FTC Post-Hearing Brief on Escape Clause Investigation of Electric Shavers

TABLE 	OF 	CONTENTS
Page
Argument 	\
I. 	Remington's 	expert 	adopted 	the 	Federal 	Trarle
~ommission's framework 	for 	deciding 	whether
rising 	imports 	are 	a 	substantial 	cause 	of 	any
injury 	\
II. 	The 	public 	record 	does 	not 	indicate 	whether
rising 	imports 	are 	a 	substantial 	cause 	of
whatever 	injury 	Remington 	may 	~ave 	incurred 	~
III. 	Remington's 	expert 	agreed 	with 	the 	FTC
that 	auctioned 	quotas 	are 	preferable 	to
nonauctioned 	quotas 	if 	imports 	are 	restricted 	4
Can c 1u sian 	: 	5

Posthearing 	Brief 	of 	the 	Federal 	Trade 	~ommission
on 	the 	Escape 	Clause 	Investigation 	of 	Electric 	Shavers
Aqrumen t
I. 	Remi ngton' s 	exper t 	adopted 	the 	Federa I 	Trade 	Commi ss i on's
framework 	for 	deciding 	whet1er 	rising 	imports 	are 	a
substantial 	cause 	of 	any 	injury.
In 	both 	our 	prehearing 	brief 	in 	this 	investigB.tion 	and 	our
briefs 	in 	prior 	escape 	clause 	investigations 	by 	the 	Internationl11
Trade 	Commission 	("ITe"), 	the 	Federal 	Trade 	Comnission 	("FTC")
has 	suggested 	a 	framework 	for 	deciding 	whether 	rising 	imports 	are
3. 	substantial 	cause 	of 	any 	injury: 	balancing 	the 	impact 	on 	the
Un i ted 	S tat e sin d us try 	0 fad e c lin e 	i nth e 	p ric e 	0 f 	imp 0 r t 5 	'N it:,
the 	impact 	on 	the 	United 	States 	industry 	of 	either 	an 	increase 	in
the 	i n d us try I s 	cos t s 	0 r 	c han g!= sin 	dome s tic 	d ema n d 	con d i t ion s .
Dr. 	Samuel 	Rosenblatt, 	Remington's 	expert 	witness, 	testified 	"I'm
going 	to 	adopt 	the 	FTC's 	approach, 	.qlbeit 	somewhat 	modified 	from
the 	approach 	they 	used 	in 	this 	particular 	hearing, 	and 	confine 	my
analysis 	to 	the 	methodology 	t~at 	they 	put 	forth 	before 	you 	i1 	the
nonrubber 	footwear 	case." 	(tr. 	at 	84). 	No 	other 	expert 	wi tness
pre sen ted 	a n 	a I t ern a t i vet 0 	0 u r 	me tho d 	0 fan a 1 y z i ;) g 	the 	c a usa lit Y
issue. l
Dr ..John 	:leilly, 	the 	expert 	witness 	for 	North 	American
Philips 	Corp., 	did 	not 	address 	the 	causality 	issue 	at 	the
hearing 	and 	said 	he 	would 	discuss 	it 	in 	his 	posthearing
submission 	(tr. 	at 	239).

·-
II. 	The 	public 	record 	does 	not 	indicate 	whether 	rising 	imports
are 	a 	sub s tan t i ale a use 	0 f 	wh ate v e r 	i n j u r v 	R ern i n g ton 	ma V 	'"I a v e
incurred.
Dr. 	Rosenblatt 	testi fied 	that 	in 	analyzing 	the 	causal i ty
issue 	he 	would 	"review 	the 	three 	variables: 	ciemanrj, 	domestic
d ema n d j 	dome s tic 	sup ply jan d 	i rnp 0 r t 	s u [) ply." 	(t r. 	a t 	85). 	We
briefly 	discuss 	each 	of 	these 	factors. 2
Victor 	Kiam, 	Remington's 	President, 	testified 	tl)l1t 	'"Ie
decided, 	when 	he 	bought 	nernington 	in 	1979, 	to 	"stop 	chllnging
models 	every 	year 	In 	my 	opinion 	[Remington) 	harl 	tl)C 	b0St
product 	on 	the 	market. 	Changes 	were 	not 	necesstlry." 	(tr. 	Ilt
5 1 ) . 	It 	appears 	that 	tf)ere 	has 	b~en 	a 	shift 	in 	consumer
preferences 	toward 	rechargeable 	shavers 	(tr. 	at 	296). 	However,
Remington's 	rechargeable 	shaver, 	unlike 	those 	of 	its 	major 	rival
cannot 	be 	used 	wi th 	a 	cord 	if 	the 	charge 	has 	been 	depleteci
(Consumer 	Reports 	(November 	1984), 	ex. 	24 	of 	Remington's
petition), 	and 	Remington 	did 	not 	dispute 	the 	claim 	by 	N.V.
Philips 	that 	Remington's 	share 	of 	sales 	of 	men's 	rechargeable
shavers 	has 	declined 	(ex. 	38 	of 	N.V. 	Philips' 	prehear'ing
brief). 	Remington 	also 	does 	not 	produce 	eit~er Dattery 	operat~d
e ~ e c t ric 	s h a v e r s 	0 r 	a 	., wet - dry" 	e 1 e c t ric 	s h a v e r 	(s e eRe In i n g ton . s
price 	lists, 	ex. 	10 	of 	Remington's 	petition), 	bot I-) 	of 	whi~h are
imported 	by 	rival 	firiTIs 	from 	Japan 	(tr. 	at 	265-69,281-86).
Indeed, 	Mr. 	Kiam 	testified 	that 	Remington 	now 	plans, 	if 	it 	gets
2 	"Ve 	intimate 	no 	views 	on 	two 	disputed 	issues 	that 	the 	ITC must
decide 	before 	addressing 	the 	causality 	issue: 	the
appropriate 	definition 	of 	t,e 	industry 	and 	whether 	the
industry 	is 	being 	seriously 	injured, 	or 	threatened 	with
serious 	injury.
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relief 	from 	imports, 	to 	"concentrate 	on 	developiDg 	and 	producing
a 	new 	line 	of 	technologically 	advanced 	electric 	shaver 	models."
( t r. 	a t 	8 I ) . 	Remington's 	management 	decision 	to 	de-emphasize 	the
development 	of 	new 	models 	during 	the 	last 	six 	year'S 	may 	Account
for 	part 	of 	whatever 	injury 	Remington 	has 	incurred 	or 	IS
threatened 	with. 3
Dr. 	R0 sen h 1 a t t 	t est i fie d 	t hat 	0 n e 	s!) 0 u Ide x ;"1 min e 	c h 11 n g e s 	i:)
Remington's 	"wage, 	capital 	costs, 	raw material 	costs, 	what 	have
you." 	(tr. 	at 	87). 	1\1 r. 	Kia m 	t est i f i ~ d 	t hat 	Rem i n g ton's 	"l!-l b 0 r
costs, 	direct 	labor, 	is 	a 	small 	percentage 	of 	the 	total 	cost 	of
producing 	electric 	shavers 	at 	l\emington." 	(tr. 	fit 	79). 	Wh i Ie
admitting, 	on 	cross-examination, 	that 	he 	had 	looked 	at 	datil 	for
all 	of 	Remington's 	costs 	(tr. 	at 	181), 	Dr. 	Rosenblatt 	presented
e v ide n c e 	tot he 	I TC 	0 n I yon 	Rem i n g ton's 	un i t 	I abo r 	cos t s 	sin c e
1980 	(Remington's 	ex. 	N). 	Thus, 	ilt 	this 	time 	the 	ITC 	apparently
does 	not 	have 	data 	that 	would 	permit 	it 	to 	analyze 	trends 	in
Remington's 	total 	unit 	costs.
Dr. 	Rosenblatt 	testified 	that 	he 	agreed 	wit~ 	Dr. 	i\1orkre 	t~1at
the 	imp 0 r t 	sup ply 	cur ve 	"i s 	h 0 r i z 0 n t a I 	a t 	t!1 i s 	poi n t. " 	(tr. 	lit
39) . 	Dr. 	Rosenblatt's 	data 	indicate 	that 	the 	dollar 	price 	of
imports 	of 	electric 	shavers 	(adjusted 	for 	inflation 	in 	the 	United
3 	Congress 	indicated 	that 	"changes 	in 	consumer 	tastes
r or] 	p 0 0 r 	mI:l nag e men t" 	1'10 U I d 	not 	IV a r ran t 	esc ape 	c I a use 	reI i e f .
S. 	Rep. 	No. 	1298, 	93d 	Cong., 	2d 	Sess. 	(1974) 	at 	121.
-3-

States 	but 	not 	for 	changes 	i" 	t'Je 	exchange 	rate 4 ) 	has 	rleclined 	by
about 	3.5 	percent 	in 	the 	first 	nine 	months 	of 	1985 	as 	comparerl 	to
the 	first 	nine 	months 	in 	1984 	(Remington's 	ex. 	0).
In 	sum, 	shifts 	in 	consumer 	preferences 	nnd 	rising 	costs 	at
Remington 	mllY 	be 	more 	important 	than 	declining 	import 	prices 	In
explaining 	injury, 	if 	Remington 	has 	incurred 	any 	injury.
III. 	Remington's 	expert 	a~reerl with 	t'1e 	FIr:: 	tt1at
a u c t ion e d 	quo t a s 	are 	pre r era hIe 	ton 0 n /) u c t ion e rl
quotas 	if 	imports 	nre 	restricted.
In 	our 	prehearing 	brief 	we 	argued 	that 	the 	least 	costly
r eme d y 	(i f 	the 	I TC 	fin d s 	t hat 	the 	i n d u s try 	i s 	i '1 j U red 	by 	r i s i 'I g
imp 0, r t s) 	i sad jus t men t 	ass i s tan c e 	tow 0 r k e r s . 	If, 	however,
imports 	are 	to 	be 	restricted, 	then 	we 	urged 	t'Jat 	the 	ITe:
recorrrnend 	tariffs 	rather 	than 	import 	quotas; 	if 	import 	quot!1S 	are
recorrrnended, 	then 	we 	sugges ted 	tha t 	they 	be 	auc t i oned. 	Dr.
Rosenblatt 	testified, 	on 	cross-examination, 	that 	no,,-auctioned
import 	quotas 	would 	b8 	a 	less 	desirable 	way 	than 	an 	auction 	q~ota
o f 	res t ric tin g 	imp 0 r t s 	from 	the 	per s p e c t i ve 	0 f 	bot h 	the 	Un i ted
States 	economy 	and 	Remington 	(tr. 	at 	183-184).
4 	The 	ITC 	can 	examine 	the' 	impact 	of 	exchange 	rates 	as 	part 	of
its 	investigation 	of 	"any 	factors 	which 	in 	its 	judgment 	may
be 	contributing 	to 	increased 	imports 	of 	t~e 	article 	under
investigation." 	19 	U.S.C. 	§ 	225l(b)(6). 	Remington 	now
contends 	that 	serious 	injury 	began 	in 	1985 	and 	that 	it 	is
threatened 	with 	serious 	injury 	(tr. 	at 	45). 	In 	recent 	months
the 	dollar 	has 	depreciated 	against 	most 	major 	currencies, 	Ilnn
Corrrnissioner 	Stern 	took 	account 	of 	the 	depreciation 	of 	the
dollar 	against 	the 	yen 	in 	finding 	no 	threat 	of 	injury 	in
Heavvweight 	~otorcvcles. and 	Engines 	and 	Power 	Train
Subassemblies 	Therefor, 	TA-20l-47 	(February 	1983)(dissenting
opinion) 	at 	77.
-4-

Conclusion
For 	the 	reasons 	set 	forth 	abo\'e 	and 	in 	our 	prehearing 	f)rief,
rising 	imports 	may 	not 	he 	a 	sustantial 	cause 	of 	any 	injury
incurred 	hy 	the 	industry. 	1 f 	t tI e 	I TC 	fin d s 	t hat 	the 	i nd u s try 	i s
injured 	by 	rising 	imports, 	thcn 	we 	urge 	that 	the 	ITC 	recomnenci
~djustment assistance 	to 	workers; 	if 	the 	ITS 	reco~mcnrls
restrictions 	on 	imports, 	ttIen 	we 	suggest 	thAt 	tariffs 	be
r e c orrme nd e d 	rat her 	t h II n 	quo t II s; 	i f 	quo til S 	8. r ere c 0lm1e nd e rl, 	the n
we 	u r get hat 	the y 	be 	au c t ion e rj •
Respectfully 	submitted
on 	be ha I f 	0 f
the 	Federal 	Trade 	;'ommission,
David 	T. 	Scheffman
Acting 	Director'
Bureau 	of 	Economics
Richard 	S. 	Higgins
Deputy 	Director 	for
Regulatory 	Analysis/
. 	Industry
Bureau 	of 	Economics
Keith 	B. 	Anderson
Assistant 	Director 	for
Regulatory 	Analysis
Bureau 	of 	Economics
Morris 	E. 	Morkre
Economist
Bureau 	of 	Economics
AIna nd a 	f3. 	Pe d e r son
Acting 	Director
Bureau 	of 	Consumer
Protection
.January 	23, 	1986
-5-
Walter 	T. 	Winslow
Acting 	Director
Bureau 	of 	Competition
( 	----.
- 	LoL~~ I 	' .- J.~
Edward 	F. 	Glynn, 	Jr 	J
Assistant 	Director
(International 	Antitrust)
Bureau 	of 	Competition
Benjamin 	Cohen
Attorney
Bureau 	of 	Competition

CEHTIFICATE 	OF 	SEHYICE
I 	hereby 	certify 	that 	on 	this~J..aay 	of 	January 	1986, 	I 	have
served 	the 	foregoing- 	Posthearing 	Brief 	by 	causing 	the 	original
and 	14 	copies 	to 	be 	hand-delivered 	to 	the 	Secretury 	of 	the
Corrmission 	and 	by 	mailing 	a 	copy, 	first 	class, 	postage 	prepaid 	to
counsel 	for 	all 	parties 	to 	this 	proceeding, 	as 	follows:
Kermit 	W. 	Almstedt, 	Esq.
Jon e s, 	Day, 	l{ e a vis 	&: 	P0 g u e
(Surrey 	0: Morse)
1:250 	Eye 	Street, 	N.Vv.
Sui tel 100
Washington, 	D.C. 	20005.
l{ ern i n g ton 	Pro due t s, 	Inc
Huth 	A. 	Bourquin, 	Esq.
Sui 1 i van 	& CI' omw ell
1775.Pennsylvania 	Ave.~ 	N.W.
Washington, 	D.C. 	20006
N.V. 	Philips 	Gloeilampenfabrieken
Uichard 	deC. 	Hinds, 	Esq.
John 	A. 	Menke, 	Esq.
Cleary, 	Gottlieb, 	Steen 	&.
Ham i 1 ton
1752 	~ 	Street, 	N.W.
Washington, 	D.C. 	20036
North 	American 	Philips
.Corporation 	&. U.S. 	Appliances
Corp.
Harvey 	M. 	Applebaum, 	Esq.
Covington 	&. Burling
1201 	Pennsylvania 	Ave., 	N.W.
P.O. 	Box 	7566
Washington~ D.C. 	20044
Braun 	AG 	Of 	West 	Germany 	&. Braun
Inc. 	0 f 	B 0 s ton, 	Ma s s
Gail 	T. 	Gummins, 	Esq.
S ha I' I' e t t s, 	Pal e y, 	Ca I' tel'
&. Blauvelt, 	P.C.
80 	Broad 	Street
New 	York, 	New 	York 	10004
San y 0 	E 1e c t ric 	Co., 	Ltd.
&. Sanyo 	Electric 	Inc.
1\1 i c h a e I 	A. 	If e r t z bel' g, 	E sq.
Law r en celL 	IV aid e r s, 	Esq.
Grahaln 	& James
1050 	17th 	Street, 	N.W.
Su i te 	1200
Washington, 	D.C. 	:2003G
and
William 	L. 	Androlia, 	Esq.
l(oda 	&. Androl ia
1880 	Century 	Park 	East,
Suite 	519
Los 	An gel e s, 	CA 	9 0 0 6 7
Izumi 	Seimitsu 	Kogyo
Kabushiki 	Kaisha
Ronald 	P. 	Weil, 	Esq.
Gary 	K. 	Jones, 	Esq.
Hornsby 	&. Whisenand
1110 	Bricl-~well Ave.
M i am i, 	Flo I' ida 	3 3 13 1
and
Gary 	M. 	Hoffman, 	Esq.
Thomas 	J. 	Shaughnessy,
Odin, 	Feldman 	& Pittleman
10505 	Judicial 	Drive,
Suite 	300
P.O. 	Box 	367
Fairfax, 	Virginia 	22030
Hanson 	Products
Lawrence 	H. 	Walders, 	Esq.
Graham &. 	James
1050 	17th 	Street, 	N.W.
Washington, 	D.C. 	20036
Hitachi 	Sales 	Corporation
of 	America

Stuart 	M. 	~osen, 	Esq.
Wei 1, 	Gotshal 	& Manges
767 	Fifth 	Avenue
New 	York, 	New 	York 	10l~3
:\1a t sus hit a 	Ap P I ian c e 	Co.
B 	~ 	&Iv---	en J am I n 	0 hen
Attorney
Division 	of 	International
Antitrust
Federal 	Trade 	Comnission
Washington, 	D.C. 	20~80
(202) 	634-4784