Antitrust Law Daily Wrap Up, ANTITRUST—E.D.N.Y.: Vitamin C manufacturers permanently enjoined from price fixing, verdict undisturbed, (Dec 2, 2013)

By Tobias J. Gillett, J.D., LL.M.

The federal district court in Brooklyn, New York, has permanently enjoined Hebei Welcome Pharmaceutical Co., Ltd. and North China Pharmaceutical Group Corp. (NCPGC) from fixing the price of Vitamin C or limiting its supply, and denied the defendants’ attempt to upset a jury’s $54.1 million verdict against the companies for their participation in a Vitamin C price fixing conspiracy (In Re Vitamin C Antitrust Litigation, November 25, 2013, Cogan, B.).

On March 14, 2013, a jury found Hebei and NCPGC liable for violating the Sherman Act while participating in a conspiracy to fix the price of Vitamin C. In its present decision, the court addressed the defendants’ renewed motion for judgment as a matter of law, and the plaintiffs’ motion for a permanent injunction barring the defendants from entering into any agreement to fix the price or limit the supply of Vitamin C.

Motion for judgment as a matter of law. The court rejected the defendants’ motion for judgment as a matter of law. The court “reaffirm[ed] its prior rulings that Chinese law did not compel defendants to engage in antitrust violations, that the doctrines of act of state and international comity do not bar plaintiffs’ suit, and that it was inappropriate to present evidence about the meaning of Chinese laws to the jury.” Moreover, the court noted that “ample evidence” had been presented from which the jury could have concluded “that the Chinese government did not actually compel defendants to enter into anticompetitive agreements and that the Vitamin C Subcommittee of the Chamber of Commerce of Medicines and Health Products Importers and Exporters was a voluntary trade association.” Further, the determination of foreign law was a question of law for the court to decide, not the jury, and therefore the court did not err in excluding evidence of the Chinese laws and their meaning from the jury.

The court also refused to grant judgment as a matter of law to NCPGC on the ground of insufficient evidence to support the jury’s verdict. Although the court noted that it had previously expressed doubts about the sufficiency of the plaintiffs’ proof regarding NCPGC’s participation in the conspiracy, the court did not find that there was a “complete absence of evidence” to support the jury’s findings. The evidence showed that Huang Pinqi, general manager and board chairman of Hebei and deputy general manager of NCPGC, attended meetings of the Vitamin C Subcommittee, and that an announcement of his election as chair of the Subcommittee referred to him by his NCPGC title. Although Huang and a former Chamber official testified that the reference was an honorific that did not indicate that he participated on behalf of NCPGC, the jury could credit the documentary evidence over the conflicting testimony from the witnesses.

Moreover, Huang never testified that he only participated on behalf of Hebei, and had testified that he was “seldom” present at Hebei after he moved his office from Hebei to NCPGC. The jury could have inferred that NCPGC participated in the meetings because Huang was working primarily from NCPGC at the time.

The court also declined to reduce the damages award by the $7.5 million ($22.5 million after trebling) attributable to purchases from two alleged co-conspirators. Although the plaintiffs did not prove that the contracts with those co-conspirators lacked arbitration clauses, the defendants, not the plaintiffs, had the burden of showing the jury the clauses that would be the basis for reducing the damages. The plaintiffs had presented expert testimony estimating the amount of purchases falling within the class definition based on data that demonstrated that the co-conspirators were members of the Vitamin C Subcommittee and that their representatives attended meetings with the other conspirators. This testimony satisfied the plaintiffs’ prima facie burden, and therefore the burden was on the defendants to present evidence that the contracts contained clauses that should have excluded them from the damages award.

Motion for permanent injunction. The court granted the plaintiffs’ motion for a permanent injunction. The plaintiffs had proven injury, as demonstrated by the jury verdict, and evidence indicated that the anticompetitive conduct was likely to continue if not enjoined. The conspirators had discussed performing future actions “in a more hidden and smart way,” had stopped keeping notes of their meetings after the lawsuit was filed, and had not renounced their conduct. The damage to indirect purchasers was irreparable, because indirect purchasers could not bring a federal claim for damages, and often could not bring a state law claim, and the harm to many plaintiffs could be irreparable due to the difficulty of measuring it. The plaintiffs lacked an adequate remedy at law because indirect purchasers could not bring a claim for damages, and direct purchasers would face considerable expense in vindicating their rights in future. An injunction would be neither “drastic” nor “extraordinary,” because “[m]andating compliance with the law can hardly be considered burdensome.” Finally, “[c]ivil damages suits to enforce the antitrust laws are unquestionably in the public interest.”

The court rejected the defendants’ argument that a permanent injunction “would interfere with the Chinese government’s sovereign authority and its ability to regulate its own domestic affairs.” The jury had found the defendants liable based on their “voluntary, uncompelled conduct.” If the injunction later came into conflict with China’s sovereign authority, any enjoined parties could seek to have the injunction altered or vacated on that basis at that time.

The case is N. 06-MD-1738 (BMC) (JO).

Attorneys: Alanna Rutherford (Boies, Schiller & Flexner) for Animal Science Products, Inc. and Ranis Company, Inc. Darrell Prescott (Baker & McKenzie LLP) for Hebei Welcome Pharmaceutical Co. Ltd.

Companies: Animal Science Products, Inc.; Hebei Welcome Pharmaceutical Co., Ltd.; North China Pharmaceutical Group Corp.

Cases: Antitrust NewYorkNews