Syntex Agribusiness, Inc. v. United States International Trade Commission

Nies, Judge,

concurring, with whom Baldwin, Judge, joins.

*150The majority opinion focuses on the question whether a complaint filed October 24,1979, by Syntex for the purpose of a § 337 investigation (19 U.S.C. 1337) was deficient under the statute and the ITC rules. I agree that the complaint was properly dismissed, but for reasons which are stated herein.1

In addition, petitioner also asserted as grounds for mandamus that the ITC had no authority to conduct a preliminary investigation under § 603 (19 U.S.C. 2482) in connection with a § 337 investigation, and that, in any event, the ITC’s conclusion (which resulted from the § 603 investigation) that there was no basis for a § 337 investigation is arbitrary capricious and an abuse of discretion. In my view these issues must also be addressed inasmuch as they provide separate grounds for the mandamus petition.

BACKGROUND

The following chronology of events is shown by the record:

6/ 1/79 Syntex filed first § 337 complaint.
6/27/79 ITC voted not to institute requested investigation and dismissed complaint on grounds only antidumping matters were pleaded, (i.e., failure by Treasury to enforce antidumping order against Japanese imports).
7/30/79 Syntex complaint sent to Treasury with request for status report on enforcement and plans for addressing matters in Syntex complaint.
10/24/79 Syntex filed second § 337 complaint deleting reference to Treasury and substituting conspiracy between Japanese producer (Alps Pharmaceutical Co. Ltd.) and U.S. importer (Mit-sui & Co.) in predatorily pricing subject imports.
11/20/79 ITC voted not to institute §337 investigation at that time and to contact Secretary of Treasury again requesting status report on enforcement of antidumping order.
12/27/79 Status report from Treasury indicates enforcement being effected.
2/12/80 ITC voted to dismiss Syntex complaint of 10/24/79.
2/12/80 ITC voted to institute a preliminary investigation under § 603 into alleged anticompetitive practices asserted by Syntex.
2/20/80 Notice to public of §603 preliminary investigation re same. (45 FR 12,931 (2/27/80).)
9/19/80 Section 603 investigation terminated without instituting § 337 investigation.
1/ 7/81 Petition for Mandamus filed.

*151THE GROUNDS FOR DISMISSAL OF THE SECOND COMPLAINT

The complaint filed by Syntex on October 24, Í979 (second complaint), was dismissed by the Commission on February 12, 1980, on the grounds that the complaint was not properly filed under ITC rule 210.12, stating further that the decision was based on § 337(b) (3) which gives the Commission discretion regarding whether to institute an investigation based on a complaint where the alleged unfair acts are in part within the purview of the antidumping laws.

In this proceeding, the parties have treated the dismissal as resting on two separate grounds. First, the parties raise a question of interpretation of the statute. Does the ITC have any discretion whether or not to institute a § 337 investigation where the alleged unfair acts are in part within the purview of the antidumping laws? The second addresses the issue whether the complaint is inherently deficient, that is, whether it fails to satisfy the minimum pleading requirements of ITC rule 210.20.2

DISCRETIONARY AUTHORITY UNDER § 337

Section 337(a) of the Tariff Act of 1930, as amended, (19 U.S.C. 1337(a)), prohibits unfair methods of competition and unfair acts in the importation of articles into the United States. Appellant asserts that the ITC must institute an investigation upon its complaint because of the mandatory language of § 337 (b) (1) which provides :

The Commission shall investigate any alleged violation of this section on complaint under oath or upon its own initiative. [Emphasis added.]

Conversely, the Government argues that § 337 (b) (1) is tempered by § 337(b)(3).

The statutory language of § 337(b)(3) is prolix but unambiguous.3 The Commission is required to terminate or not institute an investigation under § 337 where the acts complained of are solely within the purview of 19 U.S.C. 1673 (antidumping provisions). The first Syntex complaint based on injury by reason of less than fair value *152(LTFV) sales prices and failure of Treasury to collect dumping duties, was dismissed for this reason.

The Commission may institute an investigation when the alleged acts are in part within the purview of § 1673, but, in addition, other acts are alleged which independently or conjointly provide a basis for relief under § 337. The second complaint by Syntex was identical to the first complaint in its allegations except for the substitution of allegations of conspiracy and attempted monopoly by a Japanese manufacturer and its U.S. distributor by means of excessively low prices in place of the previous allegations of dereliction on the part of the Secretary of Treasury. While Syntex does not dispute that its second complaint is based in part on acts within the purview of § 1673, it argues that the proper course of action is not dismissal, but merely suspension, pending review by the administering authority to which a matter is referred. In view of the statutory language “may institute,” I cannot agree.

The dismissal followed receipt of the 12/27/79 status report from Treasury advising that relief was being given against the damaging imports. An agency must, as the Government asserts, be given some latitude in expending its resources with respect to discretionary matters. The action of ITC, in my view, demonstrates no abuse of discretion even if the complaint were not deficient.

THE sufficiency OF THE SECOND COMPLAINT

The mandatory contents of a § 337 complaint are set forth in 19 CFR 210.20 which provides for substantial detail. The complaint, inter alia, must:

he under oath;
include a statement of facts constituting the alleged unfair methods of competition and unfair acts;
describe specific incidents of alleged importations and sales; include a description of the trade or commerce affected when the element of a complaint has the effect to restrain or monopolize such trade and commerce;
include a description of the complainant’s business and his interest in the trade and commerce or domestic industry affected; and
include data concerning the volume of sales, etc., and other data pertinent to the allegation that the effect or tendency of the importations or sales in question is to restrain or monopolize trade and commerce in the United States.

The Government argues that notice pleadings, of the type which are sufficient under Rule 8(a) of the Federal Rules of Civil Procedure (FRCP), are inadequate for ITC purposes; and ITC rule 210.20 *153reasonably requires much more. In view of the stringent time restrictions placed on the ITC,4 this argument is persuasive. In any event, a review of the pleadings here shows that the complaint is insufficient even under the liberal standards of Rule 8(a), FRCP, which requires no more than a short and plain statement of the claim, showing that the pleader is entitled to relief.

Abundant authority can be found for dismissing a complaint which is no more than a general allegation of unlawful combination and conspiracy under the federal antitrust laws. See, e.g., California Dump Truck Owners Ass’n, Inc, v. Associate General Contractors, Inc., 562 F. 2d 607 (CA 9 1977) in which the complaint was found overly broad and vague where plaintiffs averred generally unlawful combination and conspiracy; Westinghouse Electric Corp. v. CX Processing Laboratories, Inc., 523 F. 2d 668 (CA 9 1975), in which a counterclaim for antitrust conspiracy by plaintiff and other manufacturers did not satisfy Rule 8(a)(2) where it provided a general historical description of the manufacturers and the charging portion of the counterclaim referred only to plaintiff and its distributors; Augspurger v. Brotherhood of Locomotive Engineers, 510 F. 2d 853 (CA 8 1975), allegations that the defendant union acted in an unfair, invidious, unequal, and arbitrary manner toward the plaintiffs were held mere conclusion of law and insufficient under Rule 8(a); Louisiana Farmers’ Protective Union, Inc. v. Great Atlantic & Pacific Tea Co. of America, 131 F. 2d 419 (CA 8 1942), in which the court stated that a plaintiff in an antitrust suit need not set out in detail the acts complained of, although he must do more than plead conclusions in the words of the statute.

As detailed in the majority opinion, petitioner’s allegations are no more than conclusory.

AUTHORITY UNDER § 603

After the complaint of October 24, 1979, was dismissed, the Commission on its own went forward with an inquiry under § 603 to see if it could find support independently for Syntex’ conspiracy and monopoly claims.

Section 603 (19 U.S.C. 2482) provides the following authority to the ITC:

(a) In order to expedite the performance of its function under this chapter, the International Trade Commission may conduct preliminary investigations, determine the scope and manner of its proceedings, and consolidate proceedings before it.
*154(b) In performing its functions under this chapter, the Commission may exercise any authority granted to it under any other Act.

Petitioner asserts that the above language of § 603 restricts the use of this authority to investigations under 19 U.S.C. Chapter 12, and, therefore, cannot be used in connection with a § 337 investigation, that section being found in Chapter 4.1 agree with the Government, however, that § 603, enacted as part of the Trade Act of 1974, is a provision of more general applicability and may be used in connection with the ITC’s jurisdiction under § 337. The historical note to section 1 of the Trade Act of 1974 advises that the words “this Chapter” in § 603 do not appear in the original, that is, the statute which was actually passed. In the original, the words are “this Act” meaning the Trade Act of 1974, which in addition to enacting the provisions in Chapter 12 also amended sections of the Tariff Act of 1930, including § 337. The Commission was, therefore, acting within its legal authority in making a preliminary investigation under § 603 in order to decide whether to institute a § 337 investigation.

The report of the results of the § 603 preliminary investigation, which is part of the record here, became the basis for the Commission’s ultimate conclusion on September 19,1980, that there was no evidence of any conspiracy and the Commission, accordingly, voted not to institute a § 337 investigation. The report is extensive and thorough and shows no abuse of authority in the final acts of the Commission on this matter.

THE SECTION 603 REPORT

A preliminary investigation under § 603 was conducted by the Commission from February 20, 1980, until August 20, 1980, for the purpose of determining whether imports of calcium pantothenate from Japan were the subject of a combination, contract or conspiracy to restrain trade and commerce in the United States, or the subject of a scheme to monopolize the d-cal pan and/or dl-cal pan markets in the United States as a result of which U.S. companies have been forced out of these markets. It is stated in the Commission report, U.S. I.T.C. Publication 1104, October 1980, that the investigation was conducted following dismissal of a complaint by Syntex in order to determine whether Syntex’s charges merited a § 337 investigation in spite of the paucity of hard information in the complaint.

The ITC report determined that the relevant product market in issue in the investigation was cal pan, with submarkets of d- and dl-cal pan, the area of effective competition being the continental United States. Information acquired through interviews established that those companies that ceased production of cal pan did so primarily because of environmental problems which required the construction of *155prohibitively expensive new plants and the use of new technologies which were unavailable to them. Since the cost of imported cal pan was reasonable, these companies decided to cease production and to supply their customer and own needs by purchasing d- and/or dl-cal pan from foreign and domestic producers. In 1978-79 two U.S. producers, Diamond Shamrock and Thompson-Hayward, which had been producers of dl-cal pan and ceased this operation, re-entered the market with d-cal pan after acquiring new technology and constructing new state-of-the-art production facilities. Syntex’s allegation (in October 1979) that there were no domestic producers of d-cal pan since it ceased production in 1975 was erroneous.

The report further found that a Japanese manufacturer, Daiichi Seiyaku, which was virtually the only supplier of d-cal pan during 1976-79, had become so because of 'patented technology which made it, as a practical matter, the only d-cal pan source for the world market. Syntex, which in the early ’70’s was the only U.S. source for d-cal pan, ceased production in 1975. The report further found that the technology used by Syntex was that of the state-of-the-art in the late 1940’s and was obsolete. Syntex also encountered insurmountable problems from EPA and FDA regulations with attendant financial consequences. Those events, and not price competition, coalesced to create the critical factors which caused Syntex to cease production of d-cal pan. While Daiichi then acquired what could be considered a monopoly share of the market, this was found to be only temporary with new entrants eroding the Japanese company’s position.

The report found that the pricing data on Japanese d-cal pan showed no indication of artificial raising of prices to recoup losses sustained for the purpose of attaining market domination. Rather, the price in the United States increased only gradually and, according to the new domestic entrants into the d-cal pan market, the prices had not yet risen to the level these companies would like to see. Moreover, the Japanese prices did not show an immediate lowering upon entry of competitors into the d-cal pan market. This absence of attack on new competitors underscored an absence of anticompetitive behavior by the Japanese company. The report also noted the increased presence of Roche Products, Inc., a Scottish company, in the d-cal pan submarket, which is expected to lead to rapid erosion of the Japanese producer’s market share.

Syntex has at all times remained a producer of dl-cal pan. With respect to this submarket, the investigation disclosed a plethora of producing competitors located in Japan, the United States, and Eastern bloc countries. The sole Japanese producer of dl-cal pan at no time held a monopoly share of the market.5 The report finds the dl-cal *156pan (as well as the d-cal pan) submarket to be the subject of healthy and vigorous competition.

The officers of Syntex had no evidence of even the most circumstantial nature which would indicate anticompetitive conduct by Japanese producers in either the d-cal pan or dl-cal pan submarkets.

The staff found no evidence of predatory pricing, that is, pricing below average variable costs. The economic data urged by Syntex was not supportable because of basic flaws in its position which depended upon an assumption that Japanese companies could not be substantially more efficient than Syntex. The staff analyzed the structure of the cal pan market in Japan and found that it was more specialized and utilized better technology. In particular, the processes used enabled Japanese producers to recycle by-products and obtain significantly increased yields.

Another factor noted was that Syntex is only in the dl-cal pan market, whereas there is a growing consumer preference for d-cal pan. Thus, erosion of its market for dl-cal pan was predictable.

Finally, the report stated that no U.S. firm, including Syntex, nor any individual could be found with any information from which one could be led to believe that there is any cooperation between the Japanese producers and "distributors in the U.S. market, and no evidence which would establish a scheme by Japanese producers and their distributors to absorb any dumping duties.

These conclusions are found in a more than 80 page analysis of supporting data showing that better technology was to be found in Japan, competition was increasing from new entrants into the market in the United States and abroad, and deficiencies existed in Syntex’s cost analyses. Clearly, a substantial and conscientious effort was made to determine if there was a reasonable basis to go forward with a §337 investigation, notwithstanding the insufficiency of the dismissed complaint. I see no action of the ITC which is arbitrary, capricious or an abuse of discretion in not instituting a § 337 investigation, given the results of the § 603 preliminary investigation.

CONCLUSION

The ITC not having acted beyond its statutory or discretionary authority, the petition for a writ of mandamus must be dismissed.

I further believe it would be grossly unfair to preclude review of the propriety of its complaint at this time. As indicated in the majority opinion, Syntex has attempted to obtain review by a previous petition for a writ of mandamus and by an abortive appeal.

Under 19 U.S.C. 1335 the Commission is authorized to adopt such reasonable procedures and rules and regulations as it deems necessary to carry out its functions and duties Syntex does not question the reasonableness of the pleading requirements but disagrees with the determination that its complaint did not satisfy the rules.

“ * * * If the Commission has reason to believe the matter before it is based solely on alleged acts and effects which are within the purview of section 1303,1671, or 1673 of this title, it shall terminate, or not institute any investigation into the matter. If the Commission has reason to believe the matter before it is based in part on alleged acts and effects which are within the purview of section 1303,1671, or 1673 of this title, and in part on alleged acts and effects which may, independently from or in conjunction with those within the purview of this section, establish a basic relief under this section, then it may institute or continue an investigation into the matter * *

Under § 337(b) ITC is required to complete a § 337 investigation within one year. Eighteen months is allowed only in cases specifically declared to he more complicated.

This company, Alps Pharmaceutical Co. Ltd., and its U.S. distributor, Mitsui & Co., were the only named conspirators in the Syntex § 337 complaint.