US court bins verdict against 2 Chinese firms

An employee (second from left) of North China Pharmaceutical Group Corp explains its products to a potential buyer (right) at the 74th Drug Expo in Xiamen. [Photo/Xinhua]

Two Chinese drug companies won dismissal of a $147-million antitrust verdict after a federal appeals court in the United States ruled they were acting under Chinese law and couldn’t be held liable in the US for fixing prices.

North China Pharmaceutical Group Corp and its manufacturing unit, Hebei Welcome Pharmaceutical Co, shouldn’t have been forced to defend against claims that they conspired to coordinate prices to create a supply shortage for vitamin C sold outside China, the appeals court in Manhattan ruled Tuesday.

A lower court failed to give enough deference to the Chinese government’s interpretation of its own laws and should have declined to consider the case, the appeals panel said.

The Shijiazhuang, China-based companies “were required by Chinese law to set prices and reduce quantities of vitamin C sold abroad and doing so posed a true conflict between China’s regulatory scheme and US antitrust laws,” US Circuit Judge Peter Hall wrote in the opinion.

The lower-court’s decision to disbelieve China’s claim that its laws required the companies to violate US antitrust law was “highly inappropriate,” said Jonathan Jacobson, who represented North China Pharmaceutical and Hebei Welcome. Tuesday’s decision requires courts to “respect the formal submissions of foreign sovereigns” on the meaning of their laws, he said.

William Isaacson, a lawyer for vitamin C purchasers Animal Science Products Inc and Ranis Co, didn’t immediately return phone and email messages seeking comment on the ruling.

US purchasers of vitamin C filed suit in 2005 over claims they were forced to pay artificially inflated prices for the food additive, which is used in products ranging from energy drinks to livestock feed. In March 2013, a Brooklyn, New York, jury found the companies liable for violating US antitrust law. The judge awarded $147 million in damages and issued an order barring the companies from violating the law in future.

The ruling prompted the Chinese government to file briefs in support of the companies’ claim, in what the court called a “historic” first.