Undertakings in Anti-dumping Law: Recent Trends and Considerations from a Competition Law Perspective

© Springer International Publishing Switzerland 2015
Christoph Herrmann, Bruno Simma and Rudolf Streinz (eds.)Trade Policy between Law, Diplomacy and ScholarshipEuropean Yearbook of International Economic Law10.1007/978-3-319-15690-3_21

Price Undertakings in Anti-dumping Law: Recent Trends and Considerations from a Competition Law Perspective

Frank Montag 

Freshfields Bruckhaus Deringer LLP, Bastion Tower, Place du Champ de Mars/Marsveldplein, 5, 1050 Bruxelles, Belgium



Frank Montag

The author is most grateful to his colleague Tone Oeyen, associate in the Brussels office of Freshfields Bruckhaus Deringer, for his valuable assistance in the preparation of this article.


Over his career in the European Commission’s Directorate-General for External Affairs, the predecessor of what is now the Directorate-General for Trade and the European External Action Service, Horst Krenzler dealt extensively with trade defence and anti-dumping issues. This was when the author first came across him. This contact was the basis for Horst Krenzler joining the international law firm Freshfields Bruckhaus Deringer as an of counsel, after his tenure at the European Commission. During this time, the author had the pleasure of working together with Horst Krenzler on public international law, trade defence and competition law related issues. The interplay between trade defence and competition law has traditionally been hotly debated in the literature, and has recently become topical again as a result of the high profile investigation by the European Commission into dumping of solar panels from China. This article will examine the current status of this debate with a particular focus on price undertakings.

It has been extensively reported in the literature1 that anti-dumping regulation has become a widespread tool used by both developed and developing countries aimed at—some say—protecting domestic producers against unfair practices in international trade2 or—according to others—as a weapon of protectionism lacking sound economic foundation.3 A particular focus in the literature4 has been the interaction between anti-dumping and competition law. Economists seem to agree that anti-dumping law interferes with the pursuit of the goals of competition law: whereas the final goal of competition law is commonly described as promoting consumer welfare and productive efficiency, the aim of the anti-dumping rules is to offer domestic industry protection against international price discrimination perceived as “unfair” if certain conditions laid down by the law are met, thereby effectively prohibiting low(er) cost foreign suppliers from participating in the domestic market. It has even been reported that the anti-dumping rules have been used by domestic producers to facilitate cartelisation on the domestic market by fencing it off from international competition.5

The purpose of this article is not to contribute to the debate on the conceptual tensions between anti-dumping and competition law. Rather, the focus is on a particular form of relief that is available under the anti-dumping rules and on the competition law questions that can arise in that context. Price undertakings are alternatives to the imposition of anti-dumping duties.6 The European Commission has a long track record in reaching what can be described as an “amicable solution” to an anti-dumping investigation, i.e. accepting undertakings by exporters not to sell their products below a minimum export price.7

The article summarises the legal framework applicable to price undertakings and gives an overview of the pros and cons of price undertakings compared to ad valorem dumping duties. It describes the evolution in the European Commission’s decisional practice before discussing how the determination of an appropriate minimum price and the monitoring of price undertakings may raise concerns from a competition law perspective. The article concludes with a description of the Commission’s investigation into dumping of solar panels and the acceptance of a joint price undertaking offered by the Chinese exporters.

Price Undertakings Under Anti-dumping Law

Price undertakings can be described as “a form of anti-dumping measure whereby an exporting producer undertakes to increase its export prices of the product concerned to the Union to non-dumped or non-injurious levels.”8

Applicable Legal Framework

The WTO/GATT Anti-Dumping Agreement (ADA)9 foresees three types of anti-dumping measures: (1) provisional measures, (2) price undertakings and (3) definitive anti-dumping duties. Article 8 ADA provides that:

Proceedings may be suspended or terminated without the imposition of provisional measures or anti-dumping duties upon receipt of satisfactory voluntary undertakings from any exporter to revise its prices or to cease exports to the area in question at dumped prices so that the authorities are satisfied that the injurious effect of the dumping is eliminated.

The possibility for an authority to accept price undertakings from (mainly) exporters has been implemented in Article 8 of the EU’s basic anti-dumping regulation (EU ADR),10 which largely mirrors the text of Article 8 ADA.

According to the ADA and EU ADR, a price undertaking can only be accepted once the authorities have made a preliminary affirmative determination of dumping, injury, and causation between dumping and injury. Negotiations about a price undertaking can be started at the initiative of the authorities or exporters. The only condition for an undertaking to be acceptable is that the authority must be satisfied that the undertaking eliminates the injurious effect of the dumping. The authorities however have significant discretion in deciding whether or not to accept exporters’ undertakings offer. A price undertaking offer can be rejected by the authority when “their acceptance is impractical” or “for other reasons, including reasons of general policy”. Exporters on the other hand can also not be forced to enter into a price undertaking. The European Courts have confirmed the wide margin of discretion the European Commission enjoys in accepting or rejecting price undertaking offers11:

No provision of the basic regulation requires the institutions to accept undertakings which are offered by economic operators who are the subject of an investigation prior to the imposition of anti-dumping duties. On the contrary, it is clear from Article 10 of that regulation [Article 8 EU ADR] that it is for the institutions, in the exercise of their discretion, to decide whether such undertakings are acceptable. It is not open to the Court to find fault with a rejection of offers of undertakings, which was issued after individual examination and was accompanied by a statement of reasons which satisfies the requirements of Article 190 of the Treaty, where the grounds on which that rejection is based do not exceed the margin of discretion conferred on the institutions (Case C-240/84, NTN Toyo Bearing and Others v Council, [1987] ECR, 1809, paragraphs 30 to 34).12

The Commission has in the past indeed rejected price undertaking offers on different grounds, including concerns regarding the lack of effective monitoring (and associated risks of circumvention of the undertaking), the breach by exporters of previous undertakings, high volatility of prices, the risk of cross-compensation of prices etc.13 On a few occasions, the Commission explicitly motivated the rejection of a price undertaking offer on the basis of its likely anti-competitive effects.14

Pros and Cons of Price Undertakings Versus Dumping Duties

Exporting producers have an obvious incentive to convince the authorities to accept a price undertaking by way of an alternative to imposing anti-dumping duties, as they directly benefit from the additional revenue resulting from the increased price. Anti-dumping duties on the other hand result in higher import prices without increased revenues for the exporter. Some authors have also argued that the prospect of increased revenues in the event of a price undertaking creates an incentive for exporters to invest in other, non-price aspects of their products.15 Another advantage of undertakings is that they can be revised and terminated at short notice16 and therefore provide greater flexibility than duties which, in principle, remain in force for at least 5 years. Accepting undertakings is sometimes also regarded as being easier or less costly for the investigating authority.

The main drawback of price undertakings—which has indeed been frequently used as a justification by the Commission for not accepting a price undertaking offer—is that they impose a high burden on the authority and/or the domestic industry to monitor compliance by the exporting producers. In addition, an exporting producer will need to ensure that his trading activities do not fall foul of the obligations agreed to in the context of the price undertaking with an authority in a foreign country. These monitoring obligations unavoidably result in additional costs for the parties involved.

More conceptually, there seems to be an inherent tension between the concept of a price undertaking, which effectively sets a minimum price level for exporters, and competition law, the goal of which is to enhance welfare by stimulating price competition. It could therefore be argued that a drawback of price undertakings is that they increase the level of price transparency on the market and, in a worse scenario, are used as a conduit for the exchange of competitively sensitive information or even the creation of a price cartel.17

The Commission itself indicates that, in order to avoid any restriction of competition, the content of price undertakings is not made public.18 Indeed, the text of a price undertaking is not published in the EU’s Official Journal. The Commission decisions accepting price undertakings only contain high level information about the (appropriateness of the) price undertaking and do not disclose the core terms of the undertaking, e.g. the minimum price.

Evolution in the Commission’s Practice Regarding Price Undertakings: “An Instrument of the Past?”

An analysis of the European Commission’s decisional practice shows that the number of dumping investigations which are concluded with the acceptance by the Commission of a price undertaking has drastically fallen in recent years. In 2013,19 the Commission imposed definitive anti-dumping duties in 12 cases, whereas it accepted a price undertaking offer by exporters in one (high profile) case (Solar Panels).20 In 2012,21 the Commission imposed definitive anti-dumping duties in two cases and not a single case was concluded with the acceptance of a price undertaking. The 2012 and 2013 statistics confirm a trend in the Commission’s decisional practice of refraining from the acceptance of price undertakings and imposing more anti-dumping duties.

This trend has indeed been confirmed in a recent study by Armin Steinbach, which analyses, on the basis of the statistics published by DG Trade, the use of price undertakings—as opposed to the imposition of dumping duties—to settle anti-dumping proceedings in the EU in the period 2002–2012.22 Steinbach reports that the frequency of price undertakings has decreased significantly from an average of more than 40 % of cases between 1981 and 2001, to 21 % during the period from 2002 until 2012. This average has declined further during the past years, as DG Trade’s statistics show that since 2010, between 0 and 15 % of investigations resulting in the finding of dumping were concluded by means of a price undertaking.

According to Steinbach, different factors have played a role in this evolution. A first factor is the accession of Central and Eastern European countries to the EU in May 2004.23 Following the 1994 European Council declaration of Essen, price undertakings became the Commission’s preferred tool to remedy dumping from Central and Eastern European countries and Turkey.24 Upon entering the EU, trade defence proceedings involving imports originating in these countries were no longer possible, as the CEE countries entered the single market and the common customs union. The increase in anti-dumping investigations against Chinese exports has, according to Steinbach, also had a negative impact on the frequency of use of price undertakings, as the Commission’s decisional practice shows that price undertakings offered by Chinese exporters are only very rarely accepted. Concerns in relation to the ability to ensure effective monitoring of the undertakings, e.g. via certain guarantees offered by the authorities of the exporting country, are often also a reason to reject a price undertaking offer.25 The recent acceptance by the Commission of a joint price undertaking offered by Chinese exporters in the solar panel case seems to be a remarkable exception to the general trend.

Price Undertakings from a Competition Law Perspective

A price undertaking is usually described as a unilateral commitment by an exporter to increase its export prices to the EU.26 Given their inherent unilateral nature, authors have therefore considered that price undertakings are not captured by Article 101 of the Treaty on the Functioning of the European Union (TFEU), which applies to the (anti-competitive) conduct of at least two undertakings.27 This commonly accepted view has, however, been superseded by the Commission’s recent acceptance of a price undertaking jointly offered by a group of cooperating Chinese exporters in the Solar Panels case.

Despite their (in principle) unilateral nature, the effects of price undertakings offered in the context of a trade defence investigation are inherently contradictory to the objectives pursued by competition law. Whereas one of the core objectives of competition law is the promotion of consumer welfare via the stimulation and protection of price competition, price undertakings lead to a high degree of price transparency on the importing country’s market and often create a de facto fixed minimum price adhered to by exporters and possibly the domestic industry. Some have even argued that price undertakings “in fact establish Government-sponsored cartels”28 and lead to “de facto private price or quantity agreements between foreign and EC firms”.29

In the following sections, we will elaborate on the issue of information exchanges in the context of agreeing and implementing a price undertaking and on the increased level of price transparency on the domestic market resulting from the acceptance of a price undertaking.

Exchanges of Competitively Sensitive Information: A Conditio Sine Qua Non for a Price Undertaking?

The exchange of commercially sensitive pricing information in the context of price undertakings may occur at two stages: (1) when determining a minimum price which is acceptable for the investigating authority, and (2) when monitoring compliance with the price undertaking by the exporters.

The Determination of an Acceptable Minimum Price

Although, as indicated, a price undertaking usually takes the form of a unilateral statement by an exporter filed with the Commission, in order for the price undertaking to be workable in practice, the price increases the exporters are willing to agree upon should be more or less aligned.30 This inevitably requires exporters to coordinate and discuss commercially sensitive information.

In the same vein, although they are officially not consulted by the Commission in the context of price undertaking negotiations, it seems plausible that the complaining domestic industry engages in discussions in relation to the minimum price increase exporters should agree to when offering a price undertaking.

It is clear that these (hypothetical) contacts among and between exporters and the complaining domestic industry would at the very least raise eyebrows should they occur outside the context of a price undertaking negotiation. As far as we are aware, until today, the exchanges of competitively sensitive information in the context of a price undertaking have not yet been scrutinised from a competition law perspective by a competition authority.31

In this context it is worthwhile referring, by way of analogy, to the case law of the European Court of Justice on Article 4(3) of the Treaty on the European Union (TEU) and the competition law rules. Article 4(3) TEU imposes an obligation on Member States to assist each other in carrying out tasks which flow from the Treaties, to take all appropriate measures to ensure fulfilment of the obligations arising out of the Treaties and to refrain from any measure which could jeopardise the attainment of the EU’s objectives. The Court of Justice has concluded that a Member State can infringe Article 4(3) TEU in conjunction with Article 101 TFEU by maintaining in force legislation which can deprive the competition rules of their effectiveness.32 Applying this so called INNO doctrine, the Court ruled on several occasions that by taking legislative or regulatory measures which effectively require or reinforce an anti-competitive agreement between private undertakings, a Member State infringes its obligations under Article 4(3) TEU.33 It could be argued that in a hypothetical scenario where Member States have the power to investigate dumping, a Member State would violate its obligations under Article 4(3) TEU in conjunction with Article 101 TFEU when accepting a price undertaking which goes beyond a unilateral commitment from an exporter and reflects the outcome of discussions between exporters (and possibly the domestic industry) on an appropriate minimum price level. In reality, Member States do not have competence in the field of trade defence and the European Commission may consider that it is not bound by the duty of sincere cooperation laid down in Article 4(3) TEU.

Monitoring Compliance with the Minimum Price

Compliance with price undertakings is monitored both publicly by the Commission, as well as privately by the domestic industry and the exporting producers.

A price undertaking generally contains provisions regarding monitoring and reporting of the undertaking, according to which exporters are required to submit sales volumes and pricing information for exports of the products covered by the undertaking. The Commission will generally also foresee an explicit right to conduct inspection visits at the premises of the exporters. The frequent use of price undertakings in the past put a heavy burden on the Commission’s scarce resources and this has resulted in criticism of the Commission for not taking monitoring of exporters’ adherence to their price undertakings seriously.34 The significant drop in the use of price undertakings in recent years should have positively impacted on the availability of monitoring resources and it seems therefore reasonable to assume that the Commission is serious about monitoring compliance in the—relatively limited number of—cases which result in the acceptance of a price undertaking.

The domestic industry and the exporting producers each have their own reasons to individually monitor compliance with a price undertaking. Exporters will want to ensure that they are not foregoing sales and the increased revenues which result from the price undertaking as a result of maverick exporters who undercut the minimum price of the price undertaking or use non-price incentives to increase their sales. The domestic industry has a clear interest in taking measures aimed at monitoring a price undertaking agreed to by exporters, independently of the public monitoring carried out by the Commission, as they will want to be certain that the price undertaking is adhered to. It has also been argued that, given the often limited market transparency, it may even be required for the domestic industry and the exporters bound by a price undertaking to communicate directly in order to clarify misunderstandings which may arise during the implementation of the price undertaking.35

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