Second Circuit: International Comity Precludes Antitrust Liability of Chinese Manufacturers for Conduct Mandated by Chinese Law -
On September 30, 2016, the U.S. Court of Appeals for the Second Circuit issued its decision in In re Vitamin C Antitrust Litigation, No. 13-4791-cv, reversing a $147 million judgment against Chinese vitamin C manufacturers on international comity grounds. The Second Circuit held that the district court should have given deference to an amicus brief filed by the Chinese Government stating that the conduct accused in the complaint was mandated by Chinese law, and that the lower court should have abstained accordingly from asserting jurisdiction over the case. The plaintiffs have since filed a petition for rehearing en banc, which is pending as of this writing. The decision has garnered considerable attention in both the U.S. and China (where it was hailed as a victory for Chinese companies over the extraterritorial application of U.S. laws), but its practical import may be tempered by recent developments in Chinese law and policy and the distinction of an unprecedented appearance by the Chinese Government as amicus curiae supporting the defense of sovereign compulsion.
The case involved claims brought by U.S. purchasers of vitamin C against Chinese manufacturers pursuant to the Sherman and Clayton Acts, alleging that the defendants conspired to fix prices and limit supplies of vitamin C sold on the international market in 2001 to 2005. Although the defendants were located in China and sold vitamin C on international markets, and not within the United States, they were subject to liability under U.S. antitrust laws pursuant to the Foreign Trade Antitrust Improvements Act of 1982 (FTAIA), 15 U.S.C. § 6a, which permits the application of U.S. antitrust laws to conduct involving foreign trade and commerce where “such conduct has a direct, substantial, and reasonably foreseeable effect” on U.S. domestic or import commerce.
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