China's attempt to control vitamin C market leads to multi-national legal discussion

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Date: January-March 2017
From: International Law Update(Vol. 23, Issue 1)
Publisher: American Bar Association
Document Type: Article
Length: 4,342 words
Lexile Measure: 1550L

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Plaintiffs-Appellees, Animal Science Products, Inc. and The Ranis Company, Inc., and various U.S. vitamin C purchasers, brought a multi-district antitrust class action against Defendants-Appellants Hebei Welcome Pharmaceutical and North China Pharmaceutical Group Corporation, entities incorporated under the laws of China. In their complaint, Plaintiffs alleged that Defendants conspired to fix the price and supply of vitamin C sold to U.S. companies on the international market in violation of Section 1 of the Sherman Act, 15 U.S.C. [section] 1, and Sections 4 and 16 of the Clayton Act, 15 U.S.C. [section][section] 4, 1.

Beginning in the 1970s, China, as the leading producer and exporter of vitamin C, started implementing various export controls in order to retain a competitive edge over other producers of vitamin C on the world market. In 1990s, as a result of a reduction in vitamin C prices, the Government facilitated industry-wide consolidation and implemented regulations to control the prices of vitamin C exports. In 2001, China supplied 60% of the worldwide vitamin C market.

In 2005, various vitamin C purchasers in the United States, including Plaintiffs-Appellees, filed numerous suits against Defendants-Appellants. The Plaintiffs alleged, that in December 2001 Defendants colluded with an entity referred to as both, the Western Medicine Department of the Association of Importers and Exporters of Medicines and Health Products of China and the China Chamber of Commerce of Medicines & Health Products Importers & Exporters, (the "Chamber"), and agreed to restrict their exports of Vitamin C in order to create a shortage of supply in the international market, all with the purpose and effect of fixing prices.

Defendants moved to dismiss the complaint on the basis that they acted pursuant to Chinese regulations regarding vitamin C export pricing. Furthermore, they argued that they were required by the Chinese Government to coordinate prices and create supply shortage. Moreover, they argued that the district court should dismiss the complaint pursuant to the act of state doctrine, the doctrine of foreign sovereign compulsion, and/or principles of international comity.

In support of Defendants' motion to dismiss, the Ministry of Commerce of the People's Republic of China (the "Ministry') filed an amicus curiae brief representing that it is the highest authority within the Chinese Government authorized to regulate foreign trade; and that the Chamber is a Ministry-supervised entity authorized by the Ministry to regulate vitamin C export prices and output levels. As presented, the Chamber was an instrumentality of the State that was required to implement the Ministry's administrative rules and regulations with respect to vitamin C trade. The Ministry also presented evidence that the Chamber created a vitamin C Subcommittee (the "Subcommittee") in 1997, and a "price verification and chop" policy ("PVC") implemented in 2002, all with the aim to regulate the vitamin C industry. As explained, before 2002, only companies that were members of the Subcommittee were allowed to export vitamin C, and were granted an "export quota license" if its export price and volume was in compliance with the Subcommittee's coordinated export price and export...

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Gale Document Number: GALE|A549156115