Admitted Chinese Price-Fixers Duck Liability

     MANHATTAN (CN) – A China-based supplier of vitamin C had no choice but to violate U.S. antitrust laws in complying with its government’s orders to limit exports and fix prices, the Second Circuit ruled.
     U.S. vitamin suppliers had already won a verdict against the supplier and its holding company, but the federal appeals court ordered the case dismissed Tuesday in deference to economic regulation from the Chinese government.
     “Because defendants could not simultaneously comply with Chinese law and U.S. antitrust laws, the principles of international comity required the district court to abstain from exercising jurisdiction in this case,” U.S. Circuit Judge Peter Hall wrote for a three-person panel.
     China has been the world’s leading exporter of vitamin C for over half a century. After the country began opening its market to the world in the 1970s, strict rules were put in place to limit the flow of vitamin C and control its price.
     Chinese suppliers accounted for 60 percent of the world’s supply of vitamin C in 2001, and U.S. companies began filing lawsuits here.
     The cases were soon consolidated for multidistrict litigation in New York, where the plaintiffs argued that Hebei Welcome Pharmaceutical and its holding company, North China Pharmaceutical Group, had essentially established a cartel that deliberately controlled the supply and inflated the price of vitamin C.
     Rather than deny the allegations, Hebei and its co-defendant claimed that they were forced to set prices and limit Vitamin C exports by the Chinese government.
     Indeed, the Chinese government supplied testimony that confirmed the defendants were at the mercy of Chinese law.
     A federal judge for the Eastern District of New York eventually ruled for the plaintiffs, awarding them $147 million and barring the defendants from future anti-competitive behavior.
     That verdict unraveled Tuesday with the Second Circuit’s 45-page ruling, which remands the case back to U.S. District Court with orders to dismiss.
     “We hold that the district court abused its discretion by not abstaining, on international comity grounds, from asserting jurisdiction because the court erred by concluding that Chinese law did not require defendants to violate U.S. antitrust law and further erred by not extending adequate deference to the Chinese government’s proffer of the interpretation of its own laws,” Hall wrote.

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