Judge David Trager calls the case unprecedented
The Chinese Ministry of Commerce is defending charges filed by a US-based company that it is exempt from global antitrust laws in regard to vitamin C price fixing. Vitamin C price fixing…déjà vu? Not entirely. Unlike the vitamin price fixing cases filed against US, EU and Japanese companies in the 1990's, wherein private entities conspired to raise prices, in this case, the Chinese Ministry believes that it is afforded the same type of protections enjoyed by the Organization of Petroleum Export Countries, i.e., OPEC and oil pricing.
The Chinese vitamin C companies say they were compelled by the Chinese ministry to synchronize export prices along with supply and demand. Where things get complicated, is that the four companies' sales representatives colluded on US soil during a 2004 Las Vegas trade show. As the Wall Street Journal points out in a Nov. 25 article (www.online.WSJ.com), the "case could test whether China is subject to global antitrust laws."
In 2001, when the EU and Japanese companies abandoned the vitamin C market, the Chinese inherited a bulk of the vitamin C production. The lawsuit, filed by Animal Science Products Inc., alleges that since then, the Chinese dominated the market and conspired to raise prices resulting in markedly higher prices for food makers, animal feed manufacturers and consumers. Four Chinese companies control 60% of the vitamin C market in the U.S., and the wholesale prices increased from US$2.5 per kilogram in 2001, just over $4/kilo in 2005 to jumped to US$7/kilo in 2008.
Until this year, some of the companies involved in the suit were state-owned, hence the Ministry's defense platform. This year, for the first time in Chinese business history, the country has enacted its own antitrust laws to restrict monopolies including price fixing, though the laws only address domestic antitrust, not export pricing.
This case is but one of many Chinese price fixing cases. The US steelmaking industry is steeped in its own cases against magnesite, used for steelmaking. In this case, magnesite manufacturers content that they too were acting under government authority when they discussed prices. As Judge Trager said, "unprecedented" is the best word to describe the fallout of this case on the global business world.