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Chinese Vitamin C Makers Fixed Prices, U.S. Jury Says

Chinese vitamin C makers were ordered to pay $162.3 million to U.S. customers for fixing export prices after a federal court jury in New York found their actions weren’t compelled by the nation’s government.

The jury of five women and two men in Brooklyn returned a verdict yesterday, finding that American dietary supplement firms which filed the antitrust lawsuit proved their case against the Chinese companies. Jurors deliberated for just half a day before reaching a decision to award $54.1 million in damages, which were tripled to $162.3 million under U.S. law.

“We are particularly proud of this victory for private antitrust enforcement against an international cartel,” William Isaacson, an attorney for the plaintiffs, said in an e-mail after the verdict.

A lawyer for the defendants, Charles Critchlow, didn’t immediately return a call seeking comment about whether they will appeal.

The case marks the first time Chinese companies have faced a trial on U.S. antitrust claims, according to James Serota, a lawyer for one of the companies named in the suit. The country’s Ministry of Commerce told the court in a 2006 brief that it was “deeply interested” in the proceedings and that a verdict for the plaintiffs could “adversely affect implementation of China’s trade policy.”

Companies’ Argument

Chinese firms in the case, including North China Pharmaceutical (600812) Co. and its Hebei, China-based unit Hebei Welcome Pharmaceutical Co., argued they couldn’t be held liable for price-fixing in the $500 million global vitamin C market because they were acting under the direction of regulators.

The firms alleged that they would be subject to punishment, including denial of permission to export, if they disobeyed government orders to adhere to volume and pricing restrictions.

In closing arguments March 13, Isaacson, an attorney with Boies, Schiller & Flexner LLP, told jurors that the Chinese vitamin makers were merely trying to shift the blame.

“They needed an excuse,” Isaacson said. “They needed to point the finger.”

The jury reached their decision surprisingly quickly for an antitrust case, said one litigator not involved in the matter, indicating that Chinese firms’ allegations of government control “didn’t fly.”

‘Clear-Cut Case’

“It was a clear-cut case to them and they didn’t buy that defense at all,” Jeffrey S. Jacobovitz, of Arnall Golden Gregory LLP, said in a phone interview.

In the lawsuit, filed by Animal Science Products Inc., a livestock-supplement firm based in Nacogdoches, Texas, and Ranis Co., a food company based in Elizabeth, New Jersey, a group of Chinese firms was accused of manipulating prices by constricting supplies. The firms provided about 80 percent of the bulk vitamin C in the U.S., according to plaintiffs. Prices rose as high as $15 per kilogram ($6.82 per pound) from about $2.50 per kilogram during the scheme, plaintiffs alleged.

While more companies were sued, only North China and Hebei Welcome Pharmaceutical Co., remained in the case by the time of the verdict. Hong Kong-based China Pharmaceutical Group Ltd. (1093) and its Weisheng Pharmaceutical unit, which were also in the trial, reached a $22.5 million settlement this week, according to an attorney for the companies.

Aland Jiangsu Nutraceutical Co. and Shenyang, China-based Northeast Pharmaceutical Group Co. (000597) settled before the trial.

‘An Example’

The case is “an example of the kinds of issues that China is increasingly running into through its economic globalization,” Jacques deLisle, a professor of law and political science at the University of Pennsylvania, said in a phone interview yesterday.

For many industries in China, the influence of government is still present even as businesses become privatized, making it difficult to tell whether a company is acting voluntarily, said deLisle, who is also director of the university’s Center for East Asian Studies.

“The line between public and private is just much murkier in China, in that many business entities are in various ways deeply entangled with the state,” he said.

In court yesterday, U.S. District Judge Brian Cogan praised the jurors for their attentiveness during the trial, which began Feb. 25, saying they demonstrated a “textbook example of how it should be done.”

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 Brooklyn at csmythe1@bloomberg.net

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

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