SHANGHAI — A group of Chinese vitamin C makers was ordered by a U.S. District Court to pay $162.3 million in fines after a jury found the companies guilty of engaging in price-fixing.
A jury in Brooklyn, New York, returned the verdict Thursday after a group of American companies accused the Chinese producers of acting in concert to raise prices in violation of U.S. antitrust laws.
The case is significant because China produces about 80 percent of the world’s supply of ascorbic acid, or vitamin C, which is a key ingredient in items like food and soft drinks to animal feed, vitamin supplements and even cosmetics.
The Chinese-made vitamins end up as ingredients in products made by major brands like Coca-Cola.
The case was striking because of the unusual defense that the Chinese companies mounted. While admitting in court that they had colluded on setting prices, lawyers representing the Chinese companies said they were compelled to do so by the Chinese government.
In court papers, China’s Ministry of Commerce supported the Chinese companies’ argument.
But lawyers who brought the class-action suit against the Chinese companies said the companies acted on their own and not on government orders.
The jury agreed and voted in favor of a $54 million judgement against four Chinese companies. The U.S. District Court judge in the case trebled the damages, as required by U.S. antitrust law.
Two other Chinese companies involved in the case agreed to pay about $32 million to settle the case. One company settled shortly before the trial began and another settled during the proceedings.
William Isaacson, an attorney for the plaintiffs at Boies, Schiller and Flexner, said the fines would change the way Chinese companies do business in the United States.
“Chinese companies selling products in the U.S. are going to be treated the same as other companies,” Mr. Isaacson said. “There’s a history of cartel prosecutions in the U.S., European cartels, Japanese cartels, Korean cartels. This is the first one against Chinese companies.”
The verdict marks the second time in two decades that vitamin makers have been accused of violating antitrust laws. In 1999, The U.S. Justice Department broke up a “vitamin cartel” that had been led by European companies, including the Swiss pharmaceutical giant Roche and BASF of Germany. The companies had overcharged big food and beverage makers like Kellogg, Coca-Cola and Nestle. Eventually the makers of bulk vitamins agreed to pay more than $1.5 billion to settle the allegations.
Soon after, experts say, the Chinese gained a dominant share in the global vitamin C market, and after several big European producers exited the business, the Chinese companies began raising prices.
By 2001, the Chinese companies were acting like a cartel and fixing the price of vitamin C, according to the American lawyers representing buyers of vitamin C in the New York case.
Lawyers representing the Chinese companies could not be reached early Friday. And one of the Chinese companies involved in the case, Hebei Welcome Pharmaceutical, said by telephone Friday that it did not yet have a statement to release.
Article source: http://www.nytimes.com/2013/03/16/business/global/us-fines-chinese-vitamin-c-makers.html?partner=rss&emc=rss