North China Pharmaceuticals Group (“NCPG”) and HeBei Welcome Pharmaceuticals (“HeBei”) (collectively, the “Companies”) believe that the Second Circuit Appellate Court should overturn a district court ruling that found them guilty of violating the Sherman Act by creating a price-fixing cartel related to their Vitamin C products. The Companies argue that they had to coordinate in order to avoid violating Chinese law and since they were following those regulations, they could not act in accordance with the Sherman Act. According to the Companies, the U.S. courts should not interfere with another nation’s regulations. This “sovereign compulsion” defense has been successful in past antitrust cases, but U.S. courts are not required to consider it. NCPG and HeBei have gotten support from the Chinese Ministry of Commerce, which claims that it forced the Companies to fix the prices of their Vitamin C products. The plaintiff class composed of direct and indirect purchasers disagreed, and argued that no agency required NCPG and HeBei to fix their prices. They conceded that the Chinese government set minimum prices in the wake of concern from the World Trade Organization, but there was no punishment in the event that the Companies did not change their prices. Additionally, this minimum price did not require the Companies to meet and fix their Vitamin C prices.
This case highlights the complexity of legal issues that multi-national companies face. It also exhibits the difficulty for court systems in an international economy, as they have to consider their own country’s laws, as well as the sovereignty of other countries in establishing their own regulations. As multi-national companies continue to increase imports from and exports to the United States, it will be helpful for them to understand that any commercial activity involving the U.S. can bring them under jurisdiction of antitrust laws. A foreign multi-national company may be sued for antitrust violations in a U.S. court if it does business in the United States or if its business affects commerce in the United States, even if it has no U.S. offices or employees.
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