ITC’s U.S. Steel Decision Unlikely To Have Broad Impact

30 March 2018 Law360 Publication
Author(s): David A. Hickerson

In a long-awaited decision in a case of first impression, the International Trade Commission ruled in a March 19, 2018, final determination that a complainant alleging price-fixing as an unfair act under Section 337 must also allege an antitrust injury, as would be required for a plaintiff who files a price-fixing complaint in federal district court.[1] The decision is unlikely to have a broad impact on future ITC investigations, as the claim asserted by U.S. Steel is not a frequently pursued antitrust claim.

In particular, U.S. Steel’s claim asserted that Chinese steel producers fixed prices at below-market prices and caused it harm as a competitor, whereas a typical antitrust claim alleges prices were fixed at an artificially high price and caused injury to buyers of the articles. U.S. Steel’s claim also did not allege “predatory pricing,”[2] which would be necessary to assert a “too-low” price-fixing claim in federal district court. Because of the atypical nature of the claim, the decision by the ITC is unlikely to have impact on the more usual types of antitrust claims.

The decision was issued 16 months after the ALJ’s initial determination dismissing the claim. Ordinarily, the ITC issues a final determination within a matter of a few months after the initial determination. The length of time taken by the commission is an indication that the issue was a close one. The decision was also issued over a strong dissent of Commissioner Broadbent, and the majority opinion drew the votes of only three commissioners, due to two vacancies currently at the commission. Notably, there are no decisions of the Federal Circuit addressing the issue, suggesting an appeal may follow.

U.S. Steel filed this Section 337 complaint alleging, among other claims,[3] that Chinese producers of carbon alloy steel conspired through the Chinese government and the Chinese Iron and Steel Association to fix prices of steel imported into the United States. However, U.S. Steel did not allege an “antitrust injury,” as discussed below. Rather, U.S. Steel argued that Section 337 does not require pleading or proof of an antitrust injury — all that is required is an “unfair method of competition” or other “unfair act” in the importation of articles, and an injury or threat of injury resulting from that act.[4]

The majority opinion relied on U.S. Supreme Court decisions that require a plaintiff alleging a price-fixing claim to also allege an “antitrust injury” to have standing to bring the claim in federal district court.[5] According to the Supreme Court in Brunswick Corp. v. Pueblo Bowl-O-Mat Inc., an “antitrust injury” is “injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants’ acts unlawful.” This means a plaintiff must allege that its injury “stems from a competition-reducing aspect or effect of the defendants’ behavior.”[6]

In other words, an “antitrust injury” is normally an injury to consumers, not competitors. Typically, where a group of competitors conspire to fix prices, they do so to artificially raise prices to consumers. Here, by contrast, U.S. Steel alleged the Chinese steel producers fixed prices to lower them in the U.S. market, underselling U.S. Steel’s products, and thereby injuring U.S. Steel.

The ITC’s majority opinion affirmed the ALJ’s dismissal of the price-fixing claim because it failed to allege an antitrust injury. Core to the ruling was the majority’s recognition that “the Commission has been guided by the express Congressional limitations on federal law in other substantive areas when determining the scope of unfair acts under Section 337(a)(1)(A).”[7]

The majority noted its reliance on substantive patent law to underscore its reliance on substantive federal law in other areas.[8] Because federal courts have imposed the antitrust injury requirement, the majority “interpreted ‘[u]nfair methods of competition and unfair acts’ under Section 337(a)(1)(A), when predicated on the Sherman Act, to require antitrust injury.”[9] Otherwise, the majority reasoned, “U.S. Steel’s approach would have the Commission create a new version of antitrust law for disputes between private parties that conflicts with established federal precedent and runs the risk of undermining the antirust laws’ fundamental purpose.”[10]

Commissioner Broadbent authored a 24-page dissent, disagreeing with the majority that Section 337’s “unfair methods of competition and unfair acts” provision contained an “antitrust injury” requirement. Commissioner Broadbent reasoned that Section 337 and the antitrust statutes are different, both in their substantive requirements and their purposes. Citing Suprema Inc. v. Int’l Trade Comm’n, 796 F.3d 1338 (Fed. Cir. 2015) (en banc), Commissioner Broadbent stated “the Federal Circuit observed that Congress has addressed the menace of unfairly traded imports in a unique enforcement statute in Section 337 that is distinct from the statutory schemes designed to address domestic commercial unfair practices.”[11]

Accordingly, Commissioner Broadbent opined that “Section 337 is a broad and flexible international unfair competition statute designed to provide American industries with a powerful tool to combat a broad array of international unfair practices and schemes in the importation of articles that harm domestic commerce.”[12]

Commissioner Broadbent also noted that the “antitrust injury” requirement is not found in the language of the antitrust statutes — rather, it is a judicially-created doctrine. Accordingly, in her view, there is no congressional limitation that restricts Section 337 on commission action with respect to price-fixing claims.[13]

Commissioner Broadbent further noted that a price-fixing conspiracy is a crime and per se illegal when the price-fixing agreement occurs, without any requirement of an actual injury.[14] Thus, as stated by the Supreme Court in the seminal ARCO case, “[P]roof of [an antitrust] violation and of antitrust injury are distinct matters that must be shown independently.”[15]

Implications of the Decision

The commission’s final determination ruled on an issue of first impression. It was decided by a commission that is two commissioners short of its full complement, and issued over a lengthy dissent. Whether or not the decision will be appealed, and how the Federal Circuit would rule if it is, are open questions.

Assuming the decision stands, it is a narrow decision limited to complainants who would allege an infrequent form of price fixing as the unfair act under Section 337; that the prices of the importers are too low, but not predatory; that the complainant does not contend that the respondents will later raise their prices above competitive levels; and that the price-fixing caused an injury to the complainant’s domestic industry. Notably, the antidumping laws already protect U.S. domestic industries against imports whose prices are determined to be less than fair value, and the countervailing duty laws protect against imports that have been subsidized by a foreign government. Therefore, the U.S. trade laws still provide protections against underpriced imports.

The decision also has no application to price-fixing claims by customers that allege harm to competition because the prices are too high and that an antitrust injury occurred. Those claims are, by the reasoning of the U.S. Steel decision, viable at the ITC because there the complainant is likely to be able to allege an antitrust injury. The U.S. Steel decision applies only to the unique type of case alleged by U.S. Steel here — prices were fixed by agreement among competitors at a low value, but not at predatory levels.

Additionally, while the U.S. Steel complaint was framed as one of price-fixing, there could potentially be other unfair acts involved. For example, the dissent noted U.S. Steel’s complaint alleged “a massive and complex conspiracy among Chinese producers ... including coordinated enterprise restructuring, standard setting, oversight and coordination of pricing and production, information-sharing concerning competitively-sensitive data” and other actions. Because the commission reversed the ALJ’s ruling that the dismissal was with prejudice,[16] it may be possible for U.S. Steel or other future complainants to frame allegations to encompass a broader scope of unfair acts.

Finally, the decision is unlikely to apply beyond the narrow area of standing in antitrust cases. That is because areas of law other than patent infringement[17] and antitrust claims do not typically have a standing requirement for bringing cases in federal courts, other than Article III “injury in fact” standing, which does not apply to administrative or Article I proceedings such as Section 337 proceedings.

This article was originally published by Law360. You can read this version here.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] In the Matter of Certain Carbon and Alloy Steel Products, 337-TA-1002 (Commission Opinion March 19, 2018).

[2] For U.S. steel to allege predatory pricing, it would need to allege that the respondents’ short-term losses would be recouped through long-run profits based on future pricing above the competitive level. See, e.g., Brooke Group v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 222-24 (1993), cited by Maj. Op. at p. 18.

[3] U.S. Steel also alleged two other claims that were dismissed or withdrawn prior to the commission’s final determination. See Maj.Op. at p. 2.

[4] See Section 337(a)(1)(A).

[5] Maj. 17-20.

[6] 429 U.S. 477, 489 (1977).

[7] Maj. 12.

[8] See id. at 11-12.

[9] Id. at 15.

[10] Id. at 20.

[11] Dissenting Opinion at 9.

[12] Id. at 10.

[13] See Dis. Op. at 11.

[14] Dis. Op. at 13.

[15] Id. at 15, quoting Atlantic Richfield Co. v. U.S. Petroleum Co., 495 U.S. 328, 344 (1990).

[16] See Maj. Op. at 27.

[17] The ITC follows the patent standing requirements imposed by federal courts. Maj. Op. at p. 24.

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