A small Illinois manufacturer of telecommunications equipment has taken on Japanese giant Nippon Electric Co. Ltd. (NEC) in a lawsuit that could help determine how foreign firms will be allowed to compete in the rapidly expanding U.S. Market for electronic communications systems.
MCL Inc., a $5-million maker of high-powered microwave amplifiers and satellite communication devices in LaGrange, Ill., has joined with Aydin Corp., a larger supplier based in Fort Washington, Pa., in charging that NEC sold equipment in the United States at prices far less than their fair market price in Japan -- a practice known as "dumping."
The complaint stems from contracts for powerful amplifiers used to transmit signals to satellites from earth-stations. Communications Satellite Corp., known as Comsat, awarded the Japanese firm two contracts in January 1981. MCL and Aydin had submitted bids to Comsat for negotiation. They were both unsuccessful. The lawsuit charges NEC with violating the Tariff Act of 1930, as amended, which requires companies to price products sold in the United States no lower than fair value price, the price at which they would be sold at home. The two companies argue that NEC sold the amplifiers to Comsat for nearly 40% less than Japanese fair value prices.
The case may be crucial to the domestic telecommunications industry, contends David M. F. Lambert, the Washington, D.C., attorney representing MCL and Aydin. Having won the key Comsat contract, Lambert maintains that Japanese competitors have captured a major share of the U.S. market for high-powered amplifiers used in satellite transmission equipment for the next few years. And, he adds, "they now have the potential to gain a significant advantage in the markets for ground receivers, too."
MCL's decision to engage in legal action was not easy, given its size and limited resources, says Robert E. Morgan, president of the family-owned company. But high-powered amplifiers account for half of the firm's sales. With MCL so highly dependent on volume production, Morgan says he would "have to phase out of the business in two or three years if NEC can get away with this kind of thing." Adds Morgan, "The important thing was to stand up and be counted." Legal fees amounting to more than $100,000 have been footed by the two firms with help from other members of the Electronic Industries Association.
If U.S. trade officials find fault, they can impose duties on the Japanese products in order to bring prices to fair market levels. A preliminary study found NEC guilty of dumping, and the International Trade Administration levied a tariff of 16.6% of equipment value. Whether or not they are successful, the companies must absorb the legal costs; neither company will receive any damages. Says Morgan, "All we want is equal competition in the marketplace."