By Andrew Longstreth
NEW YORK, Feb 22 (Reuters) - When two Chinese vitamin C
manufacturers go to trial in Brooklyn as early as Monday,
they're expected to rely on a seldom used defense. Accused of
fixing prices, they will say their government compelled them to
A class action antitrust lawsuit filed in U.S. District
Court in New York on behalf of vitamin C purchasers in the
United States accuses the Chinese companies of raising prices
over a period from December 2001 to June 2006. Jury selection is
scheduled for Monday.
The trial will offer a rare opportunity to test the foreign
sovereign compulsion doctrine, which protects foreign companies
that were compelled by their own governments to break U.S. law.
Historically, defendants who invoke the defense have had
little success because they lack the necessary evidence to show
they were compelled to act under threat of penalties from their
home governments, say legal experts.
"This is not an easy case for these alleged Chinese cartel
members," said D. Daniel Sokol, a visiting professor at the
University of Minnesota Law School who specializes in antitrust
The case will turn on whether the defendants can show in
sufficient detail how they were compelled by the Chinese
government to cooperate on production and price as part of the
Chinese government's regulation of vitamin C exports.
The litigation against the vitamin C manufacturers began in
2006. The plaintiffs, led by a small New Jersey vitamin C
distributor called The Ranis Company Inc, alleged in their
complaint that the defendants consented to limit their exports
in a 2001 written production and price agreement.
As a result, according to the plaintiffs, spot prices for
vitamin C jumped to as high as $15 per kilogram in April 2003
from around $2.50 per kilogram in 2001.
Last year, a third defendant, Aland (Jiangsu) Nutraceutical
Co Ltd, settled by agreeing to pay $10.5 million.
SUPPORT FROM CHINA
At the trial, the defendants will be Hebei Welcome
Pharmaceutical Co Ltd and Weisheng Pharmaceutical Co Ltd and two
affiliated companies. The plaintiffs are seeking $54 million,
which could be tripled under antitrust law.
Throughout the case, the defendants have received support
from China's government, which filed its first-ever amicus brief
in a U.S. court. The Ministry of Commerce argued that a ruling
against the manufacturers would "improperly penalize" them for
"the sovereign acts of their government and would adversely
affect implementations of China's trade policy."
As a matter of law, the argument did not persuade U.S.
District Judge Brian Cogan, who rejected a motion for summary
judgment by the defendants in 2011.
"Although defendants and the Chinese government argue to the
contrary, the provisions of Chinese law before me do not support
their position, which is also belied by the factual record,"
Cogan wrote. "I decline to defer to the Chinese government's
statements to the court regarding Chinese law."
At a hearing in October, Cogan told lawyers for the
defendants that at trial he would not allow witnesses to testify
that they were compelled by the Chinese government. Such
statements, he said, would be considered legal conclusions and
"witnesses can't testify to conclusions."
Instead, Cogan said that the defendants would have to
specifically detail what they were instructed to do by the
Leading the case for the plaintiffs will be William
Isaacson, a partner at Boies, Schiller & Flexner. Isaacson and
his firm are familiar with the vitamin C market, and in the late
1990s investigated a vitamin C cartel among European and
Japanese companies that resulted in over $1 billion in
The case is In re: Vitamin C Antitrust Litigation, U.S.
District for the Eastern District of New York, No. 06-md-1738.
For plaintiffs: William Isaacson of Boies, Schiller &
For Weisheng: Daniel Mason of Zelle Hofmann Voelbel & Mason.
For Hebei: Charles Critchlow of Baker & McKenzie.
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