industry, any discriminatory action, performed by a competitive dominant undertaking, is prohibited per se and is therefore subject to pecuniary penalties under competition law. The anti-dumping law aims to mitigate the behavioral consequences, and the competition law punishes such actions.

Certain comparisons of the Competition and Anti-dumping rule acts are as follows:

The table under 7.3 in Final Report of Study on Anti-dumping and Competition Law

There have also been concerns against the removal of anti-dumping legislation. It is hereby proposed that moves toward free trade agreements should be initiated. Regional trade agreements can go a long way toward the establishment of free trade. The same can be achieved by eliminating the anti-dumping duty imposition along with the elimination of the tariffs. Positive signs exist in that regard as the world as a whole has started to grasp the dynamics of multi-trade agreements. It is also predicted that the number of regional trade agreements will expand decently in the upcoming periods. The Anti-Dumping Law's key purpose is to preserve and protect the domestic industries' interests. However, as in the Competition Act, 2002 less competitive companies will close with immediate effect and leave the market if they are unable to compete and trade with other industry participants.¹² Competition law has no protectionist nature whereas the Anti-Dumping Act has protectionist conduct. Both of these are mutually incompatible, they cannot coexist together at the same time as they are analogous.¹³ It has been advised over the past few years that anti-dumping measures and competition measures are replicas, that the complementary mechanisms are replicas too, and that one should take place from the other and both should not take place at the same time. Anti-dumping measures are not generally, henceforth, a way of revitalizing fair trade (although sometimes it may be), rather they are, to some extent, a protective mechanism. It would be very optimistic to conclude that the widespread standardization of competitive measures would smoothly result from the elimination of Anti-Dumping measures.¹⁴

Even from an economic point of view, there is no sufficient ground for supporting any anti-dumping law, as market-wide price discrimination is a legitimate and accurately rational, shrewd, and legitimate action to boost profit. There is no rationalization under this line of altercation for criticizing certain export prices only because they appear to be lower than prices in other markets. Domestic price discrimination, i.e., the price difference between the domestic markets of one country, is usually not penalized. There is debatably no fiscal sense to look solely into imposing dumping duty on regional price discrimination. Of the completely different types of dumping, only predatory pricing dumping and other strategic dumping cases are raising overall welfare concerns.¹⁵

III. Conclusion

Competition laws are protecting and promote competition in the market as a major objective whereas anti-dumping laws protect competition up to a certain extent. But only the objective of the European Countries’ anti-dumping legislation serves an objective similar to that of competition law. Nowadays, instead of maximizing competition through fair price differentiation, firms use anti-dumping laws to seek protection by imposing anti-dumping duties to protect the industry from it. On the other hand, competition through price differentiation until it leads to predatory pricing.

Both under anti-dumping law and competition law, price discrimination is the main source for being penalized. But this price discrimination is used as a broader aspect under competition law especially ‘predatory pricing’, whereas under anti-dumping law is concerned only with only one price discrimination which is ‘dumping’. This shows that the method used under anti-dumping laws to determine production costs cannot be used to determine whether the product is being sold at a discriminatory price under competition law and vice versa. Some instances of 'price discrimination such as 'predatory pricing' have been presumed to hurt competition and cannot be justified because they have been 'adopted for meeting competition'.

When evaluating the effect of an alleged anti-competitive activity on competition, the investigative authorities may investigate the degree to which competition in the relevant market is affected either by establishing barriers to new market entrants, or by expelling existing competitors from the market, or foreclosing competition. In the competition, authorities are also required to take into account the pro-competitive effects that may ensue from the alleged anti-competitive conduct, such as whether the conduct an increases benefits to consumers or improvements in production or distribution of goods, or promotion of technical, scientific, and economic development and the like. Whereas in the case of anti-dumping, one of the possible reasons not to enforce penalties on all forms of international price discrimination (dumping) was to discourage the use of anti-dumping legislation solely as a tool to remove 'fair' competition from abroad. Therefore the regulations attached to the dumping activity resulting in damage to the domestic industry were intended to 'remedy' the domestic industry's 'injury' situation as opposed to providing a deterrent for the actions. The maximum anti-dumping duties that can be imposed are either less than the 'margin of dumping' or equal to. If dumping results give rise to sustained negative trends through these measures, it is said that the domestic industry is suffering an injury, which could eventually push the like product producers out of the market. There is a connection between competition law and anti-dumping law, as both sets of legislation concentrate on how the supposed anti-competitive activity or dumping contributes to actual ‘competitors are being driven out of the market’.

References:

• Horlick, G. and Vermulst, E., “The 10 Major Problems with the Anti-dumping Instrument: An Attempt at Synthesis” Journal of World Trade 39(1): 67-73, (2005)
• “Study on Anti-Dumping and Competition Law”, available at: <http://www.cci.gov.in/sites/default/files/1>
• Andreas, K., “Antidumping rules versus competition rules”, Institute for World Economics and International Management, Universitat Bremen
• Article 3, WTO Anti-Dumping Agreement
• Viner, J., ‘Dumping: a problem in International Trade’, (1922)
• Business Week, “Restricting imports of machine tools had different but equally adverse consequences” December 2, 1991: 38-9. See The New York Times, October 7, 1991: D1, D4.
• Finger J.M., Francis Ng and Wangchuk, S., “Antidumping as safeguard policy” (2000) presented at the University of Michigan, Gerald R. Ford School of Public Policy and Japan Economy Program conference, Oct 5-6, 2000.
• Vermulst, E., “The WTO Anti-dumping Agreement” (OUP 2005) 324
• Vermulst, E., “Adopting and implementing Anti-dumping Laws-Some suggestions for Developing Countries”, Journal Of World Trade, (1997) Vol. 31, no:2, pp 5-24
• Customs Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995
• Section 9A of the Customs Tariff Act, 1975 [Act No. 51 of 1975 (18th August 1975)]
• Section 9B of the Customs Tariff Act, 1975 [Act No. 51 of 1975 (18th August 1975)]

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