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case. The Court was faced with the same "prices v. profit"
argument in Bausch & Lomb, Inc. In that case, B&L Ireland, like
Compaq Asia, had a lower cost structure than its competitors.
Respondent argued in Bausch & Lomb, Inc., as he does here, that
B&L Ireland should have earned the same net profit margins as its
competitors. This Court held:
The fact that B&L Ireland could, through its possession
of superior production technology, undercut the market
and sell at a lower price is irrelevant. Petitioners
have shown that the $7.50 they paid for lenses was a
"market price" and have thus "earned the right to be
free from section 482 reallocations." * * * [Bausch &
Lomb, Inc. v. Commissioner, supra at 592-593.]
The same is true in the present case. The CUP method establishes
arm's-length prices for PCA's that were sold by Compaq Asia, and
a large profit margin does not prevent use of the CUP method.
In summary, respondent's position ignores the prices that
were paid by Compaq U.S. to unrelated subcontractors. Instead,
respondent contends that Compaq Asia should earn the same net
profit margins, while not charging the same prices, as the
comparable companies. Because Compaq Asia costs were less than
the costs of comparable companies, respondent asserts that the
prices that were paid to Compaq Asia should be $232 million less
than the prices that were paid to the unrelated subcontractors
for comparable PCA's. Respondent, however, is unable to identify
a single actual market participant that sold PCA's at only two-
thirds of the prevailing market price.
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