CCM: North China Pharmaceutical prevails in US VC antitrust case 10-26-2016

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, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.

 

For more information about CCM, please visit www.cnchemicals.com or get in touch with us directly by emailing econtact@cnchemicals.com or calling +86-20-37616606.

 

Tag: vitamin

 

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