Price-Fixing: U.S. District Court Orders Chinese Vitamin C Makers to Pay $162.3 Million, Foreign State Compulsion Defense Rejected
March 16, 2013
In a very interesting case reported by the New York Times, Wall Street Journal, Bloomberg and others, a U.S. District Court late last week ordered Chinese vitamin C manufacturers (including Hebei Welcome Pharmaceutical Co. and North China Pharmaceutical Group Corp.) to pay more than $162 million, after a New York jury found the companies liable in this civil price-fixing case. Other companies, including China Pharmaceutical Group Ltd., reached settlements before trial.
Some unusual aspects of this case included the fact that the defendants argued the foreign state compulsion defense (i.e., were compelled by the Chinese state to engage in the conduct – for a discussion of the defense see: here) and the fact that China’s Ministry of Commerce supported the defendants. The case is also being reported as the first time Chinese companies have been on trial in the U.S. for alleged antitrust violations. In this regard, plaintiffs’ counsel for U.S. vitamin C buyers said:
“Chinese companies selling products in the U.S. are going to be treated the same as other companies. … There’s a history of cartel prosecutions in the U.S., European cartels, Japanese cartels, Korean cartels. This is the first one against Chinese companies.”
With respect to damages, the jury in this case voted in favor of a $54 million judgment against the Chinese manufacturers, which was tripled to $162 million.
Plaintiffs in this case included a Texas animal feed company and a New Jersey vitamin distributor, who alleged that the Chinese vitamin manufacturers formed an illegal price-fixing cartel that had resulted in increased prices since 2001. The raw vitamins at issue in this case are used as ingredients in food and beverage products, vitamins for consumers and animal products.
In Canada, convictions arising from an international bulk vitamins price-fixing and market allocation cartel in the 1990s resulted in fines against European and Japanese vitamin manufacturers (including vitamin C) of more than $95 million against twelve corporations and three individuals. That case, which resulted in European and Japanese companies paying a total of about $1 billion in criminal fines and more than $1 billion in civil judgments at the time, also included the largest Canadian cartel fine to date against a single defendant – Hoffmann-La Roch Ltd., which was fined $48 million. See: here, here and here.
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