District Court Denies Motion For Summary Judgment In Groundbreaking Decision Regarding The Foreign Sovereign Compulsion Defense Despite Chinese Government's Appearance As An Amicus

Article by Robert Ritchie*

Judge Brian Cogan of the U.S. District Court for the Eastern District of New York rejected an argument on summary judgment that a group of Chinese vitamin C manufacturers were compelled by the Chinese government to fix prices for the export of vitamin C.1 By doing so, he allowed a putative antitrust class action against the manufacturers to move forward. The decision explored the contours of the foreign sovereign compulsion doctrine, taking a narrow view of its potency as a defense to antitrust liability. Notably, the decision rejected the arguments of China's Ministry of Commerce (the "Ministry"), which argued in support of the defendants in the Chinese government's first ever appearance before a U.S. court as an amicus. In 2002, the Chinese government established an export regime for several products, including vitamin C, known as "Price Verification and Chop." The regime was to be administered by the Chamber of Commerce of Medicines and Health Products Importers and Exporters ("Chamber of Commerce"), an entity that the Chinese government had earlier established to serve as both a regulatory body and a private trade association. The defendants were members of the Chamber of Commerce and its subcommittee for importers and exporters of vitamin C. Pursuant to Price Verification and Chop, the subcommittee enacted an "industry-wide price agreement" for the export of vitamin C.2 Anyone wishing to export vitamin C would then have to submit its contract to the Chamber of Commerce, which would analyze the contract for conformity with the price agreement. Customs would prevent the export of products under contracts found not to be in conformity. Before the implementation of Price Verification and Chop, the Chinese government had directed the Chamber of Commerce itself to establish mandatory minimum export prices for Vitamin C. The Chamber of Commerce enforced these mandatory minimum prices by suspending or revoking the violator's export license.3 The Price Verification and Chop regime thus relaxed the prior regime and was part of the Chinese government's overall transition from a command-and-control economy to a more market-based economy. The regulations establishing the Price Verification and Chop regime made note of this. It referred to the subcommittee of Vitamin C manufacturers within the Chamber of Commerce as "a self-disciplinary industry organization . . . established on a voluntary basis."4 But though membership...