Chinese Companies Hebei Welcome and NCPG Prevail in Closely Watched Vitamin C Antitrust Litigation

On September 20, 2016, the U.S. Court of Appeals for the Second Circuit issued its decision in a closely watched dispute that may be the largest-ever antitrust case involving Chinese companies.

In In re Vitamin C Antitrust Litigation, the plaintiffs alleged that two Chinese companies, Hebei Welcome Pharmaceutical Co. and North China Pharmaceutical Group (NCPG), along with several alleged co-conspirators, had engaged in price fixing in violation of U.S. antitrust laws in connection with vitamin C exported from China. The primary issue in the case was whether the Chinese government had required the challenged conduct. WSGR represented Hebei Welcome and NCPG before the Second Circuit.

For the first time ever, the Ministry of Commerce of the People's Republic of China (MOFCOM) appeared in a U.S. court, where it said that the conduct at issue was, in fact, compelled. However, the U.S. District Court for the Eastern District of New York declined to credit MOFCOM and rejected the argument. All companies other than Hebei Welcome and NCPG then settled, and trial proceeded against those two, resulting in a $150 million treble damage judgment. NCPG and Hebei Welcome appealed to the U.S. Court of Appeals for the Second Circuit, and the Chinese government submitted an amicus brief on appeal and a formal Diplomatic Note to the U.S. State Department protesting the trial court decision.

On January 29, 2015, a Second Circuit panel heard the appeal by Hebei Welcome and NCPG of the $150 million. In the court's ruling issued on September 20, the Second Circuit said that because the Chinese government filed a formal statement in the district court asserting that Chinese law required the defendants to set prices and reduce the quantities of vitamin C sold abroad, and because the Chinese companies could not simultaneously comply with Chinese law and U.S. antitrust laws, the district court should not have exercised jurisdiction of the case. The Second Circuit therefore vacated the district court judgment, reversed the district court's denial of the defendants' motion to dismiss on international comity grounds, and remanded the case with instructions to dismiss the plaintiffs' complaint with prejudice.

WSGR partner Jonathan Jacobson argued the appeal for Hebei Welcome and NCPG. The WSGR team also included partner Scott Sher and associates Dan Weick, Brad Tennis, Justin Cohen, Tiffany Lee, and Ke Li.

For more information, please see the Second Circuit's decision.