false designation of origin that fools Customs, not consumers, is not actionable

Diamond Sawblades Manufacturers’ Coalition v. Diamond Tools
Tech., LLC, 2020 WL 7028029, No. 1:19-cv-04674-TWP-TAB (S.D. Ind. Nov. 30, 2020)

Plaintiffs sued defendants for RICO and Lanham Act
violations and for prohibited predatory pricing, tortious interference, and
civil conspiracy under state law.  

In May 2005, DSMC petitioned the Commerce Department and the
ITC “asserting that certain foreign manufacturers of diamond sawblades were
selling their products in the United States at dumped prices.” In 2009, Commerce
published an “Antidumping Order” on diamond sawblades and parts thereof from China,
having determined that imports from China were being “dumped” at prices below
fair value and that this actually threatened the U.S. industry for diamond
sawblades with material injury. Commerce thus halted imports. The order was
reissued five years later after a review.

Defendants allegedly circumvented the Antidumping Order,
opening “shell facilities in Thailand and Canada—countries that are not subject
to the Antidumping Order—through which to fraudulently ship Chinese goods to
the United States as ‘Thai’ or ‘Canadian’ goods” after relabeling, and at
times, minor labor on the sawblades. Commerce and DHS therefore “issued
anticircumvention decisions and findings of wrongful evasion of the Antidumping
Order.” Despite the Antidumping Order, domestic consumption of subject imports
was even higher than during the original period of investigation; many domestic
producers were simply forced to leave the industry. “Indeed, of the original
nine members of the domestic Diamond Sawblades Manufacturers’ Coalition, only
two remain.”

The RICO claims failed because they were RICO claims.

False designation of origin: the court indicated that this
had to be a false advertising claim because §43(a) requires confusion over
affiliation with/approval by another party. The claim failed because
the allegedly fraudulent relabeling of origin deceived Customs, not consumers. (I
don’t see why the precedents saying that deception doesn’t have to be of end
consumers to count shouldn’t extend here, given a strong but-for causation
argument that the end consumers could never have bought the products without
the deception.)  The court reasoned that the
complaint failed to allege “that any mislabeling regarding national origin
would likely dupe the consuming public into buying the products of Defendants
instead of those of its members.” This wasn’t a case of false US origin
labeling—false designation as products of Thailand or Canada wasn’t relevant to
consumers. The arguments that the materiality of literal falsity could be
presumed, and that Chinese products might be especially unattractive to US
consumers, failed, as did the argument that the “false labels enabled them to
sell the products at issue well below fair value—i.e., at much cheaper
prices—which plainly influences consumers’ purchasing decisions.” The complaint
simply didn’t allege how these labels would materially affect a consumer’s purchase,
even if the briefs argued for something special about Chinese origin labeling.

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