C-277/85

A provisional anti-dumping duty of 33.3% was imposed on Canon Inc.'s electronic typewriters by the Provisional Duty Regu­ lation. It was collected at that rate and a Without making a formal objection to the definitive duty of 35 % was imposed by the admissibility of Case 277/85, the Council Definitive Duty Regulation. To these regu­ contended in its defence in that case that lations and to the Basic Regulation under (a) it was doubtful whether importers were which they were made, I refer to my admissible to bring such actions, and (b) it

CANON v COUNCIL

Under this ground, Canon argues as follows. (1) The Commission was obliged Admissibility by Article 2 (9) of the Basic Regulation to make a fair comparison between export price and normal value; the Commission consistently violated this overriding requirement by using methods of calculation First it is necessary to deal with the admissi­ which respectively inflated normal value and bility of Case 277/85. In the current state of depressed export price. Comparing these the law, exporters of the product covered by inevitably yielded an absurdly high dumping anti-dumping legislation may challenge that margin, namely 76.5%. A correct appraisal legislation, especially where they are named of the facts, in accordance with the Basic in it, as is Canon Inc. Importers associated Regulation, would have revealed no with such an exporter (as opposed to inde­ dumping. Canon maintains that its dumping pendent importers) may also challenge such margin was zero. (2) The Commission's

OPINION OF SIR GORDON SLYNN — JOINED CASES 277 AND 300/85

For the reasons given in my Opinion, in TEC, I reject the argument that Article 2 (9) (either alone or read together with Article 2 (10)) imposes any overriding requirement about comparison. As indicated in the 'Mini ball-bearing' Cases, the calcu­ In this context Canon mentions American lation of normal value and the calculation of practice, in particular the 'export sales price export price are separate exercises governed offset' ('ESP offset') allowed by the by different rules, the former by Article Department of Commerce where the export 2 (3) to (7) and the latter by Article 2 (8) price (termed 'US price' in American law) is of the Basic Regulation. The rules constructed. Where it applies, the ESP concerning comparison in Article 2 (9) and offset allows general selling expenses to be (10) come into play only after export price deducted from normal value (termed 'fair and normal value have been established market value' in American law) up to the according to their respective rules. They do limit of the general selling expenses not override those rules, but lay down rules deducted from the export price. Apparently concerning adjustments which may be made this practice has been approved by the concerning specified matters (differences in courts in the USA and it has been published physical characteristics of the product, as an administrative rule in the Code of differences in quantities, differences in Federal Regulation (19 CFR paragraph conditions and terms of sale and differences 353.15 (c)), but it is not provided for in the in import charges and indirect taxes) in American anti-dumping statute and appears order to place the export price and the to be granted by the Department of normal value on a comparable basis. Commerce as a concession outside the terms

In any event the practice cannot be taken over wholesale into the EEC system: the Canon insists as an essential part of its case two systems are too different in the details that the comparison was not made at the of their operation and there is no warrant same level of trade. Yet Recital 24 to the for doing so in the legislation. Although the Definitive Duty Regulation states: 'All third recital to the Basic Regulation states: comparisons were made at ex-works level', 'Whereas in applying these rules it is which I take to be intended to be essential, in order to maintain the balance of synonymous with 'ex-factory'. In my rights and obligations which these opinion, Canon has not demonstrated that Agreements [in particular GATT and the either export price or normal value were Code] sought to establish, that the calculated at any stage other than Community take account of their interpre­ ex-factory, whether wholesale or retail. The tation by the Community's major trading argument that full allowance was allegedly partners, as reflected in legislation or estab­ not made for the SGA expenses and profit lished practice', it does not even impose a of the Japanese sales company does not so substantive obligation on the Community much concern the level of trade as the authorities to have regard to the matters appropriateness of the general expenses and mentioned. At most therefore a practice profits used in calculating normal value. such as the American ESP offset is an element from which the Community auth­ orities may derive guidance in applying the Basic Regulation. A reference to the American practice, even by way of guidance, does not establish that the comparison provisions of the Basic Regu­ When considering whether the right lation, particularly Article 2 (9), override comparison was made, the dispute is not as the provisions on normal value in Article I see it about the level of trade but about 2 (3) to (7). the allowances which Canon argues should have been made under Article 2 (10) of the Basic Regulation. Recital 24 to the Definitive Duty Regulation states: 'For the purpose of a fair comparison between normal value and export prices the Commission took account, where appro­ The argument that the comparison was not priate, of differences affecting price made at ex-factory level falls to be rejected comparability such as differences in physical for the reasons which I gave in my Opinion characteristics and differences in conditions in TEC. In particular, Canon, like TEC , and terms of sale where claims of a direct sells in Japan through a related sales relationship of these differences to the sales company, Canon Sales Company ('Canon under consideration could be satisfactorily

In taking the approach described in Recitals In my view the refusal to grant the 24 to 26 of the Definitive Duty Regulation, allowances in question was in accordance the Community authorities in my view with the Basic Regulation. Article 2 (9) of followed the natural meaning of the words the Basic Regulation provides that export of Article 2 (10) (c). I reject the contention price and normal value shall be on a that the Community authorities interpreted comparable basis as regards inter alia them in an excessively restrictive way: the 'conditions and terms of sale'. To that end criterion of a 'direct relationship' which Article 2 (10) provides that, if they are not they used is the very one stated in the first on a comparable basis, due allowance shall sentence of that provision. I reject the be made in each case, on its merits, for contention that the application of that differences affecting price comparability; criterion brings Article 2 (10) (c) into and it lays down that 'the following conflict with Article 2 (9). Article 2 (9) guidelines shall apply in determining these provides for allowances in respect of allowances'. It is obvious from this wording 'conditions and terms of sale'. If those that Article 2 (10) lays down detailed rules words are to mean anything they must be for the implementation of the principles taken to refer to specific sales and specific stated in Article 2 (9) and in case of doubt contracts of sale, and it is entirely consistent falls to be read in accordance with those with that for Article 2 (10) (c) to require 'a principles. direct relationship to the sales under

Ground 2: Errors in calculating normal value

Finally, reliance is placed on the word 'generally' in the sentence 'allowances generally will not be made for differences in overheads and general expenses', as well as By its second ground of annulment Canon on the word 'guidelines' in the opening lines argues as follows. (1) The Commission was of Article 2 (10). It is true that Article obliged by Article 2 (3) (a) and 2 (3) (b) 2 (10) (c) does not purport to lay down an of the Basic Regulation to calculate normal absolute rule, but a guideline which will value on the basis either of the domestic admit of exceptions. However, Recitals 24 prices charged by Canon .Inc. or, if it and 25 both admit that it is only a general rejected those prices by reference to Article rule, and cannot be impugned on that 2 (7), on the basis of cost of production at account. Moreover, such exceptions have to ex-factory level. The Commission, in be substantiated by the party claiming to proceeding to base normal value on the benefit from them. The second sentence prices charged by Canon Sales, failed to of Article 2 (10) provides: 'Where an comply with this obligation. (2) Con­ interested party claims such an allowance, it struction of normal value on the basis of must prove that its claim is justified'. It was cost of production was in any event appro­ therefore for Canon to show that the priate in the light of the small number of

OPINION OF SIR GORDON SLYNN — JOINED CASES 277 AND 300/85

The Community authorities were plainly entitled to treat Canon Sales as being 'associated' with Canon Inc. for the purposes of Article 2 (7) of the Basic Regu­ lation and therefore had a discretion to Whereas this threshold is 5 % by volume 'of disregard Canon Inc.'s prices to Canon exports to the Community', Canon states Sales for the purpose of determining normal that the US practice is to disregard domestic value. Canon has failed to show that thai sales if less than 5 % of exports are to discretion was exceeded or improperly used countries other than the USA. The weight Therefore its argument that normai value to be given to US practice is limited for the should be based on Canon Inc."s prices to reasons previously outlined. Within those Canon Sales must be rejected. limitations, on the one hand, it is to be

CANON v COUNCIL

observed that the American practice situation in Japan because the language is confirms the figure of 5 % for the threshold not written in Roman characters, that can and, in any event, I do not accept that provide no reason — contrary to what exports to countries other than the one Canon alleges — to depart from a normal concerned by the alleged dumping are application of Article 2 (3) (a) of the Basic necessarily the appropriate ones to take. As Regulation. If the domestic sales reach a at present advised, I think that exports to sufficient volume I do not see how such the country (or economic community) circumstances can alter the conditions laid concerned by the dumping constitute a down in the legislation under which actual more appropriate standard of comparison. I domestic price can be used as a basis for therefore do not find any grounds for normal value. contesting the 5 % threshold in Recital 4.

OPINION OF SIR GORDON SLYNN — JOINED CASES 277 AND 300/85

Even when this complaint is examined under the provisions to which it properly relates, it fails. Canon says: 'The Commission refused to deduct all of Canon Sales' costs, despite the fact that Canon Sales' only function was selling'. The Community authorities, however, were under no obligation — as implied by Canon — to deduct all of the selling costs Then mention is made of the deduction of of Canon Sales. In my Opinion in TEC I Canon Sales' selling costs, in particular the have explained why, in my view, the costs borne by Canon Sales in advertising exporters cannot claim such deductions

CANON v COUNCIL

simply because in the same corporate group As regards the other four models, I reject they happen to have split up the manufac­ for the reasons I gave in my Opinion in turing and the selling functions between TEC the argument that the Community formally separate bodies. authorities were not entitled under the Basic Regulation to construct a 'surrogate' normal value using elements of actual domestic price for guidance.

OPINION OF SIR GORDON SLYNN - JOINED CASES 277 AND 300/85

riters. The Commission chose to calculate Canon Sales' profit on electronic typewriters as if it had not incurred (to give one example) especially heavy advertising costs. This made an enormous difference. Adver tising amounted to 7 % of overall turnover of Canon Sales. However, for electronic typewriters taken alone, actual provable Although advertising costs are cited as 'one advertising costs amounted to 26% of example', the costs mentioned by Canon are turnover. Thus, using the wrong figure had in fact confined to advertising and the effect of substantially overstating the promotion. No other costs have been urged

riters. In fact, as the evidence given to the Canon has submitted no evidence to Commission showed, the costs of adver substantiate its allegations. On the other tising electronic typewriters were nearly hand, the Council in its rejoinder states as three times the costs of advertising all follows: 'The advertising costs as submitted products when stated as a percentage of by Canon included 198 separate cost items. turnover. Had the Commission accepted the When these items were scrutinized it was self-evident fact that these costs reduced the found that: only 59 of the 198 different cost profits of Canon Sales on sales of electronic items were accompanied by documentation; typewriters, the profit margin attributed for an overwhelming number of the 59 to Canon (and to other exporters who had items it was not clear whether the documen no domestic sales) would have been tation (simply photocopies of what appear considerably lower'. to be advertisements) did in reality relate to the items listed by Canon; 30 of the 59 items referred exclusively to those electronic I deal with this point in particular detail typewriters which were not the subject of because, as indicated in this quotation, the

the investigation and which were excluded apparently accepted the same cost figures from the duty (Anicie 1 (3) of Regulation (including advertising costs) when they were No 1698/85) and for which the profitability used for the SGA expenses element of had not to be established; several of the constructed normal value. Lower SGA items exclusively referred to products other expenses result in a lower constructed than electronic typewriters, namely so-called normal value, which is favourable to Canon. DWs, AP 89 (floppy disk units) and However, Canon can hardly be heard to screens; several of the items referred to both contest figures in one part of a calculation electronic typewriters as investigated and to which is unfavourable to it if it accepts them other products such as screens; the sales in another part of the calculation which it material (price lists, technical brochures), to considers favourable. which apparently some of Canon's other items refer, covers not only the electronic typewriters under investigation but also a floppy disk unit, screens, small typewriters of the kind not included in the investigation, accessories and other products; none of the 198 cost items was accompanied by invoices which would have revealed the amount of costs actually paid to outside parties. It is furthermore not clear whether any of the alleged costs resulted from one part of the Further in relation to the element for SGA Canon group charging another pan of the expenses included in constructed normal Canon group. The vouchers added by value, Canon submits that the Community Canon appeared to be merely internal authorities should have had regard to manuscript records, and did not provide any overhead expenses relating to export sales corroborative evidence'. It follows that not overhead expenses relating to the Canon fails to substantiate its allegation that Japanese market, and it seeks to assert that the Community authorities did not take due Commission Regulation No 3453/81 account of advertising and promotion costs in calculating the 47 % profit margin. The imposing a provisional anti-dumping duty allegation that the profit margin was on imports of certain cotton yarns orig­ wrongly calculated therefore falls to be inating in Turkey (Official Journal 1981, rejected. L 347, p. 19) lays down a rule to that effect. In my view it does not, if only because it was superseded by Council Regu­ lation No 789/82 imposing a definitive anti­ dumping duty on the same products (Official Journal 1982, L 90, p. 1); but even giving due weight to both of these regulations it is clear that they concern a special case where the Community auth­ orities had so little information about sales on the domestic market that they had to fall back on data concerning export sales to provide them with guidance in calculating the normal value. They do not lay down any such rule as Canon contends for, and wn ere — as in this case — ample infor­ An additional reason for rejecting it — but a mation is available about overhead costs on reason which applies only to Canon and not the domestic market it is impossible to to the other exporters — is that Canon accept a contention that the Community

authorities were obliged to ignore it and What is required by Article 2 (3) (b) (ii) is look instead at overhead costs on exports. that the profit margin should be 'reasonable' and, as I said in my Opinion in TEC, it is reasonable to use profit margins actually obtained on the domestic market. According to Recital 16 to the Definitive Duty Regu­ lation, it was considered reasonable to compute the constructed value for the four Canon models concerned using Canon's profit margin on its sales of the other two models on the domestic market. In my opinion, that was a sound guide to the profit normally realized, and that approach was in conformity with the Basic Regu­ lation. Canon alleges that 'its management accounts showed a profit on electronic typewriters of 7.2% during the period'. These accounts have not been produced to the Court. It is not clear what models they covered or whether they include export sales. No indication is given as to how the figure was worked out, and whether the Finally, as regards the 'reasonable margin of calculation used elements which might be profit' to be included in constructed normal irrelevant for present purposes. The words value, Article 2 (3) (b) (ii) of the Basic 'management accounts', although vague, Regulation specifies : 'As a general rule, and suggest that the accounts are only those of provided that a profit is normally realized Canon Inc. not of the Canon group as a on sales of products of the same general whole, which for the reasons already given category on the domestic market of the do not provide an appropriate basis. In country of origin, the addition for profit particular if the 7.2% figure is based on a shall not exceed such normal profit'. Canon transfer price between Canon Inc. and submits that 'it would therefore have been Canon Sales and if it represents only the more appropriate for the Commission to profit of Canon Inc. and not also that of examine profit margins in the office Canon Sales, it cannot be relied on for the equipment sector in Japan as a whole'. First, construction of normal value. In the absence this submission is not supported by the text, of evidence submitted to the Court, it is a because the provision does not state that the bare assertion of doubtful value and profit margin must be that in the same provides no reason to overturn the profit general category of goods but only that it figure used by the Community authorities. must not exceed that in the said category. Secondly, as I said in my Opinion in TEC, 'the same general category' of. goods must, on a reasonable reading and in the light of the concept of 'like product' in Article 2 (2) and (12), be taken to mean electronic typewriters, and I would reject any wider category of office equipment for this purpose. Therefore this submission must be rejected and the various profit figures put Accordingly, both as regards the two forward by Canon in connection with it models for which normal value was based must also be disregarded. on actual domestic price and as regards the

models for which normal value was Where, as here, export price is based on the constructed, Canon's second ground of first arm's length sale, Article 2 (8) (b) annulment alleging errors in the calculation stipulates that 'allowances shall be made for of normal value falls to be rejected in its all costs incurred between importation and entirety. resale, including all duties and taxes, and for a reasonable margin of profit'. Canon does not challenge that rule but alleges a number of errors in the way it was applied. First, it says that it was erroneous to take 5 % as a reasonable profit margin and not the 3 % which Canon proposed. Canon Ground 3: Errors in calculating export price advances no evidence or argument to substantiate that submission. The Council on the other hand explains that the 5 % was derived from independent importers' profit margins and it was appropriate to use them as being the most objective basis available for the purpose of arriving at a satisfactory estimate of the arm's length export price. By its third ground of annulment Canon That approach appears to be within the alleges that the methods used by the discretion of the Community authorities in Commission in calculating export price were establishing a 'reasonable margin of profit'. unfair and inaccurate and were therefore Since Canon advances no reason to rebut it, contrary to Articles 2 (8) and 2 (9): the Canon's allegation of error must be Commission arrived at the export price by dismissed. making deductions corresponding to the overhead expenses of Canon Inc.'s European subsidiaries, as well as deducting an assumed profit; the Commission should have calculated export price in parallel to its calculation of normal value. Secondly, Canon alleges error by the Commission in 'refusing to give credit for interest income received by Canon subsi­ diaries and in its treatment of the so-called customer cash reduction; and other issues'. These bare allegations are not explained in Since Canon France, Canon Germany and any further detail or substantiated by Canon UK were wholly owned subsidiaries evidence. No error on the part of the there was plainly an association between Community authorities in this connection, them and Canon Inc. within the meaning of in my view, has been demonstrated. Article 2 (8) (b) of the Basic Regulation, and in my view the Community authorities were therefore entitled pursuant to that provision to construct the export price 'on the basis of the price at which the imported product is first resold to an independent Thirdly, Canon alleges that the advertising buyer'. I reject the contention that the costs incurred in connection with the launch Community authorities were required to of certain models in the United Kingdom, base export price on the price between Germany and France should have been Canon Inc. and its European subsidiaries. allocated over a wider number of models

Under Article 2 (11) of the Basic Regu­ lation cost calculations are in general based on available accounting data, 'normally allocated, where necessary, in proportion to Ground 4: Defective injury assessment the turnover for each product and market under consideration'. The advertising related specifically to three particular models. Although, of course, the advertising might have had the effect of raising public awareness of electronic typewriters Although it was found that Canon had a generally, that is not a sufficient argument dumping margin of 76.50%, the exact level to justify a departure from the general rule, of injury attributed to it was only 35.03%. and in my view the Community authorities Since, under Article 13 (3) of the Basic were entitled to allocate the advertising Regulation, the anti-dumping duty may not costs to the models concerned. Although exceed the lower of the two figures, it is the Canon claims to have been developing 'a injury figure which determined the rate of market in Europe', the three subsidiaries duty imposed on Canon. Rounded down to had each been given the exclusive distri­ the nearest whole number, the rate imposed bution rights in their respective Member was 35 %. States, which means that the 'market under consideration' was in fact a national market in each case. The Community authorities were therefore not mistaken in allocating the advertising costs to each of the countries Canon's fourth ground of annulment is that concerned. Since the expenses were incurred the injury finding in the Definitive Duty during the period under investigation, they Regulation was defective, and Canon had to be considered as costs for that advances some 10 arguments in support of period. In my view therefore, the advertising that ground. A number of those arguments costs were properly allocated to the models, rest on an expert report compiled for Canon areas and periods of time to which they by Dr Jackson. Dr Jackson's evidence related, and Canon's submission on those attempts to minimize the European manu­ costs fails. facturers' loss of market share at the relevant period and to explain away their diminished profitability by reference to the 'life cycle' of products, whilst on the other hand emphasizing difficulties encountered by Triumph-Adler and Olympia in changing Finally, Canon's submission that export over from the production of mechanical and price should have been calculated in parallel electromechanical typewriters to that of to normal value is merely repetitive and falls electronic typewriters.

The Council, with the assistance of expert the Council at the interim measures hearing evidence from Mr Reis, challenges the show an even worse drop in profitability on validity of that report in a number of funda­ the basis of the European manufacturers' mental respects. Thus in particular, it is said own confidential figures. Some of Dr that Dr Jackson seeks to deduce the Jackson's figures are admitted to be movement of prices, profits and other estimates, and all of them are from Outside' phenomena from the product life cycle sources. The Community authorities have concept, but within a current cycle he can confidential information from the only give a subjective assessment, as reliable Community producers themselves which Dr judgments can be made only after the event. Jackson could not have. Therefore it is not Moreover, he looks exclusively at the life surprising that he is simply wrong on a cycle of the class of products, i. e. electronic number of points, e. g. Triumph-Adler's typewriters as a whole, whereas for market share (Chart K), the proportion of precision a distinction has to be made OEM machines sold by the three European between the life cycle of a class of products, companies (never more than 11 %, not subdivisions of the class (in so far as they 'about half' as alleged) and the decline in can be identified) and individual models or profitability (63.4% over two years, much makes. Again, contrary to what Dr Jackson more than he alleges) for the Community suggests, if a market share grows slowly on producers. a rapidly expanding market, the growth in market share does not exclude dumping: without the dumping it might have grown more quickly. Dr Jackson talks about 'revenue' (i. e. turnover) or prices, when what counts is profit. Sources for his graphs are not cited (although some sources are cited in the Reply). The graphs do not purport to cover all Member States of the EEC. Dr Jackson talks about 'company performance', but that is irrelevant to the point at issue, i. e., whether there was dumping in the product concerned. The fact that a company suffers other — perhaps even more serious — problems does not exclude its also suffering from dumping, neither is that fact relevant to proof of dumping. By superimposing different plots on the same graph — especially Graph F — Dr Jackson masks the fact that even on his figures Canon and the other Japanese producers' turnover in electronic typewriters at all material times continued to grow, whereas that of the three European producers fell in 1983 and 1984. Dr Jackson's own Charts D, F, G, H , I and J show depressed sales and profitability for Mr Reis considers that the European manu­ the European manufacturers explicable only facturers were not overtaken by the new by price undercutting and not by Dr technology of electronic typewriters but on Jackson's 'product life cycle' theory. In this the contrary pioneered those products and respect the profitability graphs submitted by Canon does not dispute that electronic typewriters were first introduced in Europe

by Olivetti, in 1978. Mr Reis states that the situation of the Community industry; it first electronic typewriters marketed in the requires them to establish whether the Federal Republic of Germany were dumped imports are causing injury, which marketed in 1979 by Olivetti, Triumph- they did in this case. Adler and Olympia; the first Japanese producer to market them there was Brother in 1981; and Canon did not do so until 1982. Since it was European manufacturers of electronic typewriters who pioneered and developed the market, the Japanese suppliers who subsequently came on the In this connection Canon mentions the scene benefited from their investment Community authorities' treatment of OEM without having incurred the associated purchases by the Community manufacturers. costs. Mr Reis ascribes the success of the Such OEM machines were counted by the Japanese companies in penetrating the Community authorities as Japanese exports, European market and building up their which was proper and is not challenged by market share inter alia to strong support Canon. Furthermore, Canon agrees that, as from financially powerful parent companies stated in Recital 32 to the Provisional Duty in Japan, deliberate exploitation of the Regulation, the Community producers' European industry's investment in share of the Community market fell from developing a market for a new class of about 63 % in 1982 to about 51 % in product, technically sound, robust, though 1983-84, specifically referring to machines not superior, products and aggressive price manufactured in the Community. It would tactics. not have been correct to treat OEM machines in any other way, and Canon's complaint remains only that the Community authorities 'did not acknowledge' that the market share they found for Japanese-made machines included a percentage of OEM machines. That complaint, in my view, is unfounded. The Community authorities at In this highly technical and complex area it no time denied that a proportion of the is not surprising that experts disagree, but imports were on an OEM basis; they overall I find Mr Reis's reply to Dr treated them properly in substance (which Jackson's report persuasive. Canon does not deny). It appears that their approach was well known to Canon (which does not complain of having been misled). Not every detail can be stated in the recitals to a regulation, and it seems to me that a matter of secondary importance, such as this one, need not necessarily be spelled out in detail in the recitals. The first argument advanced by Canon in relation to the issue of injury is that the injury findings are one-sided and that the Commission failed to make a complete and impartial review of the market as a whole. In my opinion, however, Article 4 of the Basic Regulation does not require the Community authorities necessarily to Canon also attempts to suggest that undertake a comprehensive analysis of the 'capacity problems' were in part responsible

for holding back growth in the sales of into Community law. It is not suggested by Community producers. That assertion is not Canon (or any other applicant in the present made out. The Council has convincingly cases) that Article 4 of the Basic Regulation shown that the Community producers were is in any respect contrary to Article 3 of the not operating at full capacity at any time Code. The legality of the contested injury between 1980 and the end of 1983. finding falls to be decided by reference to Article 4 of the Basic Regulation. Reference to the Code might become necessary if a need were shown to clarify some point in the Basic Regulation, but none such has been shown in relation to the present issue. Therefore it is not appropriate to resolve the present issue by reference to Article 3 of the Canon's second argument is that the Code, as Canon implies, but only by Commission relied on misleading or reference to Article 4 of the Basic Regu­ irrelevant factors, ignoring other factors lation. suggesting there was no injury caused by the alleged dumping. It avers that the finding of injury was based almost exclu­ sively on price, on the market share of the imports, and on financial factors which are valueless since the Commission seems to have made no attempt to distinguish the losses caused by structural problems of Article 4 (1) of the Basic Regulation is Community manufacturers from the adverse particularly important with respect to the impact of Japanese competition; that no question of causation. It provides that a credit was given for increased production, determination of injury shall be made only increased sales, improved turnover, capacity if the dumped imports are causing (or utilization or lower stocks, and that, threatening to cause) material injury to the contrary to Article 3 (4) of the Code, Community industry 'through the effects of the Commission uncritically attributed to dumping'. It specifies that injuries caused by Japanese imports the adverse consequences other factors which also adversely affect the for European industry of developments in Community industry 'must not be attributed technology and the inadequate productivity to the dumped imports'. of the domestic industry which at the same time were injuring the industry. It was a technological revolution which almost over­ whelmed Olympia and Triumph-Adler, coupled with their own poor productivity because of the change in technology.

The evidence is strongly against Canon's share and in profitability were due to their assertion that Olympia and Triumph-Adler own conduct. were damaged by a technological revolution rather than by dumped Japanese imports. Dr Jackson's assertions on this point have, in my view, been disproved by other evidence. The European manufacturers were not It is wrong to assert that the Commission surprised by the new technology: they made no attempt to distinguish the effects invented it. Olivetti, as well as Olympia and of dumped Japanese imports from any Triumph-Adler, initiated the change in tech­ effects of what Canon calls the 'structural nology alluded to ; the Japanese manufac­ problems' of the Community industry. The turers followed. injury was measured particularly by reference to price undercutting, which is normally due to outside competition rather than a manufacturer's own internal problems. The method of measurement used was, contrary to Canon's suggestions, well suited to evaluate the injury caused by dumping and to exclude any injury which might be due to other causes, particularly those relating to Community manufacturers' internal arrangements. The wording of the The evidence is also against Canon's injury finding in the Definitive Duty Regu­ assertion that the Community industry was lation clearly shows a separation of injury damaged by its own poor productivity caused by the dumped imports from injury rather than by dumped Japanese imports. due to other factors. Thus, Recital 38 states The evidence shows that, despite being first that, 'the facts as finally determined show in the market, the Community manufac­ that the injury being caused by dumped turers were prevented from building up imports of electronic typewriters originating productivity by large-scale Japanese in Japan, taken in isolation from that caused dumping. by other factors, has to be considered as material. No other factors, such as volume and prices of other imports which were not dumped, or contraction in demand, were found to have been contributory to the injury established'. The words 'the injury established' in this recital do not mean 'all the problems experienced by Community industry' as Canon implies but plainly refer back to the preceding recitals and mean 'the injury described and analysed above', i. e. As regards what Canon describes as the the injury resulting from dumped Japanese 'structural problems' of the Community imports. The recital plainly does not deny industry, the evidence suggests that Olympia the existence of 'structural problems', as and Triumph-Adler changed over from the Canon alleges, but does demonstrate that production of mechanical and electro­ the Community authorities identified the mechanical to the production of electronic injury specifically caused by dumped typewriters less quickly than Olivetti and Japanese imports and established that no invested large amounts of money in the other factors contributed to that particular process. It does not, however, support the injury. That approach is entirely in innuendo by Canon that their fall in market

OPINION OF SIR GORDON SLYNN — JOINED CASES 277 AND 300/85

in my opinion under no duty to work assume that a fall in profitability reflected through every single one, since they are injury caused by dumped Japanese imports. only cited as examples (see the words 'such as') of economic factors which might indicate the 'consequent impact on the industry concerned'. Although utilization of capacity and stocks do not appear to be expressly mentioned in the recitals of either regulation, I consider that it was within the discretion of the Community authorities to This submission rests on a general theory as omit mention of them, if they considered to the life cycle of products when at best that other factors gave them sufficient what would be relevant for present purposes guidance. As regards increased production, is the life cycle of specific models. Secondly, increased sales and increased turnover, it seems far more likely that profits for elec­ Canon's allegation is simply wrong, because tronic products are greatest not during the they were dealt with in the recitals. In so far early stages, as alleged, but that such as Canon intends to argue that they were products are most profitable when they are incorrectly dealt with, increase of sales (or well established and the initial developing turnover) has to be set against the fact that and marketing costs have been absorbed. I the sales did not increase as fast as demand do not accept the assertion that a reduction on a market which was expanding rapidly. in profitability was a normal market Furthermore a decrease in profitability due phenomenon for the electronic typewriters to price undercutting must be given due in question during the period in question. weight as against rising sales. In my view, the Community authorities were entitled to make the assessment they made in both respects and Canon's argument falls to be rejected.

Definitive Duty Regulation: 'It was estab­ decline in profitability caused by dumping in lished that if the profitability of the total this case was particularly damaging. Community industry in 1982, i. e. the year when large-scale imports of Japanese type­ writers were starting, was 100 (index) the profitability (expressed as a percentage of turnover before tax) has declined to 36.6 (index) during the reference period .... Even allowing for seasonal distortions, the quarterly consolidated profitability of sales in the Community during the period of investigation has been regularly below Canon's fifth argument is that it is obscure a level at which the existence of this what evidence the Commission had as to industry could be guaranteed'. price competition. That is not borne out by the text of the two regulations concerned. According to Recital 31 of the Provisional Duty Regulation: 'The resale prices of the dumped imports generally undercut the prices of the Community producers during the period under investigation by varying degrees depending on models and markets. Although there were instances of no under­ cutting, the latter generally ranged between 11.4 and 30 % and inn some cases reached 48.5%'. That finding was confirmed in the Definitive Duty Regulation (Recital 32), but at that stage the Community authorities considered it unnecessary to examine the price undercutting in any further detail. The reason for that decision was stated in Recital 33 in the following terms: 'It was not considered necessary to undertake a Thus it was found that the profits of the detailed examination of price undercutting Community industry had been driven down by Japanese imports since the prices realized so low that it was facing extinction. It is, I by the Community producers had been think, impossible to explain that away as a depressed by the prices of the Japanese normal market phenomenon. Moreover, the products'. Both the decision and the reasons evidence of both sides concurs in asserting for it are in my opinion sound. It would the vital necessity for a company which has indeed have been futile for the Community launched a technically innovative product authorities to examine undercutting of (such as an electronic typewriter) to recoup actual prices in any further detail because quickly the usually considerable costs it has the prices of Community producers had incurred on research, development and been depressed by large-scale dumping of marketing the new product and to get in Japanese products sustained over a more profit to finance the next cycle of considerable period and the comparison technical research. It was at this sensitive could not have yielded a meaningful result. stage that the Community producers were (The Community authorities instead deprived by dumping of the profits which constructed the prices within the they vitally needed. Thus if the evidence Community as they would have been if not about product life cycles has any validity, it depressed by dumped imports, and as I said is in my view to demonstrate that the in my Opinion in TEC that was a valid

It appears by this argument that Canon is seeking to challenge the position taken by the Council in Recital 41 of the Definitive Duty Regulation which states inter alia as follows : Moreover, Canon's argument about the troubles of the 'inefficient' Community producers arising from factors other than the dumping is one of causation, but Article 4 of the Basic Regulation does not require that dumping should be the only or even the 'Moreover, the Council is not convinced principal cause of injury. Indeed, one of the that Community interest necessarily requires major features which distinguishes the that the specific situation of an allegedly less present code from its predecessor, the First efficient producer when confronted with Anti-Dumping Code (of 1967), is its aban­ unfair trade practices be disregarded; the donment of the criterion that the dumping Council considers that by setting the injury must be 'demonstrably the principal cause' elimination level by including all three of the injury in favour of the test that it is Community producers rather than having merely 'causing injury'. Article 3 (4) of the regard to the allegedly less efficient one present code expressly provides that 'there alone, Community interest is appropriately may be other factors' such as technological reflected.'

CANON v COUNCIL

In my view, the fact that part of the Community industry is experiencing diffi­ culties due to causes other than dumping makes it more — not less — necessary to prevent additional injury due to dumping. It cannot therefore be argued that the level of Canon's eighth argument is that the level of protection against dumping must be set at the profit margin used in calculating the the level needed to protect only the most target price was excessive. Recital 35 to the efficient Community producer. As to Definitive Duty Regulation, giving reasons, whether it should be set at a level to protect states that 10% was considered a reasonable the least efficient Community producer, it is profit margin to include in the target sales clear that the Community authorities did price of the Community product. It also not set it at such a level. Recital 41 states states that the Community authorities that the level was calculated by reference to reached that figure despite a demand from all three Community producers; and Recital the Community industry that it should be 36 shows that the calculation was based on much higher (20% on turnover or 30 % on an average of the costs of production of capital). Canon suggests, although without all Community producers. Where — as any supporting evidence, that the figure of here — the costs of production of the 10% greatly exceeded the profit levels ever Community producers differ from one to achieved on electronic typewriters by at another, it is not possible to give each of least two of the three complainant them the same degree of protection against companies. The Council has stated that that dumping; and it seems to me that applying suggestion is incorrect, and that in fact, an average degree of protection (as was although the precise figures are confidential, done here) is entirely consistent with the two of the complainant companies had requirements of the Basic Regulation. profits on sales of electronic typewriters in

the Community substantially exceeding 10% each made bona fide evaluations of the before dumping began. Canon's argument percentage differences in the value of the on this point is not substantiated. various models, it was concluded that the most reasonable solution was generally to use a figure at the mid-point between these evaluations'. Canon complains that this method is misconceived and that splitting the difference between two estimates of Canon's ninth argument concerns the way value cannot be relied on to produce a in which the extent of the injury was meaningful figure. Canon submits that the measured. The way the injury was measured Commission should instead have used the is set out in detail in Recitals 34 to 38 of the cost of production of the differing features, Definitive Duty Regulation. Basically the as being the only objectively verifiable price of the Community-made product was indicator. compared to the price of the dumped import on the Community market. A duty equi­ valent to the difference between the two prices would bring the price of the dumped imports up to a level where they would no longer unlawfully injure the Community industry. In my view that basic ap­ proach — price comparison — is a straight­ forward way of achieving the aim of the Basic Regulation and is in accordance with its provisions. The adjustments made by the Community authorities do not purport to be precise or to be statistically exact, but only to be a reasonable approximation. In my view, for the particular adjustments concerned, a For the purpose of that comparison, the reasonable approximation was sufficient. prices of the dumped imports were adjusted Recital 34 states: 'When it came to before being compared with the target price evaluating the technical differences between of the Community-made electronic typew­ the most similar models, it became apparent riters. According to Recital 34 the reason that any evaluation would, to a substantial for that adjustment was that, 'unlike many extent, be influenced by subjective appreci­ other products, an immediate comparison ations of the anticipated reactions of pros­ between imported and Community- pective purchasers. Furthermore the produced models was impossible because of exporters and the Community industry their variety and their differing technical expressed the view that no objective specifications'. Canon does not deny that a yardstick for a comprehensive comparison direct model-for-model comparison was was available'. The subjective element in impossible and it does not deny that some estimating the value of different features in adjustment was necessary in order to effect the eyes of potential customers necessarily a comparison. excludes any precise result; the evaluation can only be approximate. I do not accept Canon's suggestion that the figure is meaningless, nor can it be said to be arbitrary. Evaluations were made by the Recital 34 states that the adjustment was Japanese exporters and by the Community made in the following way: 'Given that the producers, who both have extensive exporters and the Community industry have knowledge and experience of the market to

Accordingly I consider that no illegality has Ground 5: Procedural matters been demonstrated in the way the Community authorities calculated the adjustments to be made in respect of the different features of the products compared, and that Canon's ninth argument falls to be By its fifth ground of annulment, Canon dismissed. avers that, since no prudently run enterprise could have anticipated the Commission's unprecedented methods of calculation, the contested regulation constituted a retro­ active penalty. The revolutionary nature of Canon's 10th argument on the subject of the Commission's policies imposed on the injury is that Canon was given insufficient Commission, and on the Council, especially information and that the statement of high procedural standards, which the reasons in the regulation is inadequate. The institutions failed to respect; they did not details which have been given to the Court examine all relevant factors, did not give of a meeting between the Commission and adequate consideration to arguments Canon and of correspondence between the submitted, and did not give adequate Commission and Canon amply demonstrate reasons to explain their actions.

OPINION OF SIR GORDON SLYNN — JOINED CASES 277 AND 300/85

In my opinion, it has not been shown that consider. The actions of the Community the methods of calculation were improper. authorities have not been shown to be The high rate of the duty imposed was unlawful in any respect and are fully simply the consequence of the very heavy explained in the recitals to both regulations dumping which had caused the Community concerned. Therefore, in my view, Canon's industry extremely severe injury. No fifth ground of annulment should be relevant factor has been shown which the rejected. Community authorities failed duly to