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Jury Finds Chinese Vitamin C Makers Fixed Prices; $153.3M Judgment Entered

NEW YORK- (Mealey's) A federal judge in New York on March 14 entered judgment for $153.3 million after trebling a jury's $54.1 million verdict in favor of a direct purchaser class on its allegations that Chinese corporations participated in an illegal cartel to fix prices and limit supply for exports of vitamin C to the United States (In re Vitamin C Antitrust Litigation [Animal Science Products, Inc., et al. v. Hebei Welcome Pharmaceutical Co. Ltd., et al.], No. 06-md-1738, No. 05-cv-0453, E.D. N.Y.; See February 2013).

The jury concluded that Hebei Welcome Pharmaceutical Co. Ltd. and North China Pharmaceutical Group Corp. (NCPGC) "knowingly entered into an agreement or conspiracy with the purpose of or predictable effect of fixing the price or limiting the supply of Vitamin C."

The jury rejected the defendants' argument that they were compelled by the Chinese government to enter into the agreements from Dec. 1, 2001, to June 30, 2006, and that they "faced the prospect of penalties or sanctions for not complying with the directives or commands of the Chinese government."

U.S. Judge Brian M. Cogan of the Eastern District of New York trebled the jury's damage award and entered judgment against the defendants, jointly and severally, after deducting $9 million received from former defendants.

Exports Restricted

Purchasers of vitamin C in the United States alleged that in December 2001, at a meeting of the Western Medicine Department of the Association of Importers and Exporters of Medicines and Health Products of China, vitamin C manufacturers - including Hebei Welcome Pharmaceutical Co. Ltd., NCPGC, China Pharmaceutical Group Ltd. (CPG),Weisheng Pharmaceutical Co. Ltd., Aland Jiangsu Nutraceutical Co. and Northeast Pharmaceutical Co. Ltd.- and the association reached an agreement whereby Chinese manufacturers of vitamin C agreed to control export quantities and raise prices by restricting their exports of vitamin C to create a shortage of supply in the international market.

The purchasers brought a putative class action under Section 1 of the Sherman Act and Sections 4 and 16 of the Clayton Act.

Judge Cogan denied the Chinese corporations' omnibus motion for summary judgment in September 2011, concluding that "[t]he Chinese law relied upon by defendants did not compel their illegal conduct.  Although defendants and the Chinese government argue to the contrary, the provisions of Chinese law before me do not support their position, which is also belied by the factual record.  I decline to defer to the Chinese government's statements to the court regarding Chinese law."  The judge denied the defendants' motion for permission to take an interlocutory appeal.

In May 2012, the direct purchasers reached a $9.5 million settlement with Aland.  It was the first civil settlement with a Chinese company in a U.S. antitrust cartel case.

Remaining Defendants

On Feb. 8, Judge Cogan denied NCPGC's motion for summary judgment.  NCPGC argued that it is not a vitamin C manufacturer but instead is an investment holding company that has an indirect ownership interest in manufacturer Hebei Welcome.

The judge concluded that, based on NCPGC's website's description of it as a "leading pharmaceutical manufacturer" with "output and sales volume of" vitamin C "ranking in the forefront of the world" and a document listing NCPGC as one of the "[s]everal manufacturing companies" that supported the chamber's proposed coordinated production termination, "a reasonable jury could conclude that NCPGC was involved in vitamin C manufacturing."

On Feb. 20, the judge denied CPG's motion for summary judgment as untimely.  CPG argued that the purchasers' attempt to pierce the corporate veil of Weisheng, which is a wholly owned subsidiary of CPG,  in order to reach CPG must fail because the purchasers failed to plead facts sufficient to support the elements of veil piercing under Chinese law.

Opening arguments began Feb. 25.  CPG and Weisheng reached a $22.5 million settlement soon before the jury was charged on March 13. The jury rendered its verdict on March 14.


The purchasers are represented by Michael D. Hausfeld, Brian A. Ratner and Brent W. Landau of Hausfeld in Washington, D.C.; James T. Southwick, Shawn L. Raymond and Suyash Agrawal of Susman Godfrey in Houston; William A. Isaacson, Tanya Chutkan and Jennifer Milici of Boies, Schiller & Flexner in Washington; and Alanna Rutherford of Boies Schiller in New York.

NCPGC and Hebei Welcome are represented by Darrell Prescott and Catherine Yunie Stillman of Baker & McKenzie in New York and Daniel Mason of Zelle Hofmann Voelbel & Mason in San Francisco.

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