March 8, 2013

The responsibility for coordinating prices and production of vitamin C to prevent "malicious competition" and could halt exports from manufacturers who did not comply was admitted by a retired Chinese official with a Brooklyn jury on Tuesday (Mar 5).

The testimony from former Chinese Ministry of Commerce official Qiao Haili came during the second week of a closely watched price-fixing trial. Qiao testified on behalf of the defendants in the case, Hebei Welcome Pharmaceutical Co Ltd, Weisheng Pharmaceutical Co Ltd and two affiliated companies. A class of vitamin C purchasers alleged the companies conspired to fix prices over a period from December 2001-June 2006.

The companies have invoked a seldom used defence, arguing the Chinese government compelled them to coordinate prices and production or risk losing their permission to export. The so-called foreign compulsion doctrine protects defendants who are compelled by their own government to break US law.

Qiao, who oversaw vitamin C exports for the Ministry of Commerce, told the eight-member jury Tuesday that he coordinated the product's export prices and quantity for companies that were part of the ministry, including the defendants. If the companies did not comply, he could stop them from exporting vitamin C, he said.

He said the restrictions were needed to prevent "malicious competition" and price-cutting among rival vitamin C manufacturers.

"That type of competition is very irrational and causes a tremendous amount of loss for the country," Qiao said. He is the first Chinese official to take the stand in a US court proceeding, lawyers for the parties have said. He is expected to continue testifying Wednesday.

The plaintiffs, who are led by a small New Jersey distributor called The Ranis Company Inc., have said that the Chinese companies coordinated export tactics to prop up their own falling prices. As a result, according to the plaintiffs, spot prices for vitamin C jumped to as high as US$15 per kilogramme in April 2003 from around US$2.50 per kilogramme in 2001. They are seeking US$54 million in damages, which could be tripled under antitrust law.