Judge considers appeal request in Chinese vitamin C cartel case

Judge Brian Cogan of the US District Court for the Eastern District of New York recently rejected ​the Chinese firms’ bid to get the case thrown out on the grounds that the ‘foreign sovereign compulsion’ doctrine (which protects foreign firms compelled by their governments to break US law) applied.

This means the case can now proceed to trial, although most observers expect a settlement is more likely given that the defendants have admitted fixing prices.

No trial date fixed (yet)​

William Isaacson, partner at Washington DC-based Boies, Schiller & Flexner and co-lead counsel for the US plaintiffs Animal Science Products Inc and Ranis Co, said a trial date had not been fixed as Cogan was considering several motions filed after his September 6 ruling denying the defendants’ motion for summary judgment.

He told NutraIngredients-USA: “The judge is considering other pending motions and the future schedule. The defendants filed a motion asking the district judge to permit them to appeal the summary judgment decision, and we will respond.”​

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Other motions filed included “a motion to dismiss some defendants on jurisdictional grounds”​, he added.

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No rock and no hard place​

In his ruling published on September 6, Cogan said: “There is no rock and no hard place. The Chinese law relied upon by the defendants did not compel their illegal conduct.”​

The case has attracted a lot of publicity as the Chinese Ministry of Commerce took the unprecedented step of submitting a written document to the court supporting the defendants.

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Professor Spencer Waller, director of the Institute of Consumer Antitrust Studies at the Chicago School of Law, said that for the foreign sovereign compulsion defense to be successful, defendants had to go beyond showing that the foreign government had permitted, suggested or even encouraged anti-competitive behavior.

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He added: “You need to prove flat out compulsion. That is, you have to be able to prove they made me do it…”​

A sharp rise in the price of vitamin C​

The actions of the four Chinese firms - Northeast Pharmaceutical Group Co, Jiangsu Jiangshan Pharmaceutical Co, Hebei Welcome Pharmaceutical Co and China Pharmaceutical Gr – was claimed by the plaintiffs to have contributed to a sharp rise of the US price of vitamin C in 2001 as they controlled such a large share of the market (more than 60%) between them.

The firms in question have admitted fixing prices, but claimed they were compelled to do so by the Chinese Ministry of Commerce, said Cogan in his ruling.

“The defendants do not dispute that the cartel agreements at issue violate the antitrust laws.”​

Click here ​to read Judge Cogan's ruling on the motion of summary judgment.