Price-Fixing Claim Against Chinese Companies Dismissed on Grounds of International Comity

In an important decision affecting international litigation, the United States Court of Appeals for the Second Circuit reversed on the grounds of international comity a multi-million dollar judgment for price-fixing against Chinese manufacturers of vitamin C.

The case, In re: Vitamin C Antitrust Litigation, was brought over ten years ago by U.S. consumers against two Chinese companies, alleging a classic antitrust scheme:  that the defendants, along with others, conspired to fix prices at a high level and simultaneously reduce supply in order to generate a shortage of Vitamin C.

The defendants did not dispute the price fixing scheme.  In fact, they conceded it.  Their defense was that they had acted pursuant to Chinese regulations regarding export pricing.  In essence, the defendants’ position was that they were required by the Chinese government to coordinate prices and create a supply shortage.

After the lower court denied the defendant’s motion to dismiss the complaint on the grounds of international comity the case went to trial and the jury found for the plaintiffs and awarded $147 million in damages.

On appeal, the chief question presented, in the words of the court, was, “what laws and standards control when U.S. antitrust laws are violated by foreign companies that claim to be acting at the express direction or mandate of a foreign government.”

The court concluded that because the Chinese government filed a formal statement in the district court asserting that Chinese law required defendants to set prices and reduce quantities of vitamin C sold abroad, and because defendants could not simultaneously comply with Chinese law and U.S. antitrust laws, the principles of international comity required U.S. court to abstain from exercising jurisdiction.  The court vacated the judgment and ordered the complaint dismissed.

Critical to the court’s decision was the issue of whether it must defer to the statements of the Chinese government concerning its laws in order to determine whether a “true conflict” exited between Chinese and U.S. laws.

The court stated: “We reaffirm the principle that when a foreign government, acting through counsel or otherwise, directly participates in U.S. court proceedings by providing a sworn evidentiary proffer regarding the construction and effect of its laws and regulations, a U.S. court is bound to defer to those statements. If deference by any measure is to mean anything, it must mean that a U.S. court not embark on a challenge to a foreign government’s official representation to the court regarding its laws or regulations, even if that representation is inconsistent with how those laws might be interpreted under the principles of our legal system.”

Read the full decision HERE

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