March 2, 2007

 

Chinese companies wins a brief reprieve in vitamin c anti-trust case 

 

 

The Ranis company's withdrawal from its anti-trust lawsuit against China's Dongbei Pharmaceutical Group in January gave a reprieve in a two-year legal battle against one of the biggest pharmaceutical companies in China, analysts said. 

 

America's Animal Science Products Inc and The Ranis Company Inc filed an anti-trust lawsuit two years ago against four Chinese vitamin C producers, namely: Hebei Welcome Pharmaceutical Co. Ltd., Jiangsu Jiangshan Pharmaceutical, Dongbei Pharmaceutical Group and Weisheng Pharmaceutical Co. The suit alleged that the four conspired to manipulate prices of vitamin C.

 

However, Chinese companies are not celebrating anytime soon as the worst is not yet over.  The driving force behind the class-action lawsuit is David Boise of law firm Boise, Schiller and Flexner. Boise is one of America's top litigation lawyers and represented the state in Microsoft's anti-trust case. The class action lawsuit initiated by the law firm is the first involving Chinese companies. Such lawsuits are initiated in America by law firms who find suitable plaintiffs against monopolies. Legal fees are waived and the law firms derive their fees from a percentage of the damages awarded to plaintiffs.

 

The class action lawsuit precipitated lawsuits from US companies in various states throughout the different states of the US against the four Chinese companies. As Dongbei is a state-owned company, both sides applied for the cases to be consolidated in a class-action lawsuit in the Federal Court in New York. In February 2006 Dongbei's lawyers proved that Animal Science Products did not have the right as plaintiff to launch the lawsuit as it was not a direct buyer.

 

The lawyers representing the Chinese companies also sought to have the Ranis case thrown out by pointing out that disputes between the two parties were to e handled by the China International Trade Arbitration committee, as set out by the contract between Ranis and Dongbei and not in a court of law.

 

Seeing that the case might be resovled in China instead of the US, Ranis had opted to drop the case.

 

Despite the minor victory, the defendants are adopting a cautious attitude. The Chinese companies' lawyers have filed a motion to dismiss the case due to the involvement of the Chinese government in the vitamin C industry. However, if it was rejected, and the decision upheld by the Supreme court, it would be difficult for similar appeals in future to be launched on that premise, a lawyer representing the companies said.

 

The two defendants have not withdrawn their lawsuits entirely against Dongbei but are lowering their demands in stages, said Jiangshan's vice president Wang Qiang.

 

As such cases drag on, companies may either incur huge legal costs or pay millions in damages to the plaintiffs once the courts hand down their decision.

 

Already, more than 20 companies in China are being sued in anti-trust cases and more are on the way, according to Jamie Serota, a top-notched lawyer representing Dongbei.

 

Most of the Chinese firms targeted were those with prices regulated by the customs authorities or those with products exported under quota. The rationale for such a measure was to prevent manufacturers from lowering prices and dumping their goods on other countries. However these measures in turn made the companies an easy target for anti-trust lawsuits due to the similarity in pricing.

 

Serota said it is important that companies state in their contracts the arbitration authority even though that in itself may not prevent an anti-trust case. As the legal costs in other countries may be prohibitive and dissimilar to US systems, most US companies would be unwilling to pitch their battles outside the US, he pointed out.