Chinese Vitamin C Makers Face Price-Fixing Trial in U.S.

Chinese makers of vitamin C abused their dominance of a $500 million market by limiting exports to fix prices, a lawyer for U.S. buyers of the nutrient told jurors at the start of a federal antitrust trial.

China Pharmaceutical Group Ltd. (1093), based in Hong Kong, its Weisheng Pharmaceutical unit, North China Pharmaceutical Co., and its unit Hebei Welcome Pharmaceutical Co., based in Hebei, China, were sued by food and beverage companies, vitamin packagers and other direct buyers for allegedly conspiring to artificially raise prices from December 2001 to June 2006.

“These companies met, agreed and conspired to increase prices in the U.S., contrary to our free-enterprise system,” William Isaacson, a lawyer for the plaintiffs, said in his opening statement today in Brooklyn, New York.

The defendants each “voluntarily agreed to control their quantity and safeguard their prices,” Isaacson said.

The companies involved in the case supplied about 80 percent of the vitamin C in the U.S., Isaacson said. As a result of the alleged conspiracy, prices rose to as much as $15 a kilogram (2.2 pounds) in April 2003 from about $2.50 a kilogram in December 2001, according to a memorandum filed by the plaintiffs in September 2006.

U.S. businesses suffered $54.1 million in damages as a result of the conspiracy, Isaacson said.

Government Orders

The makers of the vitamin, which is found in some fruits and vegetables and can also be synthesized, said that the Chinese government compelled them to agree on prices and product quotas, according to court papers. They also contended that the parent companies, China Pharmaceutical Group and North China Pharmaceutical Co. (600812), didn’t manufacturer vitamins and shouldn’t be in the suit.

“We are not here to defend the conduct of the Chinese government,” said Daniel Mason, a lawyer for China Pharmaceutical and Weisheng. “They have a much different system than ours.”

Price spikes for vitamin C between 2001 and 2006 can be explained by fears surrounding outbreaks of SARS and avian flu, defense lawyers said.

“Ultimately, market forces were at work, independently dictating the prices that were charged,” said Charles Critchlow, a lawyer for Hebei Welcome and North China Pharmaceutical.

Early Complaints

Animal Science Products Inc., a livestock-supplement firm based in Nacogdoches, Texas, and Ranis Co., a food company based in Elizabeth, New Jersey, filed complaints in 2005 accusing the Chinese companies of conspiring to inflate prices for bulk vitamin C.

U.S. District Judge Brian M. Cogan has ruled that the plaintiffs can pursue damages on behalf of all direct buyers of vitamin C that purchased the material for delivery in the U.S. from certain defendants starting in December 2001.

Closely held Aland Jiangsu Nutraceutical Co., which had also been a defendant in the case, settled with the plaintiffs for $10.5 million, according to court filings.

The case is In re Vitamin C Antitrust Litigation, 1:06-md- 01738, U.S. District Court, Eastern District of New York (Brooklyn).

To contact the reporter on this story: Christie Smythe in New York at csmythe1@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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