On 20 Sept., 2016, the United States Court
of Appeals for the Second Circuit (2d Cir.) released the verdict of the vitamin C (VC) antitrust case against Hebei Welcome Pharmaceutical Co., Ltd. (Hebei
Welcome), a subsidiary of North China Pharmaceutical Co., Ltd. (North China
Pharmaceutical). Accordingly, the court vacated the previous judgment, reversed
the district court’s order and remanded with instructions to dismiss the
plaintiffs’ complaint with prejudice. This suggested Hebei Welcome’s victory in
this case.
Source: Baidu
In 2005, Hebei Welcome, together with the
other 3 Chinese VC enterprises CSPC Weisheng Pharmaceutical (Shijiazhuang) Co.,
Ltd., Aland (Jiangsu) Nutraceutical Co., Ltd. and Northeast Pharmaceutical
Group Co., Ltd., were sued by US VC purchasers The Ranis Company, Inc. and
Animal Science Products, Inc.
The two plaintiffs alleged that these Chinese
enterprises had conspired to fix the price and supply of VC sold to the US
since Dec. 2001, which violated the US antitrust laws. In March 2013, the Chinese
enterprises settled with a total indemnity of USD34 million to the defendants,
except Hebei Welcome who chose to appeal the verdict to the 2d Cir.
Rather than deny the plaintiffs’
allegations, Hebei Welcome instead moved to dismiss on the basis that they
acted pursuant to Chinese regulations on VC export pricing. In 2002-2008, China
implemented a “price verification and chop” policy which only allowed VC
enterprises with “export quota license” to export. The license was granted only
when enterprises’ export price and volume was in compliance with the export
price and export quota coordinated by the China Chamber of Commerce for Import
& Export of Medicines & Health Products (CCCM, HPIE). The Ministry of
Commerce of the People's Republic of China (MOC) also explained in its brief to
the US court: “The CCCM, HPIE, unlike any trade association in the US, is in
fact a ministry-supervised entity authorized by the MOC. Acted as an
instrumentality of the State, it was required to implement the MOC’s
administrative rules and regulations with respect to the VC trade” Therefore,
the MOA suggested revocation of the litigation.
In fact, the very purpose of the CCCM, HPIE
is to maintain business order and protect fair competition in foreign trades of
medicinal items. Since the end of last century, the Chinese VC industry has
been confronted with overcapacity, leading to price war among VC exporters. As
a result, the MOC required the CCCM, HPIE to implement the “price verification
and chop” policy. In recent years, both export price and volume of VC stayed
stable in China – annual price averaged USD3-4/kg and volume remained around
9-12 tonnes per month.
China's exports of vitamin C, Jan.
2014-Aug. 2016
Source: China Customs
Affected by the antitrust litigation, North
China Pharmaceutical had almost stopped its export of VC and made product
upgrading and transformation by extending into downstream businesses of VC and
developing VC derivatives.
Yet, as the winner, the company may be able
to boost its VC export business in the coming period. “The verdict won’t pose
great impact on our financial performance, but may help us expand international
market,” stated the company in its announcement released on 23 Sept., 2016, “Of
course, the plaintiff still have the right to appeal.” Yet, it is slim chances
for them to overturn, according to some industry insiders.
However, given the ongoing overcapacity and
low VC export price and volume, the company’s profit from export is likely to
be limited.
This article comes from Vitamins China E-News 1610, CCM
About CCM:
CCM is the leading market intelligence provider for China’s
agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a
range of data and content solutions, from price and trade data to industry
newsletters and customized market research reports. Our clients include Monsanto,
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Tag: vitamin