FTC Pre-Hearing Brief Before the U.S. International Trade Commission In the Matter of Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof

COMMISSION AUTHORIZED
V880050
BEFORE THE UNITED STATES
INTERNATIONAL TRADE CODISSION
)
In the )latter of J 	)
)
Antifr.ict.ion Bearings 	)
(Other Than Tapered Roller 	)
Bear.ings) 	and Parts Thereof 	)
~ the Pederal Republic 	of 	)
Gerwany, 	Prance, 	Italy, 	Japan, 	)
Rcwania, 	S.inqapore, 	Sweden, 	)
'l'ba.il.and, 	and the United ltinqdoa 	)
)
)
IDV8st.iqation Ros. 	731-TA-391-399 	)
aDd 303-TA-19 	and 	20 	)
--:-------------------)
llarch 23, 	1989
PRB-IIBARIBG BRIEF OP 'l'IIB
noDAL 'J.'RADB COIOIISSIOB
Pederal Trade Ca.aission
Sixth 5 	Pennsylvania Avenue, 	B.W.
Wasbinqton, 	D.C. 	20580
(202) 	326-2955

I. 	Introduction
The 	International 	Trade 	Commission 	("ITC" 	or 	"Commission")
has 	before 	it 	in 	this 	case 	a 	single 	company's 	antidumping 	and
countervailing duty 	petitions, 	which address 	anti friction 	bear-
ings 	and 	parts 	imported 	from 	nine 	countries. 1 	This 	is 	the 	final
stage 	in 	a 	process 	that 	began 	a 	year 	ago 	with 	the 	filing 	of 	these
petitions. 	An 	affirmative 	finding 	by 	the 	ITC 	that 	imports 	of
bearings 	sold 	at 	"less 	than 	fair 	value" 	and 	imports 	of 	subsidized
bearings 	are 	causing material 	injury 	to 	the 	domestic 	industries
producing bearings 	will 	result 	in 	issuance 	of 	duty 	orders 	that
will 	likely 	burden 	bearing 	imports 	for 	years 	to 	come.
This 	brief 	is 	respectfully 	submitted by 	the 	Federal 	Trade
Commission 	("FTC"),2 	which, 	like 	the 	lTC, 	is 	an 	independent 	regu-
latory 	agency of 	the 	federal 	government. 	The 	FTC's 	mission 	is
to 	protect 	competition 	and promote 	consumer welfare. 	The 	FTC 	is
charged with enforcing Section 	5 of 	the 	Federal 	Trade 	Commission
Act, 	15 	U.S.C. 	S 	45, 	which prohibits, 	inter 	alia, 	unfair 	methods
of 	competition. 	In 	fulfilling 	its 	mandate, 	the 	FTC 	seeks 	to
ensure 	that 	sound and 	consistent 	principles 	are 	applied 	to 	issues
1 	The 	petition covers 	imports 	from 	the 	Federal 	Republic 	of
Germany, 	France, 	Italy, 	Japan, 	Rumania, 	Singapore, 	Sweden, 	Thai-
land, 	and 	the 	United Kingdom.
2 	Commissioners 	Azcuenaga 	and 	Strenio 	dissented 	from 	the
vote 	to 	file 	this 	brief.
1

affecting 	competition, 	and 	has 	intervened 	in 	the 	past 	before 	the
International 	Trade 	Commission 	toward 	that 	goal. 3
The 	ITC 	and 	FTC, 	of 	course, 	administer 	different 	statutes
with 	somewhat 	different, 	but 	related, 	goals. 	The 	antitrust 	laws
protect 	consumers 	from 	unfair 	trade 	practices 	that 	injure 	compe-
tition; 	the 	trade 	laws 	protect 	competitors 	from 	unfair 	foreign
trade 	practices 	that 	injure 	domestic 	industries. 	We 	believe
tools 	of 	analysis 	developed 	to 	identify domestic 	unfair 	trade
practices 	may be 	usefully 	applied 	to 	international 	trade 	matters
within the 	trade 	laws' 	statutory 	framework 	with 	beneficial 	conse-
quences. 	It 	is 	with 	that 	goal 	that we 	appear 	in 	this 	proceeding
and 	submit 	this 	brief 	for 	the 	lTC's 	consideration.
Important 	issues 	in 	this 	case 	include 	the 	definition of
"like 	product" 	and 	"domestic 	industry"; 	resolution 	of 	those
issues 	may determine whether 	the 	Commission 	finds 	injury. 	Con-
gress 	has 	left 	it 	to 	the 	ITC 	to 	give 	content 	to 	those 	ambiguous
terms, 	and 	the 	ITC 	in 	the 	past 	has 	relied on a 	number of 	factors
3 	~,~, 	Stainless 	Steel 	and 	Alloy Tool 	Steel, 	Inv. 	No.
TA-203-16 	(1987); 	softwood Lumber Products 	from 	Canada, 	Inv. 	No.
701-TA-274 	(1986); 	64K DRAM 	Components 	frQm 	Japan, 	Inv. 	No. 	731-
TA-270 	(1986); 	Electric 	Shavers, 	Inv. 	No. 	TA-201-57 	(1986); 	Apple
Juice, 	Inv. 	TA-201-59 	(1986); 	NQnrubber 	FQQtwear, 	Inv. 	No. 	TA-
201-55 	(1985); 	Carbon 	and 	Certain Alloy 	Steel 	Products, 	Inv. 	No.
TA-201-51 	(1984); 	Certain Canned Tuna 	Fish, 	Inv. 	No. 	TA-201-53
(1984); 	Unwrought 	Copper, 	Inv. 	No. 	TA-201-52 	(1984); 	Color 	Tele-
vision 	Receiyers 	from 	the 	Republic 	Qf 	Korea 	and Taiwan, 	Inv. 	No.
731-TA-134, 	135 	(1983); 	Certain Steel 	Products 	frQm 	Belgium,
Brazil, 	the 	Federal 	Republic 	Qf 	Germany, 	France, 	Italy, 	Luxem-
bourg, 	the 	Netherlands, 	and 	the 	United 	Kingdom, 	Inv. 	Nos. 	701-TA-
86-87. 	92-94, 	96-97, 	99, 	101, 	104-105, 	107, 	109, 	117, 	119, 	121,
123-124, 	128 	and 	138 	(1982). 	The 	statute 	governing 	the 	ITC 	in
fact 	calls 	for 	cooperation between the 	ITC 	and 	FTC 	to 	aid 	and
assist 	the 	ITC 	in 	its 	work. 	~ 	19 	U.S.C. 	S 1334.
2

in 	defining 	the 	relevant 	"domestic 	industry" 	on which 	to 	focus
its 	investigation. 	The Commission 	itself 	has 	noted, 	however,
that 	decisions 	are 	reached 	in 	an'ad 	hoc 	manner 	and, 	in 	the 	pre-
liminary decision 	in 	this 	case, 	it 	noted 	that 	past 	decisions
have 	limited precedential 	value. 	Common 	outcomes 	in 	similar
cases 	would promote 	predictability and 	allow both 	domestic 	and
foreign 	businesses 	to 	plan 	their 	affairs 	knowing 	what 	is 	and 	what
is 	not 	a 	violation of 	the 	law.
The 	lTC 	is 	concerned 	about 	the 	effect 	of 	unfair, 	low-priced
imports 	on domestic 	industries. 	Producers 	may 	be 	adversely
affected by 	low-priced 	imports 	if 	the 	imports 	are 	substitutes 	for
their 	own 	products. 	The 	injury 	analysis 	therefore 	should 	focus
on 	industries 	defined 	to 	include 	substitutable products. 	An
injury 	analysis 	which 	focuses 	on 	such meaningful 	markets, 	using
consistent, 	objective 	criteria, 	would be 	predictable 	and 	would 	be
consistent with Congressional 	intent. 	The 	approach we 	offer 	for
the 	lTC's 	consideration would 	allow 	the 	lTC 	to 	identify 	those
products 	that 	are 	substitutes 	for 	unfairly 	traded 	imported
products, 	and 	to 	consider whether the 	domestic 	industry 	producing
those 	products 	is 	injured.
The 	Federal 	Trade 	Commission has 	had 	substantial 	experience
in defining markets 	for 	pUrPOses 	of 	analyzing mergers, 	and 	has
refined 	the 	tools 	for 	defining product markets 	in merger 	guide-
lines 	and 	in case 	law. 4 	We 	suggest 	that 	the 	lTC 	consider 	adopt-
4 	~,~, 	B.F. 	Goodrich Co., 	slip Ope 	at 	14-16, 	FTC
Docket 	No. 	9159 	(March 	15, 	1988); 	Hospital 	COhP. 	of 	America, 	106
(continued ... )
3

ing 	an 	analogous 	market 	approach 	in 	its 	determinations 	of 	"like
product" 	and 	"domestic 	industry." 	We 	will 	discuss 	in 	subsequent
sections 	the 	importance 	of 	a 	consistent 	approach 	to 	industry
definition, 	the 	FTC's 	market-based approach, 	the 	appropriateness
of 	a 	similar 	approach 	for 	the 	lTC, 	and 	the 	experience 	of 	the 	FTC
in 	bearings 	investigations. 5
II. 	THE 	I'l'C SHOULD CONSIDER ADOPl'IRG A XARKE'.r APPROACH
TO DB'l'RIUIIlUBG 	' LIKE PRODOC't' 	ABO 	' POUSTIC 	INJ)(JSTRY'
A. 	Industxy Definition 	Is 	Central To 	Inju:cy Determinations
A two-prong 	test 	must 	be met 	before 	antidumping 	or 	counter-
vailing 	duties 	can be 	imposed. 	Not 	only must 	the 	Department 	of
Commerce 	find 	that 	foreign 	merchandise 	is 	being 	(or 	is 	likely 	to
be) 	sold 	in 	the 	United 	States 	at 	"less 	than 	fair 	value" 	or 	is
"subsidized," 	but 	the 	lTC 	must 	also 	find 	that 	an 	industry 	in 	the
United 	States 	is 	materially 	injured, 	or 	is 	threatened 	with
material lnjury, 	or 	that 	the 	establishment 	of 	an 	industry 	in 	the
4( ... continued)
F.T.C. 	361, 	464, 	466 	(1985); 	Grand 	Union 	Co., 	102 	F.T.C. 	812,
1039-41 	(1983); 	Federal 	Trade 	Commission Statement 	Concerning
Horizontal 	Mergers, 	4 Trade Reg. 	Rep. 	(CCH) 	! 	13,200 	at 	20,905-
906 	(June 	14, 	1982). 	~ AlAQ Justice 	Department 	Merger Guide-
lines 	!! 	2.11, 	2.12, 	4 	Trade 	Reg. 	Rep. 	(CCH) 	! 	13,103 	at 	20,556-
557 	(1984).
5 	The 	Federal 	Trade 	Commission 	has 	substantial 	expertise
with 	respect 	to 	bearings. 	~,~, SKF 	Industries. 	Inc., 	94
F.T.C. 	6 	(1979), 	modified, 	96 	F.T.C. 	752 	(1980); 	Textron 	Inc., 	77
F.T.C. 	655 	(1970); 	Bearings. 	Inc., 	64 	F.T.C. 	373 	(1964); 	~
Timken 	Roller 	Bearing Co., 	58 	F.T.C. 	98 	(1961); 	American 	Ball
Bearing, 	57 	F.T.C. 	1259 	(1960); 	Federal 	Mogul, 	54 	F.T.C. 	1628
(1958). 	The 	FTC 	has, 	in 	addition, 	conducted 	several 	recent 	non-
public 	investigations 	into mergers 	and 	joint ventures 	among
companies 	that 	produce 	bearings.
4

United 	States 	is 	materially 	retarded 	by 	reason 	of 	imports 	of 	that
merchandise. 6
To make 	its 	injury determination, 	the 	ITC 	must 	first 	identi-
fy 	the 	relevant 	domestic 	industry. 	The 	applicable 	statute
defines 	the 	relevant 	domestic 	"industry" 	as:
the domestic 	producers 	as 	a 	whole 	of 	a 	like 	product,
or 	those 	producers 	whose 	collective 	output 	of 	the 	like
product 	constitutes 	a 	major 	proportion of 	the 	total
domestic 	production of 	that 	product.
19 	U.S.C. 	S 	1677(4)(A). 	"Like 	product," 	in 	turn, 	is 	defined 	as:
a 	product 	which 	is 	like, 	or 	in 	the 	absence 	of 	like,
most 	similar 	in characteristics 	and 	uses 	with, 	the
article 	subject 	to 	an 	investigation.
19 	U.S.C. 	S 	1677(10). 	Petitioners 	may 	specify 	the 	scope 	of 	the
imports 	investigated, 	but 	the 	ITC must 	define 	the 	domestic 	indus-
try 	for 	which 	it 	will 	consider whether 	those 	imports 	have 	caused
injury.
Determination of 	what 	product 	is 	"like" 	the 	allegedly 	dumped
and 	subsidized 	imports 	is 	one of 	the 	most 	important 	issues 	in 	an
injury 	investigation. 7 	The 	statute 	fails 	to 	elaborate 	on 	the
6 	19 	U.S.C. 	SS 	1671, 	1673.
7 	Although many 	factors 	are 	relevant 	to 	the 	inquiry, 	the
ITC 	is 	required 	to 	examine: 	(1) 	the volume 	of 	imports, 	(2) 	the
effects 	of 	the 	imports 	on prices 	in 	the 	United States 	for 	"like"
products, 	and 	(3) 	the 	impact 	of 	the 	imports 	on domestic 	producers
of 	like 	products, 	focusing 	on 	factors 	such as 	output, 	sales, 	.
profits, 	domestic 	prices, 	cash 	flow, 	and market 	shares. 	19
U.S.C. 	S 	l677(7)(B)-(C). 	Former Vice 	Chairman Calhoun explained
several 	years 	ago:
To me, 	identification and 	analysis 	of 	what 	domestic
product 	is 	like 	the 	imported article 	in characteristics
and uses, 	or, 	in 	the 	absence 	of 	like, 	most 	similar 	in
characteristics 	and 	uses 	with 	the 	imported 	article 	is
one of 	the 	critical 	issues 	before 	us 	in 	any 	Title VII
. 	(continued ... )
5

definition 	of 	"like 	product." 	By 	simply 	stating 	that 	a 	"like
product" 	is 	a 	product 	that 	is 	"like" 	the 	imported 	article 	subject
to 	investigation; 	the 	statutory 	language 	is 	circular 	and 	provides
little 	guidance 	to 	the 	ITC. 	In 	that 	respect, 	it 	ie 	aomewhat 	like
the 	"vague 	and 	general" 	language 	of 	the 	antitrust 	lawl. 8 	As 	the
Supreme Court 	said 	in 	Brown Shoe Co. 	v. 	United 	Statel, 	referring
to 	the 	antitrust 	laws, 	"Congress 	neither 	adopted 	nor 	rejected
specifically any particular 	tests 	for 	measuring 	the 	relevant
markets. "9
B. 	Hegtral Principles Are Needed To Promote 	Predictability
In 	defining 	"like 	product" 	and 	"domestic 	industry," 	the 	ITC
begi~s 	with 	the 	definition 	of 	the 	imports 	subject 	to 	investiga-
7( •.• continued)
investigation. 	It 	is 	based upon 	our 	identification of
the 	like product 	that 	we 	define 	the 	industry. 	Our
definition of 	the 	industry, 	in 	turn, 	establishes 	the
pool 	of 	domestic 	producers 	whose 	health we 	are 	to
assess.
Truck Trailer Axle-and-Brake Assemblies 	from 	Hungary, 	Inv. 	No.
731-TA-38 	(prelim.), 	USITC 	Pub. 	1135, 	3 	ITRD 	1261, 	1266 	(1981)
(views 	of 	Vice 	Chairman 	Calhoun) 	(emphasis 	added).
8 	P. 	Areeda, 	Antitrust 	Analysis 	5 	(1981). 	The 	antitrust
laws 	include 	the 	Clayton, 	Sherman, 	and 	Federal 	Trade 	Commission
Acts. 	The Clayton Act 	prohibits 	acquisitions 	"where 	in 	any 	line
of 	commerce 	in any 	section of 	the 	country, 	the 	effect 	of 	such
acquisition may be 	substantially 	to 	lessen competition, 	or 	tend 	.
to 	create 	a 	monopoly." 	15 	U.S.C. 	S 18. 	The 	Sherman Act 	prohib-
its 	"every contract, 	combination 	. 	. 	., 	or conspiracy,' in
restraint 	of 	trade" 	and 	imposes 	penalties 	on 	"every person who
shall 	monopolize, 	or 	attempt 	to 	monopolize or combine 	or 	conspire
with 	any other person or 	persons, 	to 	monopolize 	any 	part 	of 	the
trade 	or commerce." 	15 	U.S.C. 	SS 	1-2. 	The 	Federal 	Trade 	Com-
mission Act 	declares 	unlawful 	"unfair methods 	of 	competition 	in
or 	affecting commerce." 	15 	U.S.C. 	S 	45.
9 	370 	U.S. 	294, 	320 	(1962).
6

tion, 	usually defined 	in 	the 	petition 	that 	caused 	the 	case 	to 	be
initiated and 	in 	the 	scope 	of 	the 	investigation 	initiated 	by 	the
Department 	of 	Commerce. 	The 	ITC 	then examines 	domestically 	pro-
duced products 	that 	are 	"like" 	the 	imports.
Acting 	ITC 	Chairman Brunsdale 	has 	recognized 	that 	the 	lTC's
"like product" 	determinations 	could 	benefit 	from 	"greater pre-
dictability and 	transparency."10 	Last 	year, 	then 	Vice 	Chairman
Brunsdale described 	"the 	problem 	faced 	by one 	experienced 	com-
mentator 	as 	he 	reviewed, 	in 	apparent 	bewilderment, 	a 	string 	of
Commission 	like-product 	decisions":
A galvanized carbon 	steel 	sheet 	is 	not 	"like" 	an
ungalvanized carbon 	steel 	sheet, 	but 	a 	galvanized
carbon steel 	wire 	nail 	is 	"like" 	an 	ungalvanized carbon
steel 	wire 	nail. 	Carbon 	steel 	wire 	rope 	and 	stainless
steel 	wire 	rope 	are 	like 	products, 	as 	are 	galvanized
and ungalvanized wire 	rope, 	but 	a 	porcelain-coated
carbon 	steel 	cooking pan 	is 	not 	"like" 	a 	stainless
steel 	cooking pan 	-- yet 	all 	stainless 	steel 	pans 	are
"like products", 	even though 	they may 	be 	combined with
other metals 	such as 	copper or 	aluminum. 	Carbon 	steel
wire 	rod 	and 	stainless 	steel wire 	rod, 	however, 	appar-
ently are 	not 	"like products." 	Pipe 	that 	is 	welded 	is
not 	"like" 	pipe 	that 	is 	seamless, 	unless 	the 	pipe 	is
used 	for 	the 	oil 	industry.l1
Brunsdale 	noted 	"the 	seeming 	ad 	hoc 	nature 	of 	the 	Commission's
like product 	determinations."12 	In 	the 	preliminary determination
10 	Certain All-Terrain Vehicles 	from 	Japan, 	Inv. 	No. 	731-
TA-388 	(prelim.), 	USITC 	Pub. 	2071 	at 	26 	(1988) 	(views 	of 	Vice
Chairman Brunsdale and Chairman Liebeler).
11 	~ at 	26-27 	(QPoting Palmeter, 	Inju&y Determinations 	in
Antidumping 	and 	Countervailing 	Duty Cases 	-- 	A Cornmenta&y on
U.S. 	Practice, 	21 	J. 	of 	World Trade Law 	7, 	15 	(1987)).
12 	~ at 	26.
7

in 	this 	case, 	the 	Commission 	said that 	"even 	apparently 	similar
investigations 	..• 	have 	limited precedential 	value."13
While 	each case 	must, 	of 	course, 	be 	decided 	on 	its 	own
facts, 	such an ad 	hoc 	approach 	undercuts 	predictability.14
Unpredictability may make 	complying with 	the 	law more 	difficult
for 	foreigners, 	and 	create 	uncertainty 	for 	domestic 	purchasers
of 	imported 	goods, 	as 	well 	as 	for 	domestic 	manufacturers 	who 	must
make 	business 	decisions 	based on what 	their 	foreign 	competitors
are 	likely 	to 	do 	and who 	may want 	to 	bring 	trade 	cases 	challeng-
ing 	foreign 	practices 	only when 	they expect 	to 	prevail. 	Predict-
ability would 	likely 	lead 	to 	fewer 	violations 	of 	the 	law. 	The
legislative 	history of 	the 	antidumping 	and countervailing duty
laws 	reveals 	that 	Congress 	sought 	to 	"ensure[] 	maximum 	predicta-
bility" 	in enacting 	the 	laws. 1s
The 	wayan 	industry 	is 	defined can determine 	the 	outcome 	of
the 	case. 	Generally, 	a 	given volume 	of 	imports 	will 	have 	a
greater 	impact 	on 	a 	narrowly defined market. 	Thus, 	the 	more
13 	Antifriction Bearings 	(Other Than Tapered Roller
Bearings) 	and 	Parts 	Thereof 	From 	the 	Federal 	Republic 	of
Germany, 	France, 	Italy, 	Japan, 	Romania, 	Singapore, 	Sweden,
Thailand, 	and 	the 	United Kingdom, 	lnv. 	No. 	731-TA-391-399 	and
303-TA-19 	and 	20 	(prelim.), 	USlTC 	Pub. 	2083 	(1988) 	at 	9.
14 	One 	commentator has 	said 	that 	the 	only consistency 	he
could 	find 	in 	lTC 	industry definition decisions 	is 	that 	"[t]he
petitioner almost 	always 	wins." 	Palmeter, 	Injury 	Determinations,
supra, 	at 	16. 	That 	characterization recalls 	Justice 	Potter
Stewart's 	comment 	that 	the 	sole 	consistency 	he 	could 	find 	in 	a
line 	of 	antitrust 	cases 	was 	that 	"the Government 	always 	wins,"
United 	States 	v. 	Von's 	Grocery Co., 	384 	U.S. 	280, 	301 	(1965)
(Stewart, 	dissenting), 	at 	a 	time 	before 	economic 	analysis 	played
a 	major 	role 	in 	antitrust cases.
15 	S. 	Rep. 	No. 	249, 	96th Cong., 	1st 	Sess. 	36 	(1979).
8

narrowly 	the 	domestic 	market 	is 	defined, 	the 	greater 	is 	the
likelihood 	that 	the 	imports 	will 	be 	found 	to 	have 	caused 	or 	to
threaten 	to 	cause 	material 	injury 	to 	the 	domestic 	industry. 	On
the 	other 	hand, 	in 	cases 	such 	as 	this 	bearings 	case, 	in which
dumping or 	subsidization 	allegations 	are 	made 	against 	products
from 	several 	countries 	with 	small 	import volumes, 	the 	imports 	of
any 	country may 	be 	insufficient 	to 	cause 	material 	injury 	or 	there
may be 	no 	imports 	at 	all 	of 	some 	products 	from 	some 	countries.
Those 	imports 	will 	be 	cumulated, 	however, 	if 	they 	constitute 	a
single 	"like 	product." 	Thus, 	broad 	industry 	definitions 	in 	those
circumstances 	may 	be more 	likely to 	lead 	to 	affirmative 	injury
findings 	and broad duty· orders. 	If 	no 	domestic 	product 	is
exactly 	like 	an 	imported product, 	a 	broad definition may 	also 	be
more 	likely 	to 	result 	in an 	affirmative 	finding 	since 	a 	narrow
definition would 	result 	in a 	finding 	that 	there 	is 	no 	domestic
industry to 	protect.
A neutral 	principle would 	give 	the 	lTC's 	decisions 	greater
consistency and make 	them more 	understandable 	to 	the 	domestic 	and
international 	business 	communities. 	Consistency 	and 	consequent
predictability would 	likely 	lead 	to 	greater 	compliance with 	the
trade 	laws. 	Whichever way 	it 	cuts 	in·any 	given case 	-- 	for 	or
against 	an 	affirmative 	finding 	-- 	a 	market-based 	approach 	to
defining domestic 	industries 	would 	promote 	predictability and
would be 	in accord with 	the 	goals 	of 	the 	injury 	test, 	as
explained 	below.
9

C. 	A llarket Approach 	Is 	Consistent With '1'he Purposes
Of 	The Trade Laws 	And With Congres1ioOOl 	Intent
The 	trade 	laws 	require 	the 	ITC 	to 	find 	that 	a 	domestic
industry, 	not 	just 	a 	firm, 	is 	injured 	before 	imposing 	duties 	in
response 	to 	subsidization 	or dumping. 	That 	requirement 	limits
the 	potential 	ambit 	of 	the 	law, 	which might 	otherwise 	protect
inefficient 	businesses. 	It 	allows 	domestic 	consumers 	to 	benefit
from 	foreign 	subsidization 	and dumping when 	these 	acts 	do 	not
injure 	an 	industry 	as 	a 	whole. 	If 	a 	domestic 	industry 	is 	not
injured, 	consumers 	simply 	benefit 	from 	low-priced 	goods, 	regard-
less 	of 	whether 	the 	goods 	are 	low 	in 	price 	because 	a 	foreign
government 	is 	subsidizing 	u.s. 	consumers 	or 	because 	a 	foreign
company dumps 	its 	goods 	in 	the 	U.S. 	market.
When dumped or 	subsidized 	imports 	are 	sold 	in 	this 	country,
purchasers 	of 	a 	variety of 	alternative 	products, 	rather 	than
merely purchasers 	of 	goods 	identical 	in 	all 	characteristics 	to
the 	imports, 	may 	shift 	their 	purchases 	away 	from 	their 	former
suppliers 	and 	to 	the 	importer. 	Producers 	who 	lose 	sales 	to 	the
dumped or 	subsidized 	imports 	may be 	injured by 	the 	imports. 	For
this 	reason, 	the 	alternative 	products 	should be considered 	"like"
products 	and 	the companies 	producing 	those 	alternative 	products
should be 	included 	in 	the domestic 	industry 	that 	the 	Commission
examines 	for 	injury. 	Otherwise 	the 	unfair 	trade 	practice 	might
not 	be 	the 	cause 	of 	injury, 	and 	protection 	that 	is 	levied may
impose costs 	on consumers 	while 	providing 	no 	benefit 	to 	those 	who
10

are 	injured. 16 	A proper market 	definition 	would 	therefore
include 	substitutes 	that 	exert 	competitive 	influence 	on 	sales 	of
the 	imports. 17
This 	analysis 	does 	not 	require 	petitioners 	to 	prove 	or 	the
Commission 	to 	find 	that 	the 	foreign 	manufacturers 	are 	pricing
below marginal 	cost 	or 	that 	they 	intend 	to 	drive 	the 	domestic
manufacturers 	out 	of 	business. 1S 	The 	statute 	requires 	only 	that
domestic 	competitors 	are 	injured. 	Another 	statute, 	the 	Antidump-
ing Act 	of 	1916, 	provides 	for 	criminal 	sanctions 	and 	treble
damages 	against 	importers 	who 	dump 	with 	the 	intent 	to 	destroy 	or
injure 	a 	U.S. 	industry.19
16 	A case brought 	against 	blue 	glass 	bottles, 	for 	instance,
which 	ignores 	green 	glass 	bottles, 	would 	lead 	to 	improper
results. 	If 	domestic 	blue 	glass 	bottle 	producers 	are 	unhealthy
while 	domestic 	green 	glass 	bottle 	producers 	are 	healthy, 	then 	the
unfair 	blue 	glass 	bottle 	imports 	are 	probably 	not 	the 	cause 	of
the 	domestic 	problems. 	Imposition of 	duties 	on 	blue 	glass 	bottle
imports 	will 	lead consumers 	to 	switch to 	green 	glass 	bottles, 	and
will 	not 	benefit 	the 	domestic 	blue 	glass 	bottle 	producers.
17 	In considering 	injury 	issues, 	the 	ITC 	presumes 	that
there 	is 	a 	national 	geographic 	market, 	but may 	find 	a 	regional
industry is 	appropriate. 	~ 	19 	U.S.C. 	S 1677(4)(C}. 	Since 	most
markets 	in which 	imports 	are 	significant 	are 	national 	in 	geo-
graphic 	scope, 	this 	presumption 	is 	rational, 	and does 	not 	lead
to 	overinclusion.
18 	The Court 	of 	International 	Trade, 	in 	a 	case 	addressing
causation 	analysis, 	made 	clear that 	"[i]n applying 	the 	antidump-
ing 	law under which 	this 	action 	is 	brought 	it 	is 	improper 	for 	ITC
to 	place at 	the 	center of 	its 	causation 	analysis 	the 	intent 	of 	a
foreign 	producer." 	USX COhg. 	v. 	United States, 	682 	F. 	Supp. 	60,
68 	(Ct. 	Int'l 	Trade 	1988). 	See 	also 	Maverick Tube 	COhg. 	v.
United 	States, 	687 	F. 	Supp. 	1569 	(Ct. 	Int'l 	Trade 	1988).
19 	Revenue 	Act 	of 	1916, 	ch. 	463, 	SS 	800-806, 	39 	Stat. 	798
(codified 	at 	15 	U.S.C. 	SS 	71-77). 	~ Hiscocks, 	International
Price 	Discrimination: 	The 	piscove~ of 	the 	Predato~ Pumping Act
of 	1916, 	11 	Int'l 	Law. 	227 	(1977).
11

The 	antidumping 	and 	countervailing duty 	laws 	that 	the 	ITC
enforce derive 	from 	the 	Antidumping Act 	of 	1921. 	In 	that 	Act,
Congress 	made 	injury 	to 	the 	U.S. 	industry, 	rather 	than 	intent, 	a
prerequisite 	for 	imposition of 	antidumping duties. 20 	Jacob 	Viner
explained 	at 	the 	time:
[t]he 	limitation of 	dumping 	duties 	to 	dumping 	which
injures 	or 	is 	likely 	to 	injure 	an 	American 	industry
leaves 	it 	open 	to 	a 	wise 	customs 	administration 	to 	re-
frain 	from 	interfering with 	all 	dumping 	whose 	benefit
to 	the American consumer 	is 	not 	clearly offset 	in 	part
at 	least 	by 	an 	injury, 	actual 	or 	prospective, 	to 	Amer-
ican 	industry.21
The 	current 	"like 	product" 	and 	"domestic 	industry" 	provisions
were 	enacted as 	part 	of 	the 	Trade 	Agreements 	Act 	of 	1979. 	That
statute repealed 	the Antidumping Act 	of 	1921 	and 	"replace[d] 	it
with 	a 	comprehensive 	statute 	built 	upon 	the 	1921 Act," 	in order
to 	implement 	the GATT Tokyo 	Round MTN Codes. 22 	The 	new 	law made
broad procedural 	changes, 	adopted 	an 	injury requirement 	in 	coun-
tervailing duty cases, 	and 	required 	that 	injury be 	"material,"
20 	Antidumping Act 	of 	1921, 	ch. 	14, 	S 	201, 	42 	Stat. 	11,
formerly 	codified at 	19 	U.S.C. 	S 160-71 	(1976), 	repealed 	1979.
21 	J. 	Viner, 	Dumping: 	A 	Problem 	in 	International 	Trade 	263
(1966 	reprint). 	The 	legislative 	history of 	that 	Act 	makes 	clear
that 	the 	law's 	purpose was 	to
protect[] 	our 	industries 	and 	labor 	against 	a 	now common
species 	of 	commercial 	warfare 	of 	dumping 	goods 	on 	our
markets 	at 	less 	than cost 	or 	home 	value 	if 	necessary
until 	our 	industries 	are 	destroyed, 	whereupon 	the
dumping ceases 	and prices 	are 	raised 	at 	above 	former
levels 	to 	recoup dumping 	losses. 	By 	this 	process 	while
temporarily cheaper prices 	are 	had our 	industries 	are
destroyed 	after which we 	more 	than 	repay 	in 	the 	exac-
tion of 	higher prices.
H.R. 	Rep. 	No.1, 	67th Cong., 	1st 	Sess. 	23-24 	(1921).
22 	S. 	Rep. 	No. 	249, 	96th Cong., 	1st Sess. 	15 	(1979).
12

but 	otherwise 	left 	intact 	most 	of 	the 	substantive 	provisions 	of
the 	1921 	Act. 23
Two 	remarks 	in 	the 	legislative 	history of 	the 	1979 	Act 	sug-
gest 	that 	Congress 	intended 	the 	ITC 	to 	utilize 	a 	market 	approach
to 	defining 	"like product." 	The 	Senate 	Finance Committee 	recog-
nized 	that 	under 	then 	current 	law 	the 	domestic 	industry was
defined 	to 	include 	producers 	of 	articles 	competitive with 	the
imported articles. 	The 	Committee 	Report 	states:
[T]he 	ITC 	has 	generally considered 	as 	relevant 	indus-
tries 	those 	composed of 	domestic 	producer 	facilities
engaged 	in 	the 	production of 	articles 	like 	the 	imported
articles, 	although 	it 	has 	considered domestic 	producer
facilities 	engaged 	in 	the 	production of 	articles 	which,
although 	not 	like 	the 	imports 	concerned, 	are 	neverthe-
less 	competitive 	with 	those 	imports 	in 	u.s. 	markets. 24
Although Congress 	used 	the 	"like 	product" 	language 	of 	the 	GATT
codes, 	it 	did 	not 	intend 	that 	the 	term be 	interpreted 	narrowly.
The 	Committee 	Report 	states:
The 	requirement 	that 	a 	product 	be 	"like" 	the 	imported
article 	should not 	be 	interpreted 	in such 	a 	narrow
fashion 	as 	to 	permit 	minor differences 	in 	physical
23 	S. 	Rep. 	No. 	249, 	96th Cong., 	1st Sess. 	61, 	107 	(1979);
H.R. 	Rep. 	No. 	317, 	96th Cong., 	1st Sess. 	59 	(1979). 	In 	its 	dis-
cussion of 	the Trade 	Reform Act 	of 	1974, 	the 	Senate 	Finance 	Com-
mittee 	explained, 	"This 	[1921 	Antidumping] 	Act 	is 	not 	a 	'protec-
tionist' 	statute designed 	to 	bar or 	restrict 	u.S. 	imports;
rather, 	it 	is 	a 	statute designed 	to 	free 	u.S. 	imports 	from 	unfair
price discrimination 	practices." 	S. 	Rep. 	No. 	1298, 	93d Cong., 	2d
Sess. 	(1974) 	at 	179. 	This 	sentence was 	cited with 	approval 	by
Senator 	Danforth 	in 	the 	debates 	on 	the 	1979 	Act. 	Congo 	Rec.
S10317 	(daily ed. 	July 	23, 	1979). 	Senator 	Danforth went 	on 	to
say 	that 	dumped 	imports 	are 	not 	in the 	best 	interest 	of 	the
United 	States 	consumer, 	since 	"the 	long run 	impact 	is 	likely 	to
be 	higher prices 	and 	greater profits 	for 	the 	foreign 	producers
once 	the 	domestic 	competition 	has 	been crippled." 	ld.
24 	S. 	Rep. 	No. 	249, 	96th Cong., 	1st Sess. 	82, 	90-91 	(1979)
(emphasis 	added).
13

characteristics 	or 	uses 	to 	lead 	to 	the 	conclusion 	that
the 	product 	and 	article 	are 	not 	"like" 	each 	other. 25
Moreover, 	by 	using 	the 	"characteristics 	and 	uses" 	language 	in 	the
statute, 	Congress 	seems 	to 	have 	required 	some 	physical 	similarity
but, 	at 	the 	same 	time, 	recognized 	the 	importance 	of 	commercial
interchangeability. 26 	A test 	based on 	substitutability 	is
25 	S. 	Rep. 	No. 	249, 	96th Cong., 	1st Sess. 	82, 	90-91
(1979). 	Congress, 	in defining 	"like 	product" 	to 	include 	"simi-
lar" 	products 	and 	in emphasizing 	"uses" 	as 	well 	as 	"characteris-
tics," 	did 	not 	follow 	the GATT MTN 	Codes 	precisely. 	The 	codes
define 	"like 	product" 	to 	mean 	Ita 	product 	which 	is 	identical, 	i.e.
alike 	in 	all 	respects 	to 	the 	product 	under 	consideration 	or 	in
the 	absence 	of 	such a 	product, 	another 	product which 	although 	not
alike 	in 	all 	respects, 	has 	characteristics 	closely 	resembling
those 	of 	the 	product 	under 	consideration." 	Subsidies 	Code, 	Art.
6, 	! 	1 n.18; 	Antidumping Code, 	Art. 	2, 	! 	2. 	The 	Finance 	Commit-
tee was 	apparently aware 	that 	some 	U.S. 	trading 	partners 	were
concerned that 	elements 	of 	the 	1979 	Act 	did 	not 	follow 	the
Codes. 	S. 	Rep. 	No. 	249, 	96th Cong., 	1st 	Sess. 	36 	(;1979).
Section 	3(a) 	of 	the 	1979 	Act made 	clear 	that 	if 	there 	is 	a
conflict 	between the 	statute 	and 	the 	MTN Codes, 	the 	1979 	Act
prevails. 	19 	U.S.C. 	S 	2504(a).
26 	sea E. 	Vermulst, 	Antidumping Law 	and 	Practice 	in 	the
United 	States 	and 	the 	European Communities 	at 	518-19 	(1987);
Langer, 	The 	Concepts 	of 	Like 	Product 	and 	Domestic 	Indust~ Under
the 	United 	States 	Trade Agreements 	Act 	of 	1979, 	17 	G.W.J. 	Int'l
L. 	& Econ. 	495, 	500 	(1983). 	Langer 	argues 	that 	Congress 	used 	the
term 	"similar" 	in 	the 	antidumping 	and countervailing duty 	laws 	to
mean 	the 	same 	thing 	as 	"directly competitive" 	under 	sections 	201
and 	406 	of 	the Trade Act 	of 	1974. 	Section 201, 	the 	U.S. 	escape
clause, 	requires 	injury 	to 	a 	"domestic 	industry 	producing 	an
article 	like 	or directly competitive with 	the 	imported 	article."
19 	U.S.C. 	S 	2251(b)(1). 	Section 	406 	provides 	a 	remedy 	if 	imports
of 	an 	article 	from 	a 	communist 	country, 	"like or directly 	compet-
itive with 	an 	article 	produced by 	[a] 	domestic 	industry," 	are
causing market 	disruption. 	19 	U.S.C. 	S 	2436(a)(1), 	(e)(2).
"Directly competitive" 	articles 	are 	defined 	to 	include 	"those
which, 	although 	not 	substantially 	identical 	in their 	inherent 	or
intrinsic 	characteristics, 	are 	substantially equivalent 	for
commercial 	purposes, 	that 	is, 	are 	adapted 	to 	the 	same ~ 	and
are 	essentially 	interchangeable 	therefor." 	S. 	Rep. 	No. 	1298,
93d Cong., 	2d Sess. 	122 	(1974). 	Thus 	a 	directly competitive
article 	is .defined 	in 	terms 	of 	being 	similar 	in characteristics
and 	uses 	to 	the 	imported 	product 	under 	investigation.
14

therefore consistent 	with 	Congressional 	intent.
The 	ITC 	has 	struggled with 	the 	"like 	product" 	language 	since
enactment of 	the 	Trade Agreements 	Act 	but 	has 	never 	required 	that
products 	be 	identical. 27 	In 	fact, 	the 	Commission 	appears 	to 	be
moving more 	and more 	toward 	an economically meaningful 	approach
to 	defining 	"like product" 	and 	"domestic 	industry." 	Three 	Com-
missioners 	last year 	took 	the 	position that
[t]he 	purpose of 	the 	Commission's 	[like 	product] 	in-
quiry 	is 	to 	identify the 	producers 	whose 	goods 	are
most 	clearly competitive with, 	and 	therefore 	most
likely to 	be 	adversely 	affected 	by, 	dumped 	imports.
The 	Commission's 	like 	product 	determination must 	focus
on distinctions 	between products 	that 	have 	economic
consequences, 	and must 	be 	rooted 	in 	attention 	to 	the
nature 	of 	the markets 	for 	closely competing 	imported
and domestic 	products. 28
In 	recent 	decisions, 	the 	ITC 	has 	considered 	factors 	suggestive 	of
a 	market 	approach, 	including 	interchangeability; 	customer 	and
27 	~ Portable 	Electric 	Nibblers 	from 	Switzerland, 	Inv.
No. 	731-TA-35 	(prelim.), 	USITC 	Pub. 	1108, 	2 	ITRD 	5460 	(1980)
("[t]he 	concept 	of 	likeness 	does 	not 	require 	exact 	identity, 	but
it 	does 	require 	that 	the 	goods 	be 	substantially the 	same 	in 	uses
or 	characteristics"); 	Truck 	Trailer Axle-and-Brake Assemblies
from 	HungahY, 	Inv. 	No. 	731-TA-38 	(prelim.), 	USITC 	Pub. 	1135, 	3
lTRD 	1261, 	1264, 	n.7 	(1981) 	("like" 	does 	not mean 	"virtually
identical"). 	The Commission has 	divided 	products 	like 	those
under 	investigation 	into 	separate 	"like products," 	but we 	are 	not
aware 	of 	any cases 	in which 	the 	ITC 	has 	expanded the 	product
definition 	to 	consider competitive products 	not 	included 	in 	the
petitioner's 	definition. 	Past cases 	therefore 	may 	have 	ignored
products 	excluded by 	the 	petitioner 	that 	would 	be 	included 	in 	a
market-based approach.
28 	Digital 	Readout 	Systems 	and 	Subassemblies 	Thereof 	From
Japan, 	Inv. 	No. 	731-TA-390 	(prelim.), 	USITC 	Pub. 	2081 	at 	5 	(1988)
(views 	of 	Vice 	Chairman Brunsdale, 	Commissioner Cass, 	and 	Chair-
man Liebeler). 	See 	also 	Antifriction Bearings, 	supra, 	at 	n.6;
All-Terrain Vehicles, 	supra, 	at 	23-27 	(views 	of 	Vice 	Chairman
Brunsdale 	and Chairman Liebeler); 	Certain Copier Toner 	from
Japan, 	lnv. 	No. 	731-TA-373 	(prelim.), 	USlTC 	Pub. 	1960 	(1987)
(views 	of Vice 	Chairman Brunsdale 	and Chairman Liebeler).
15

producer 	perceptions 	of 	the 	articles; 	the 	similarity 	(or dissimi-
larity) 	of 	prices 	for 	imports 	and potential 	like 	domestic 	prod-
ucts; 	channels 	of 	distribution; 	and 	production 	processes, 	common
manufacturing equipment, 	facilities, 	and 	production employees. 29
The 	purpose 	of 	this 	inquiry, 	as 	some 	commissioners 	have 	recog-
nized, 	is 	"to evaluate 	overlapping markets 	in which 	different
products 	compete."30
D. 	The Pro,posed Frl1lle1fQrk
FTC 	case 	law 	and merger 	guidelines, 	developed 	after 	substan-
tial 	experience with market 	definition, 	provide 	a 	framework 	that
could be used 	to 	define 	"domestic 	industry."31 	Most 	importantly,
29 	~,~, 	Mechanical 	Transfer 	Presses 	from 	Japan, 	Inv.
No. 	731-TA-429 	(prelim.), 	USITC 	Pub. 	2160 	(1989); 	Certain 	Steel
Wheels 	from 	Brazil, 	Inv. 	No. 	731-TA-420 	(prelim.), 	USITC 	Pub.
2124 	(1988); 	Certain Forged Steel 	Crankshafts 	from 	the 	Federal
Republic 	of 	Germany 	and 	the 	United Kingdom, 	Inv. 	No. 	731-TA-351
and 	353 	(final), 	USITC 	Pub. 	2014 	(1987); 	64K 	Qynamic 	Random
Access 	MemohY Components 	from 	Japan, 	Inv. 	No. 	731-TA-270 	(final),
USITC 	Pub. 	1862 	(1986); 	Certain Radio 	Paging 	and Alerting 	DeVices
from 	Japan, 	Inv. 	No. 	731-TA-102 	(final), 	USITC 	Pub. 	1410 	at 	21-25
(1983) 	(views 	of 	Commissioner Stern). 	See 	also 	Asociacion
Colombiana 	de 	Exportadores 	v. 	United 	States, 	693 	F. 	Supp. 	1165
(Ct. 	Int'l 	Trade 	1988); 	Yuasa-General 	BattehY Corp. 	v. 	United
States, 	661 	F. 	Supp. 	1214 	(Ct. 	Int'l 	Trade 	1987). 	The 	Commission
has 	not 	been consistent 	in 	relying on 	these 	factors 	and 	it 	is 	not
always 	clear when 	or why certain of 	the 	factors 	receive 	special
emphasis. 	In 	the 	preliminary determination 	in 	this 	case, 	for 	in-
stance, 	the 	Commission 	identified 	five 	factors 	but 	noted 	it 	"may
consider other 	factors 	which 	it deems 	relevant 	based 	on 	the
facts 	of 	a 	given 	investigation," 	Antifriction 	Bearings, 	supra, 	at
7, 	and 	the 	Commission recently 	identified eight 	factors.
Mechanical 	Transfer 	Presses, 	supra, 	at 	4.
30 	Digital 	Readout 	Systems, 	supra, 	at 	5 	(views 	of 	Vice
Chairman Brunsdale, 	Commissioner Cass, 	and Chairman Liebeler).
31 	Professor Elzinga 	has 	noted, 	"Just 	like 	the 	antitrust
agencies, 	the 	ITC 	worries 	about 	'relevant markets' 	-- 	though 	it
(continued ... )
16

the 	FTC 	recognizes 	that 	market 	definition 	is 	based 	on 	both 	demand
and 	supply 	responses 	to 	postulated price 	changes.
As 	the 	Federal 	Trade 	Commission explained 	in one 	recent
decision, 	measuring demand 	and 	supply elasticities 	would 	be 	an
ideal 	approach:
A relevant 	product market 	can 	. 	. 	. 	be 	delineated 	by
measuring cross-elasticities 	of 	supply 	and demand; 	that
is, 	by determining 	the degree 	to 	which 	-- 	within 	a
given 	period of 	time 	-- 	changes 	in the 	price 	of 	a 	given
product 	or 	service will 	induce 	changes 	in 	the 	quanti-
ties 	of 	a 	second 	product 	or 	service 	that 	are 	demanded
or 	supplied. 32
31( ..• continued)
avoids 	the 	term. 	As 	I 	understand 	the 	lTC's 	nomenclature, 	it 	is
concerned with 	the 	definition of 	'like 	products' 	and 	'domestic
industries.' 	••• 	The 	parallels 	to 	antitrust 	are 	obvious."
Elzinga, 	Antitrust 	Policy and Trade 	Policy 	-- 	An 	Economist's
Perspective, 	56 	Antitrust L.J. 	439 	(1987). 	Of 	course, 	the
Clayton Act 	similarly talks 	about 	"lines 	of 	commerce" 	and
"sections 	of 	the 	country" 	rather 	than product 	and 	geographic
markets. 	See 	also 	Note, 	Economically Meaningful 	Markets: 	An
Alternatiye Aggroach 	to 	Defining Like 	Product 	and 	Domestic
Industry Under 	the Trade 	Agreements 	Act of 	1979, 	73 	U. 	Va. 	L.
Rev. 	1459 	(1987).
32 	B.F. 	Goodrich Co., 	slip Ope 	at 	15, 	FTC 	Docket 	No. 	9159
(March 	15, 	1988) 	(citations 	omitted). 	The 	FTC 	explained 	further,
"Thus, 	the 	Supreme Court 	has 	concluded that 	both 	demand 	and
supply 	substitutability are 	relevant 	to 	determining 	the 	contours
of 	a 	relevant 	product market. 	Consistent with 	that 	position, 	the
Commission seeks 	'to 	define 	a 	product 	or group of 	products 	suffi-
ciently distinct 	that 	buyers 	could not 	defeat 	an 	attempted exer-
cise 	of 	market 	power on 	the 	part 	of 	sellers 	of 	those 	products 	by
shifting purchases 	to 	still 	different 	products.' 	Similarly, 	the
Justice 	Department 	has 	concluded 	that 	a 	given 	item constitutes 	a
relevant 	product 	if 	its 	manufacturer could 	'profitably 	impose 	a
"small 	but 	significant 	and 	nontransitory" 	increase 	in 	price' 	--
in most 	contexts, 	a 	five 	percent 	increase 	lasting one 	year 	--
without 	(1) 	inducing 	a 	significant 	number of 	buyers 	to 	begin
purchasing 	substitute products, 	or 	(2) 	inducing 	a 	significant
number 	of 	manufacturers 	of 	other 	products 	to 	begin producing 	the
product 	at 	issue." 	~. 	at 	15-16.
Own price elasticities, 	which measure 	demand 	sensitivity 	to
changes 	in a 	good's 	own price, 	are 	also 	important measures 	for
(continued ... )
17

The 	ITC might 	consider 	an analogous 	market 	approach: 	if 	a
foreign 	competitor were 	to 	charge 	a 	below-market 	price, 	would
buyers 	switch 	their 	purchases 	to 	the 	imported 	product? 	If 	so,
affected 	producers 	should be 	included 	in 	the 	domestic 	industry.
The 	fact 	that 	the 	ITC 	currently 	considers 	the 	production
process, 	common manufacturing equipment, 	facilities 	and 	produc-
tion employees 	in defining 	industries 	properly 	recognizes 	that
supply-side 	substitutability as 	well 	as 	demand-side 	substituta-
bility 	is 	relevant 	to 	market 	definition. 	As 	Acting Chairman
Brunsdale 	has 	said:
From the 	standpoint 	of 	producers, 	two 	products 	are
'like' 	each other 	if 	producers 	can easily 	switch 	from
one 	to 	the 	other, 	e.g., 	without 	a 	substantial 	new
investment 	or other material 	change 	in 	the 	production
operations. 	Thus 	the 	Commission has 	often 	focused 	on
whether 	the 	products 	in 	question 	are made 	by 	the 	same
32( ... continued)
determining 	the 	extent 	of 	a 	particular market. 	When 	these 	elas-
ticities 	are 	large, 	demand 	is 	relatively 	sensitive 	to 	changes 	in
price. 	Such behavior 	indicates 	that 	consumers 	will 	switch 	to
other products 	when 	there 	is 	a 	small 	price 	change 	and, 	therefore,
that 	good 	substitutes 	exist 	in 	the 	marketplace. 	Cross-elastici-
ties 	can be 	used to 	identify 	the 	substitute 	goods. 	The 	Court 	of
International 	Trade 	has 	upheld the 	use 	of 	elasticities 	in Title
VII 	cases. 	~,~, Mayerick Tube 	COhg., 	supra, 	at 	1574-75;
Alberta 	PQrk 	PrQducers' 	Mktg. 	Bd. 	v. 	United 	States, 	669 	F. 	Supp.
445, 	461-65 	(Ct. 	Int'l 	Trade 	1987). 	FQr 	recent 	discussions 	of
market 	definitiQn analysis, 	~ Tarr, 	A NQte 	Qn 	Obtaining
Estimates 	of 	CrQss-Elasticities 	Qf 	Demand, 	FTC 	WQrking 	Paper 	NQ.
153 	(1987); 	Scheffman & Spiller, 	GeQgraphic 	Market 	DefinitiQn
under 	the 	U.S. 	Department Qf 	Justice Merger Guidelines, 	30 	J. 	Law
& Econ. 	123 	(1987) 	(noting analysis 	is 	also 	relevant 	to 	defining
product 	markets); 	Stigler 	& Sherwin, 	The 	Extent 	Qf 	the 	Market, 	28
J. 	Law 	& ECQn. 	555 	(1985); 	Relevant 	Markets 	in 	Antitrust, 	15 	J.
Reprints 	in Antitrust 	(Elzinga 	& RQgQwsky 	eds. 	1984). 	For 	a 	gen-
eral 	Qverview, 	aee American Bar Association Antitrust 	Section,
HQrizQntal 	Merger Law 	and 	PQlicy 	89-116 	(1986).
18

employees 	using 	the 	same 	equipment 	in 	the 	same
facilities. 33
When direct 	evidence 	of 	elasticities 	is 	unavailable, 	the 	FTC
instead 	relies 	upon 	highly 	probative 	evidence 	of 	elasticities:
It 	is 	often 	difficult 	to 	measure 	these 	effects 	direct-
ly, 	either by calculating cross-elasticities 	of 	supply
and demand, 	or by calculating 	the degree 	to 	which 	firms
within 	the 	postulated product market 	could 	in 	fact
exercise market 	power. 	Surrogates 	such 	as 	distinctive
uses 	or 	characteristics, 	industry 	firm 	perceptions, 	and
persistent srice 	differences 	over 	time may 	therefore 	be
considered. 	4
The 	FTC 	has 	defined markets 	on 	the 	basis 	of 	specific 	circumstan-
tial 	evidence:
With regard 	to 	product market 	definition, 	we 	consider
such 	factors 	as 	whether 	the 	products 	and 	services 	have
sufficiently distinctive 	uses 	and 	characteristics;
whether 	industry 	firms 	routinely monitor each other's
actions 	and 	calculate 	and 	adjust 	their own 	prices 	(at
least 	in 	part) 	on 	the 	basis 	of 	other 	firms' 	prices; 	the
extent 	to which 	consumers 	consider various 	categories
of 	sellers 	• 	. 	. 	as 	substitutes; 	and whether 	a 	sizeable
price 	disparity between 	the 	different 	types 	of 	. 	. 	.
33 	Copier Toner, 	supra, 	at 	25 	(views 	of 	Vice 	Chairman
Brunsdale 	and Chairman Liebeler). 	The 	ITC 	currently uses 	this
factor 	only 	to 	distinguish 	products 	for 	which 	there 	is 	no 	supply
substitutability. 	The 	ITC might 	consider broadening 	the 	industry
definition 	to 	include 	products 	that 	are 	good 	substitutes 	in
production. 	Thus, 	if 	dumped 	or 	subsidized 	imports 	of 	a 	product
may easily 	induce 	domestic 	producers 	of 	that 	product 	to 	shift
production to 	some 	other product, 	domestic 	producers 	of 	that
other product 	may be 	injured by 	the 	imports, 	and 	could be 	includ-
ed 	in 	the 	domestic 	industry. 	Vertically 	integrated 	firms 	that
produce 	the 	product 	for 	captive 	consumption might 	also 	be
included since 	these 	firms 	could decide 	to 	both 	purchase 	their
needs 	in the 	market 	and 	either 	sell 	the 	product 	they 	produce 	in
the 	market or 	shift 	production to 	an 	alternative 	product.
34 	BeFe 	Goodrich Co., 	supra, 	at 	16.
19

sellers 	. 	. 	. 	persists 	oyer 	time 	for 	equivalent 	amounts
of 	comparable 	goods 	and 	services. 35
The 	ITC 	could make 	"like 	product" 	and 	"domestic 	industry"
determinations 	on 	the 	basis 	of 	similar 	factors. 	Domestic 	indus-
tries 	could be 	defined 	by 	the 	degree 	of 	substitutability 	between
a 	product 	and potential 	alternatives 	(whether 	covered by 	the
investigation or 	not). 	Thus 	the 	ITC might 	consider 	focusing 	on
evidence 	of 	buyers' 	perceptions 	of 	the 	degree 	to 	which 	products
are 	substitutes; 	historical 	differences 	(or 	similarities) 	in
price 	movements 	of 	the 	products 	holding common 	input 	prices
constant; 	similarities 	(or 	differences) 	in 	the 	products' 	uses,
designs 	and physical 	compositions; 	and evidence 	of 	sellers' 	per-
ceptions 	of 	the degree 	to 	which 	the 	products 	are 	substitutes
(including whether 	firms 	monitor each other's 	actions). 	These
factors 	are, 	of 	course, 	similar to 	those 	the 	ITC 	already 	consid-
ers. 	Recognizing 	that 	the 	pUrPOse 	of 	considering 	these 	specific
factors 	is 	to 	define 	economically sound markets, 	however, 	is 	an
important 	step.
35 	Grand Union Co., 	102 	F.T.C. 	812, 	1041 	(1983) 	(emphasis
added). 	See 	also 	Hospital 	Co~. 	of 	America, 	106 	F.T.C. 	361, 	464,
466 	(1985), 	aff'd, 	807 	F.2d 	1381 	(7th Cir. 	1986), 	cert. 	denied,
107 	S. 	Ct. 	1975 	(1987); 	Federal 	Trade 	Commission 	Statement 	Con-
cerning Horizontal 	Mergers, 	4 Trade 	Reg. 	Rep. 	(CCH) 	! 	13,200 	at
20,905-906 	(June 	14, 	1982); 	Justice 	Department 	Merger Guidelines
!! 	2.11, 	2.12, 	4 Trade Reg. 	Rep. 	(CCH) 	! 	13,103 	at 	20,556-557
(1984).
20

E. 	Bearings 	Industries 	Distinguished By Roller Element
Are 	Sgp,ported Dr A lIarket Ap.proach
In 	the 	preliminary 	investigation, 	the 	petitioner, 	Torring-
ton, 	urged 	the 	ITC 	to 	adopt 	a 	single 	"like 	product" 	definition,
including 	all 	anti friction 	bearings 	other 	than 	tapered 	roller
bearings. 	Torrington 	argued 	that, 	as 	the 	petitioner, 	it 	has 	the
right 	to 	define 	the 	scope 	of 	the 	investigation, 	and 	that 	the 	ITC
is 	bound by that 	definition 	to 	base 	its 	determination 	on 	the
effect 	of 	imports 	on domestic 	producers 	of 	all 	bearings 	other
than 	tapered 	roller 	bearings. 	Torrington 	also 	urged 	a 	single
"like 	product" 	definition 	as 	a 	factual 	matter 	because 	it 	claims
bearings 	have 	the 	same 	four 	characteristics, 	the 	same 	basic 	manu-
facturing 	processes, 	and 	are 	put 	to 	the 	same 	broad end 	use.
Nevertheless, 	Torrington would 	have 	the 	ITC 	exclude 	tapered
roller 	bearings 	from 	its 	analysis.
The 	ITC 	preliminarily 	rejected 	petitioner's 	arguments 	and
found 	six 	separate 	"like products": 	(1) 	ball 	bearings,
(2) 	spherical 	roller 	bearings, 	(3) 	cylindrical 	roller 	bearings,
(4) 	needle 	roller 	bearings, 	(5) 	plain bearings, 	and 	(6) 	other
antifriction devices 	such 	as 	ball 	screws 	and 	linear 	guides. 	Each
category was 	defined 	to 	include 	parts 	and components 	and 	housed
and mounted 	bearings.
Dividing 	bearings 	into 	several 	industries 	on the 	basis 	of
the 	type 	of 	rolling element, 	as 	the 	ITC 	did 	in 	its 	preliminary
21

determination, 	appears 	to 	be 	consistent with 	a 	market 	approach. 36
It 	is 	in 	accord with 	the 	FTC's 	findings 	in 	a 	fully 	litigated
matter 	that 	"the manufacture 	of 	[tapered 	roller 	bearings] 	is 	a
relevant 	market 	• 	. 	. 	distinct 	from 	markets 	consisting 	of 	other
roller 	bearings 	or 	ball 	bearings" 	and 	that 	the 	manufacture 	of
ball 	bearings 	is 	a 	relevant 	market. 37 	The 	FTC 	explained:
TRB 	[tapered 	roller 	bearings] 	manufacture 	is 	sophisti-
cated, 	eXPensive, 	and 	requires 	special 	machinery. 	TRB
have 	unique 	performance 	characteristics 	and 	are 	not
sensitive 	to 	price 	changes 	among other 	types 	of 	bear-
ings. 	Once 	a 	product 	is 	designed 	to 	require 	use 	of
TRB, 	another 	type 	of 	bearing cannot 	be 	substituted
without effecting basic 	design change~A an 	expensive
and 	infrequently undertaken 	process."
36 	The 	Commission was 	clearly correct 	in, rejecting 	Torring-
ton's 	first 	argument. 	Industry definitions 	that 	make 	no 	economic
sense 	and 	which 	increase 	the 	likelihood of 	finding 	injury by 	in-
cluding only ailing companies 	are 	undesirable. 	Petitioners 	can
of 	course 	define 	the 	scope 	of 	the 	imports 	investigated, 	but 	that
does 	not 	prevent 	the 	ITC 	from 	defining a 	domestic 	industry which
is 	economically sound 	to 	consider whether 	those 	imports 	have'
caused 	injury. 	The cases 	cited 	in Torrington's 	own 	brief 	make 	it
clear 	that 	the 	Commission has 	not 	always 	followed 	the 	petition-
er's 	proposed market 	definition. 	~ Post-Conference 	Brief 	of
the 	Petitioner, 	the 	Torrington Company, 	at 	28-48 	(April 	26, 	1988).
37 	SKF 	Industries, 	supra, 	94 	F.T.C. 	at 	40, 	78, 	86. 	That
decision primarily 	addresses 	tapered 	roller 	bearings, 	which were
excluded 	from 	the 	petition 	in 	this 	matter. 	Nevertheless, 	the
principle 	that 	it 	is 	appropriate 	to 	define 	bearings 	markets 	on
the 	basis 	of 	rolling element 	is 	established by 	the 	decision,
38 	94 	F.T.C 	at 	78. 	A Commission administrative 	law 	judge
explained 	the 	reasoning 	in more 	detail:
Separate 	technical 	standards 	for 	TRB have 	been estab-
lished by 	industry-wide 	groups. 	TRB manufacture,
which 	is 	much more 	difficult 	to 	accomplish 	than 	the
production of 	ball 	bearings, 	requires 	the 	use 	of 	spe-
cial 	machinery 	to 	control 	precisely the 	roller 	angles
and 	surfaces. 	TRB 	is 	manufactured either 	in 	separate
plants 	or on 	separate machines 	in 	the 	plants 	which
produce 	other 	bearings. 	The 	manufacturers 	of 	TRB 	are 	a
small, 	well-defined group, 	TRB 	producers 	respond 	to
(continued ... )
22

Dividing producers 	of 	antifriction 	bearings 	into 	separate 	indus-
tries 	based 	on 	the 	rolling 	element 	is 	also 	consistent 	with more
recent 	FTC 	staff 	analyses 	in 	nonpublic 	investigations 	which
similarly 	identified needle 	roller 	bearings 	and 	spherical 	roller
bearings 	as 	separate markets. 	In 	the 	latter 	investigation, 	staff
specifically 	found 	that 	naked 	spherical 	bearings 	and 	unit 	and
split mounted 	spherical 	bearings 	should be 	in 	the 	same 	market
because of 	ease 	of 	supply 	substitution.
In another 	investigation, 	superprecision 	aircraft 	bearings
of 	ABEC/RBEC 	5 	and 	above 39 	were 	identified by 	FTC 	staff 	as 	a
market 	on 	the 	basis 	of 	their 	use 	of 	specialized 	raw materials,
dedicated production 	facilities, 	exacting manufacturing 	process,
high 	quality 	standards, 	and 	lack of 	demand 	substitutability. 	The
38( ... continued)
competitive 	initiatives 	of 	each other, 	and 	do 	not 	re-
spond 	to 	competition 	from 	producers 	of 	other 	bearings.
The 	price 	of 	TRB 	is 	not 	sensitive 	to 	changes 	in 	the
prices 	of 	other 	bearings, 	nor do 	the 	prices 	of 	other
bearings 	respond 	to 	TRB prices. 	The 	unique 	character-
istic 	of 	TRB 	-- 	its 	ability 	to 	withstand 	thrust 	and
radial 	load 	-- 	has 	resulted 	in 	its 	use 	in 	low 	speed-
high 	load applications, 	including various 	automotive
applications 	such as 	the 	front 	wheel 	position. 	In
contrast, 	ball 	bearings 	are 	used 	in 	applications 	in
which 	dual 	direction 	load 	is 	not 	a 	crucial 	factor.
Once 	a 	piece 	of 	equipment 	has 	been 	designed 	for 	TRB, 	a
change 	to 	ball 	bearings 	or 	other 	forms 	of 	roller 	bear-
ings 	is 	not 	feasible.
94 	F.T.C. 	at 	40, 	n. 	183.
39 	Quality standards 	are 	set by 	the 	Annular 	Bearing
Engineers 	Committee 	(ABEC) 	and Roller 	Bearing Engineers 	Committee
(RBEC) 	of 	the 	Anti-Friction Bearing Manufacturers 	Association.
23

ITC 	should 	similarly consider distinguishing 	superprecision
bearings. 40
We 	suggest 	that 	the 	ITC 	consider 	all 	of 	the 	factors 	discuss-
ed 	in part 	11.0. 	of 	this 	brief 	in 	reaching 	its 	final 	decision.
Unless 	the 	petitioner can demonstrate 	significant 	substitutabil-
ity, 	the 	Commission 	should uphold 	its 	finding 	that 	different
types 	of 	bearings 	constitute 	distinct 	"like 	products."
Assuming 	the 	Commission 	adheres 	to 	its 	preliminary 	finding
of 	different 	"like 	products," 	the 	petitioner, 	in order 	to 	prevail
in 	this 	matter, 	must 	prove 	-- 	for 	each 	product 	-- 	that 	the
domestic 	industry 	producing 	that 	product 	is 	materially 	injured 	by
reason 	of 	imports 	from 	the 	countries 	under 	investigation 	found 	to
have 	dumped 	or 	subsidized that 	particular product. 41
40 	In~, 	the 	FTC 	found 	that 	there 	was 	a 	single 	ball
bearing market, 	and 	refused 	to 	distinguish precision 	ball 	bear-
ings 	of 	ABEC-1 	or better quality 	and commercial 	grade 	ball 	bear-
ings 	of 	less 	than ABEC-1 	quality. 	The 	FTC 	noted 	that 	the 	facts
before 	it 	showed 	that 	such bearings 	typically were 	manufactured
on 	similar equipment, 	although manufacture 	of 	the 	former 	required
a 	greater 	level 	of 	skill 	than 	the 	latter. 	The 	FTC 	said 	there 	was
little evidence 	of 	significant 	cross-elasticity of 	demand 	or
price 	sensitivity among most 	precision and commercial 	ball 	bear-
ings 	but 	said there was 	overlap 	and potential 	interchangeability
in 	the 	range 	of 	quality 	near ABEC-1 	and 	said companies 	that 	sell
ABEC-1 	bearings 	monitor 	sales 	of 	bearings 	below ABEC-1 	quality.
On 	balance 	the 	FTC decided 	not 	to 	divide 	ball 	bearings 	into 	sep-
arate 	markets 	but 	said 	it 	would 	require 	a 	stronger 	showing 	of
anticompetitive 	effect 	in 	considering a 	merger between companies
producing precision and commercial 	grade 	ball 	bearings 	since 	the
market 	definition 	issue was 	such a 	close 	question. 	94 	F.T.C. 	at
85-86. 	Similarly, 	the 	ITC might 	require 	stronger 	showings 	of
injury 	or causation where 	like 	product 	definitions 	are 	question-
able.
41 	At 	the 	preliminary stage, 	the 	ITC 	lacked evidence 	to
analyze 	each 	like 	product, 	and therefore 	focused 	on 	all 	bearings
and 	found 	injury. 	see 	19 	U.S.C. 	S 	1677(4)(0). 	Additional 	data
should 	be 	available 	for 	the 	final 	determination.
24

III. 	Conclusion
For 	the 	foregoing 	reasons, 	the 	FTC 	respectfully 	suggests
that 	the 	Commission 	consider 	adopting 	a 	market 	approach 	to
defining 	like 	product 	and domestic 	industry.
Respectfully 	submitted on 	behalf 	of 	the
Federal 	Trade 	Commission,
6~~ 	rJ(!/~
Barbara A. 	Clark
Deputy Director
z:£~O?ition
Edward F. 	Glynn, 	Jr
Assistant 	Director 	0
International 	Antitrust
Bureau of 	Competition
M. 	Howard Morse
Attorney
International 	Antitrust
Bureau of 	Competition
Federal 	Trade Commission
Sixth & Pennsylvania Avenue, 	N.W.
Washington, 	D.C. 	20580
(202) 	326-2955
25