Extraterritorial price fixing: The Vitamin C example.

Trial begins this week for four Chinese companies accused of price fixing of Vitamin C. This case is fascinating, because the Chinese Ministry of Commerce actually submitted an amicus brief in 2008 supporting the defendants, which was unprecedented. The litigation has been ongoing for quite some time. In 2008, the Chinese companies filed a motion to dismiss on the grounds that the act of state and foreign sovereign compulsion doctrines provided a defense to the price fixing. The motion was denied, because there was no "act of state" by the Chinese government, and there was really no evidence of compulsion by the Chinese government against the companies, although that is disputed.

As discussed in my post on OPEC and cartels, the act of state doctrine provides that courts of one nation may not judge the public acts of another sovereign nation within its own borders. The foreign sovereign compulsion doctrine provides that international companies sometimes find themselves in situations where the laws of the country in which they are headquartered conflict with the laws of another country where they conduct business. In such situations, the companies are unable to comply with the law of both states. The doctrine allows deference for companies when they have no choice but to violate laws of either the country in which they are headquartered or the country seeking to enforce its antitrust laws.

The act of state doctrine focuses on the acts of governments. Foreign sovereign compulsion focuses on the acts of companies and how they are influenced by the government where the company is headquartered, as well as the government seeking to enforce its antitrust laws in the given instance.

What makes this case interesting is that the courts may further interpret the act of state and foreign sovereign compulsion doctrines. If they do, it could effect geopolitical change, most significantly with OPEC. It is not likely that the Vitamin C litigation will have such far-reaching consequences, but it is possible.

I will discuss in greater depth in a future post why the act of state doctrine should not apply to OPEC.