CIT Upholds Injury Finding on Mattresses Despite ITC's Errors in Assessing Market Segmentation

The Court of International Trade sustained the International Trade Commission's affirmative injury finding on mattresses from a host of countries despite finding that the commission committed various errors in its assessment of whether the market industry is segmented.

Admonishing the ITC for not addressing Utah importer CVB's arguments regarding segmentation in the market "directly from the beginning," Judge Stephen Vaden noted he found in the commission's favor only because it ultimately did address the claims "and the harmless error principle." Despite extensive efforts from the ITC to "dodge the issue" and the fact that the domestic boxed mattress industry actually grew during the investigation period, the commission backed its injury finding with substantial evidence, the court said.

During the injury proceeding, CVB claimed that boxed and flat-packed mattresses occupy different parts of the market, adding that producers and buyers often concentrate on one product or the other. Vaden said that the "crux" of CVB's claim is that the ITC unreasonably found that the two mattress types do not create a segmented market.

The judge remarked that in its final analysis the ITC employed "mathematical obfuscation and statistical chicanery" to make the mattress industry appear less segmented than it is. In all, the court took the commission to task regarding three errors it committed in obfuscating the market segmentation.

The first error concerned producer specialization. During the proceeding, the ITC treated two pairs of domestic producers that merged during the investigation period as four separate companies, but in analyzing producer specialization, it treated the producer pairs as two entities. While the commission gave no explanation for the difference, the court said the "reason is self-evident" in that it was more convenient to treat the pairs as two companies since it gave the impression that more domestic producers make both types of products.

In its analysis, the ITC said that the three largest U.S. producers of flat-packed mattresses also made boxed mattresses. While that is strictly correct, it "fails to tell the whole story," Vaden said, since each company made multiple times more flat-packed mattresses than boxed. Additionally, while the commission said that nearly a quarter of domestic manufacturers made both types of mattresses, the court found this to be a very misleading conclusion, again due to the "stark" production and quantity differences between the two types of mattresses. The ITC's failure to acknowledge the proper data was not just "inartful" but misread the data entirely, the court said.

The second error concerned the mattress buyers' specialization. The commission's failure to provide context in its analysis gave the false impression that the buyers are indifferent about mattress packaging, but this isn't the case. Of the 19 buyers who submitted responses in the proceeding, only three bought flat-packed and boxed mattresses in numbers "approaching parity," while the other 16 bought far more, or exclusively, of one type, the court noted.

The third error stemmed from the ITC's treatment of purchaser survey rankings. Vaden said the commission ignored or failed to provide key context that undermined its conclusion that packaging type is irrelevant to buyers. The court found the ITC's statements on whether packaging was important to their buying decisions indicated that a question on the questionnaire involved ranking from a pre-selected list. However, the question didn't do that, and instead provided a blank space for the buyers to list what factors were important to them. Vaden said it was an error for the ITC to not look at the data and explain what it meant for the commission's ultimate decision.

However, the court said there was still enough evidence to support the ultimate injury finding. The ITC said that even when only looking at the domestic boxed mattress industry, the imports injured the industry, despite an increase in performance for boxed mattress makers. The commission said were it not for the imports, the industry could have grown even more, evidencing this claim with low capacity utilization rates in domestic boxed mattress factories.

While there are prior CIT decisions affirming negative injury findings where the domestic industry grew during the investigation period, Vaden said these decisions are of no importance since the court applies a "determinative" standard. Citing the Supreme Court, the judge said that the fact that it's possible to draw two different conclusions from the evidence doesn't bar the current findings.

The court also ruled that the ITC wasn't required to conduct a formal market segmentation analysis since there's no statute requiring the commission to conduct this analysis.

(CVB v. United States, Slip Op. 23-184, CIT # 21-00288, dated 12/19/23; Judge: Stephen Vaden; Attorneys: Geoffrey Goodale of Duane Morris for plaintiff CVB; Jane Dempsey for defendant U.S. government; Mary Jane Alves of Cassidy Levy for defendant-intervenors led by Brooklyn Bedding)