Chinese Price-Fixing Case Heads to High Court

MANHATTAN (CN) – The Supreme Court took up a case Friday where a China-based supplier of vitamin C averted U.S. antitrust liability because of its obligations to the Chinese government.

U.S. vitamin suppliers led by Animal Science Products Inc. mounted the appeal last year, shortly after a panel of U.S. appellate judges tossed their $147 million verdict against Hebei Welcome Pharmaceutical and its holding company, North China Pharmaceutical Group.

“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 the Second Circuit in New York.

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 that accused Hebei of establishing a vitamin C cartel.

Rather than deny the allegations, which were consolidated for multidistrict litigation in New York, Hebei claimed that it is forced to set prices and limit Vitamin C exports by the Chinese government.

Indeed, the Chinese government supplied testimony that confirmed the company was at the mercy of Chinese law.

Though a federal judge in Brooklyn awarded U.S. vitamin suppliers a $147 million verdict, the Second Circuit reversed in September 2016 with orders to dismiss the case.

“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.

Per its custom, the Supreme Court did not issue any comment Friday in taking up the case. It did say that it will resolve only one of the three petitioned questions: “Whether a federal court determining foreign law under Federal Rule of Civil Procedure 44.1 is required to treat as conclusive a submission from the foreign government characterizing its own law.”

The U.S. challengers are represented by Michael Gottlieb with Boies Schiller. Jonathan Jacobson with Wilson Sonsini represents Hebei Welcome Pharmaceutical. The U.S. Solicitor General’s Office has also submitted an amicus brief in the case, as have two professors represented by Jonathan Massey with the firm Massey & Gail.

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