A U.S. price-fixing lawsuit against Chinese vitamin makers will continue despite a ‘foreign sovereignty’ argument.
By Sun Su, Caijing 21 November 2008
A U.S. court has decided to allow an antitrust lawsuit against Chinese vitamin C producers to proceed after turning down their request – coupled with a unique appeal from the Chinese government – to have the case dismissed.
The four Chinese companies are being sued by a group of U.S. vitamin manufacturers, including Ranis Co. and Animal Science Research Inc., for allegedly violating U.S. law by manipulating vitamin C prices.
The U.S. District Court for the Eastern District of New York announced the decision November 6 after the defendants claimed in a dismissal motion that the Chinese government had directed the fixing of vitamin prices through a trade group.
The court was asked to throw out the case based on arguments that the price setting moves were “acts of the state” and subject to a foreign sovereignty doctrine that’s embedded in U.S. antitrust law.
As part of the defense, China’s Chinese Ministry of Commerce filed its first brief ever for a U.S. court, claiming the ministry directed the action of the vitamin C companies as well as a Chinese trade association that allegedly facilitated a cartel.
The ministry’s brief said the government supervised the price-fixing as part of its effort to “play a central role in China’s shift from a command economy to a market economy.”
The court rejected the motion, saying there was not enough evidence to prove the government was behind price fixing and that foreign sovereignty applies.
At the same time, however, the court rejected a request from the plaintiffs to expand the case by adding two defendants.
The lawsuit dates to early 2004, when the U.S. firms sued Chinese companies Hebei Welcome, Jiangsu Jiangshan, Northeast Pharmaceutical Group (NEPG) and Weisheng Pharmaceutical Co. for allegedly forming a cartel to set prices and limit supplies of vitamin C to the U.S. market.
Court petitions say in December 2001 the companies – which at the time controlled 60 percent of the U.S. vitamin C market – formed a cartel after meeting with the Association of Importers and Exporters of Medicines and Health Products of China. As a result of the meeting, the petitions claim, vitamin C prices climbed to US$ 7 per kilogram in December 2002 from US$ 2.50 per kilogram in 2001.
And since then, the plaintiffs claim, Chinese companies have continued operating a cartel.
In the late 1990s, Chinese companies replaced European manufacturers as the leading global suppliers of vitamins. Afterward, China’s vitamin C producers allegedly negotiated to fix export prices and volumes through a trade association, which was seen as a way to avoid risks that trading partner countries would initiate anti-dumping cases.
European vitamin makers were targets of U.S. price-fixing cases in the past. In 1999, for example, Switzerland’s Roche was fined a record US$ 500 million and Germany’s BASF was hit with a US$ 225 million penalty. At the time, the companies were the world’s first and second largest vitamin producers.
The case against Chinese manufacturers stems from suits filed in Massachusetts, California and New York courts. Later, the cases were consolidated in New York.
1 comment:
China’s Government Defends Vitamin Cartel
A U.S. price-fixing lawsuit against Chinese vitamin makers will continue despite a ‘foreign sovereignty’ argument.
By Sun Su, Caijing
21 November 2008
A U.S. court has decided to allow an antitrust lawsuit against Chinese vitamin C producers to proceed after turning down their request – coupled with a unique appeal from the Chinese government – to have the case dismissed.
The four Chinese companies are being sued by a group of U.S. vitamin manufacturers, including Ranis Co. and Animal Science Research Inc., for allegedly violating U.S. law by manipulating vitamin C prices.
The U.S. District Court for the Eastern District of New York announced the decision November 6 after the defendants claimed in a dismissal motion that the Chinese government had directed the fixing of vitamin prices through a trade group.
The court was asked to throw out the case based on arguments that the price setting moves were “acts of the state” and subject to a foreign sovereignty doctrine that’s embedded in U.S. antitrust law.
As part of the defense, China’s Chinese Ministry of Commerce filed its first brief ever for a U.S. court, claiming the ministry directed the action of the vitamin C companies as well as a Chinese trade association that allegedly facilitated a cartel.
The ministry’s brief said the government supervised the price-fixing as part of its effort to “play a central role in China’s shift from a command economy to a market economy.”
The court rejected the motion, saying there was not enough evidence to prove the government was behind price fixing and that foreign sovereignty applies.
At the same time, however, the court rejected a request from the plaintiffs to expand the case by adding two defendants.
The lawsuit dates to early 2004, when the U.S. firms sued Chinese companies Hebei Welcome, Jiangsu Jiangshan, Northeast Pharmaceutical Group (NEPG) and Weisheng Pharmaceutical Co. for allegedly forming a cartel to set prices and limit supplies of vitamin C to the U.S. market.
Court petitions say in December 2001 the companies – which at the time controlled 60 percent of the U.S. vitamin C market – formed a cartel after meeting with the Association of Importers and Exporters of Medicines and Health Products of China. As a result of the meeting, the petitions claim, vitamin C prices climbed to US$ 7 per kilogram in December 2002 from US$ 2.50 per kilogram in 2001.
And since then, the plaintiffs claim, Chinese companies have continued operating a cartel.
In the late 1990s, Chinese companies replaced European manufacturers as the leading global suppliers of vitamins. Afterward, China’s vitamin C producers allegedly negotiated to fix export prices and volumes through a trade association, which was seen as a way to avoid risks that trading partner countries would initiate anti-dumping cases.
European vitamin makers were targets of U.S. price-fixing cases in the past. In 1999, for example, Switzerland’s Roche was fined a record US$ 500 million and Germany’s BASF was hit with a US$ 225 million penalty. At the time, the companies were the world’s first and second largest vitamin producers.
The case against Chinese manufacturers stems from suits filed in Massachusetts, California and New York courts. Later, the cases were consolidated in New York.
Post a Comment