Chinese Vitamin Defendants Prevail Again, Showing Limits Of U.S. Antitrust Law's Extraterritorial Reach

• Published date: 18 August 2021
• Subject Matter: orporate/Commercial Law, Anti-trust/Competition Law, Corporate and Company Law, Antitrust, EU Competition
• Law Firm: Winston & Strawn LLP
• Author: Molly M. Donovan, Sofia Arguello, Ian L. Papendick and Thomas J. Neuner

Last week, the United States Court of Appeals for the Second Circuit reversed'for the second time'the decision of the United States District Court for the Southern District of New York that awarded treble damages to the plaintiffs in a class action suit alleging that four Chinese exporters of Vitamin C violated U.S. antitrust laws. Animal Sci. Prods., Inc. v. Hebei Welcome Pharm. Co. Ltd., No. 13-4791-cv, Dkt. No. 324-1 (2d Cir. Aug. 10, 2021). The decision shows us that, while U.S. antitrust law has a long reach, there are limits. In this case, the limitation was international comity'an exception that is applicable only in the rarest of cases.

Background

In 2013, a jury found a number of China-based companies liable for coordinating the supply and prices of Vitamin C exported to the United States. The district court entered a trebled damages award of nearly $150 million. On appeal, the Second Circuit reversed, dismissing the case and holding that the district court was bound to defer to the explanation of Chinese law that was submitted in the lawsuit by the Ministry of Commerce of the People's Republic of China, which said that Chinese law compelled the defendants to engage in the alleged conduct.

Later, the Supreme Court reversed the Second Circuit, concluding that it had afforded too much deference to the Chinese government. Animal Sci. Prods., Inc. v. Hebei Welcome Pharm. Co., 138 S. Ct. 1865 (2018). The Supreme Court remanded the case to the Second Circuit, instructing it to consider, but not to defer conclusively to, the Ministry's statement.

Recent Second Circuit Decision

Now the Second Circuit has reversed and dismissed the action yet again. The court found again that Chinese law did require the defendants to engage in the conduct at issue. But this time, the court looked beyond the statement that the Ministry submitted in the lawsuit, and considered the evolution of the regulations in the Vitamin C industry in China, including the formation of a Vitamin C Coordination Group, whose members were the exclusive exporters of Vitamin C. The members were obligated to comply with all regulations from the Ministry, including voluntarily adjusting their production outputs and coordinating on export prices, which were set by the Chamber of Commerce of Medicines & Health Products Importers & Exporters (the Chamber).

The court found that additional Chinese records substantiated that finding, including administrative materials detailing the Chamber's price...