On March 14, a jury sitting in the US District Court for the Eastern District of New York found that Chinese suppliers of Vitamin C had acted in concert to fix prices for Vitamin C, violating United States antitrust laws.  The jury awarded the American companies that acted as plaintiffs in the class-action suit US $162.3 million in damages.  All but the two remaining defendants had previously entered into settlement agreements with the plaintiffs, thereby resolving all claims against them.  The two remaining defendants have stated that they intend to appeal the judgment.

The case and resulting verdict are potentially significant for other Chinese companies exporting products to the US in several respects:

The size of the verdict is large.  The $54 million in damages that the jury voted to award was automatically trebled (tripled) as required under the Sherman Act.  However, this judgment was already substantial, especially when compared to the $10.5 million settlement agreed to by one of the defendants in May 2012, and particularly since it was assessed against only two companies.  The size of the monetary damages awarded by the jury highlights the risks that companies face when going to trial in an antitrust case in the US courts.  Potentially, these risks are also greater when the plaintiffs are US companies and the defendants are foreign, particularly when the claim is that US companies and, ultimately, consumers, paid more for their products as a result of conspiratorial conduct.

The jury took only one day to reach its verdict.  Even taking into account that this was only a two-week trial (relatively short for an antitrust case), the jury required very little time to deliberate, reflecting the fact that, for reasons we can only speculate on at this time, it was very easy for the jury to agree both that the defendants were liable of having fixed prices and the amount of damages to award.  The fast jury deliberations could fairly be interepreted as a warning to other foreign companies about the risks of going to trial in a price-fixing case, and as an admonition to do so only where the defenses they can proffer are likely to give the jury, at a minimum, significant pause.

The jury rejected the defendants “foreign compulsion defense.”  This argument, recognized under US law, allowed the defendants claim that they should not be held liable because the Chinese Ministry of Commerce (MOC) effectively required them to agree upon prices.  The jury did not agree, despite the fact that a former senior representative of the MOC testified on behalf of the defendants, in large part because there seemed to be conflicting evidence as to whether or not the MOC did in fact force the defendants to agree on price.  The fact that the jury came to a decision after such a short period of deliberation indicates that it was able to dispense with the foreign sovereign compulsion defense easily.  This is not a surprising development, even assuming that the facts relevant to this defense were conflicting.  The US Department of Justice (DOJ) is also extremely reluctant to credit this defense when attempting to negotiate a plea with a company being investigated criminally for price fixing.  If either the DOJ or a jury has any basis whatsoever for rejecting such a defense, they are likely do so if the facts are clear that companies fixed prices on products being sold in the United States.  The strong inclination in such circumstances is to hold the companies liable, and the facts supporting a legal defense will very likely need to be consistent and compelling to be successful.

The result of this trial, and the significant damages awarded to the plaintiffs, does not mean that Chinese companies should conclude that they cannot ever win at trial in an antitrust case, including in price-fixing cases.  Yet, as the jury’s verdict in the Vitamin C case reveals, winning such a case before a jury in US courts can be quite difficult, and companies need to carefully consider their options before “rolling the dice.”