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The European Commission (Commission) is 'in the dock' this week as it stands accused of infringing the very EU Competition rules it is responsible for enforcing. It accepted price undertakings from Chinese solar panel component importers under anti-dumping legislation but in seeking to prevent potential damage from 'dumping', the Commission may arguably have strengthened a horizontal price-fixing arrangement.
On 9 November 2013 the European Courts announced they are going to hear an appeal by solar panel components manufacturer SolarWorld e.a. under Article 101(1) of the Treaty on the Functioning of the EU (Article 101(1)) against the Commission's acceptance on 2 August 2013 of a "joint price undertaking" from a group of Chinese exporters and their affiliates. In doing so it brought to an end its investigation into dumping pursuant to Article 8 of the EU Anti-Dumping Regulation 1225/2009 (Regulation).
The Regulation gives the Commission the power to impose countervailing duties on imported goods or services which are being sold below market value. The duties are designed to force up prices of the goods in question and to remove any injury to competition. The Regulation also empowers the Commission to accept undertakings from importers and exporters instead of imposing such duties. These can include undertakings to cease exports or alter prices to a level not damaging to domestic businesses.
'Dumping' is the sale of goods at a cheaper price on an export market than the price of the goods on the seller's domestic market. In 1947, signatory countries to the General Agreement on Tariffs and Trade (GATT) agreed to take action against dumping and other import subsidies if they damaged a domestic industry of a member country. In 1968, the European Community (now the European Union) introduced its own Community anti-dumping legislation.
This was followed up in 1996 after the 'Uruguay Round' of talks among GATT signatories, and in 2010 the EU introduced a new anti-dumping Regulation 1225/2009 (as amended in 2012) (ie the Regulation). This gives the Commission the power to impose duties on those found to have participated in dumping, on the basis that it gives non-EU exporters an unfair competitive advantage; it is therefore necessary to raise prices through the imposition of an anti-dumping duty up to a level which restores 'normal' market conditions.
Duties can be imposed by the Commission where:
The Commission decided pursuant to Article 8(1) of the Regulation to accept a joint price undertaking offered by a cooperative of photovoltaic (PV) cell component exporters and their affiliates in the EU and China, alongside the China Chamber of Commerce for the Import and Export of Machinery and Electronic Products. The Commission had been investigating dumping covering the period from 1 July 2011 to 30 June 2012 and relating to a range of solar panel components (solar chargers of less than six cells, thin film (or 'wafer') PV products and crystalline silicon PV products). Acceptance of the undertakings saw this investigation discontinued.
The Commission's investigation had revealed that the seven groups of companies involved enjoyed tax breaks and grants in China and that their domestic market was therefore subject to "significant distortions". When they then exported their products to the EU, they were sold at dumping margins of on average over 85%, significantly above the applicable de minimis level and having, the Commission concluded, a "substantial" impact on the PV component industry in the EU.
The appellants claim the subsequent decision by the Commission to accept undertakings as to price to address its concerns infringes Article 101(1) because it recognises, accepts and reinforces an arrangement to horizontally fix prices. In addition, it is claimed that the Commission failed either to adequately disclose the key terms of the price undertaking or to give interested parties the opportunity to comment meaningfully on it.
SolarWorld also claim that the Commission's decision to accept the undertakings infringes Article 6(1) and 8(1) of the Regulation because doing so has set minimum prices for imported components at levels insufficient to make good the damage to the EU PV components industry.
The EU's anti-dumping regulations have a significant effect on companies wishing to import goods or services into the single market. If the appellant's antitrust objections are upheld, this will be hugely embarrassing for the Commission as the body with primary responsibility for enforcing EU competition rules. Going forward, it would also blunt the Commission's ability to agree undertakings on prices from large groups of exporters simultaneously. This could mean that the Commission resorts instead to its powers to impose duties on imported goods. Importers and exporters should review their current prices and consider whether they could be at risk from EU anti-dumping duties.
For more information please contact Paul Henty, Partner
T: +44 (0)20 7427 6506