District Court's Strong Stance On Overseas Enforcement May Have Prompted First-Ever Settlement By A Chinese Company In A U.S. Cartel Case

In the October 2011 edition of Antitrust News & Notes, we reported that the district court in In Re Vitamin C Antitrust Litigation had ruled that a putative class was entitled to sue Chinese corporations accused of fixing Vitamin C export prices, notwithstanding the defendants' claim that the Chinese government had compelled the price-fixing activity.1 In the wake of that ruling, and a further ruling by the district court that it has the authority to enjoin illegal conduct by the Chinese firms, one Chinese company has broken new ground by entering into a US$10 million settlement with the putative class representatives.

The plaintiffs in In re Vitamin C Antitrust Litigation2 filed suit in 2005, alleging that certain Chinese corporate defendants3 violated U.S. antitrust law by fixing the price of Vitamin C exported from China to the U.S. As previously reported, in September 2011, Judge Brian Cogan of the Eastern District of New York denied a summary judgment motion in which the defendant vitamin manufacturers argued that they were required by Chinese government export regulations to fix prices, and for that reason, they should be immune from U.S. antitrust liability under the foreign sovereign compulsion doctrine. The Chinese government, appearing for the first time as an amicus before a U.S. court, submitted a brief in support of the manufacturers' claims of compulsion, but Judge Cogan denied the motion, concluding that the applicable Chinese regulations did not require price-fixing at above-market prices and did not impose penalties on the manufacturers amounting to compulsion.4 Judge Cogan later granted a motion for class certification on behalf of direct purchasers and certified two classes of such purchasers: one seeking damages and another seeking injunctive relief.5

Since we last reported on this matter, Judge Cogan has rejected another summary judgment argument seeking to cabin the court's authority over the Chinese defendants. Defendant Northeast Pharmaceutical Co. Ltd. (Northeast) moved for summary judgment on the grounds that injunctive relief against it was not warranted on the facts, and in any event, the court lacked the ability to enforce injunctive relief against a foreign corporation. Northeast argued that an injunction against a Chinese defendant would be unenforceable in practice, because the Chinese government would be unlikely to enforce injunctions issued by U.S. courts against Chinese corporations.6 According to...