Over the last three decades, government antitrust enforcers and private plaintiffs in the United States have increasingly sought to apply U.S. antitrust laws to conduct by foreign businesses that is deemed to have effects on the U.S. economy. Many of these foreign businesses have been located in Asia: since the 1990s there have been waves of U.S. criminal prosecutions and civil cases alleging anticompetitive conspiracies between Japanese, Korean, and Taiwanese sellers and manufacturers. For most of this time, however, companies in mainland China—despite being the largest exporters of goods to the United States, first in Asia and now in the entire world—have rarely been targeted for U.S. antitrust enforcement.
A primary reason for this dearth of Chinese defendants is a principle of U.S. law called "foreign sovereign compulsion." Under this doctrine, some U.S. courts have declined to impose liability on foreign businesses for conduct that was mandated by a foreign government, such that the foreign business could not refuse to engage in the conduct without suffering significant penalties. The doctrine reflects the fact that such businesses are forced into an unfair position: either they proceed with the conduct and suffer penalties under U.S. law, or they decline to engage in the conduct and suffer penalties imposed by their own government.
This article explores the so-called Vitamin C case, which has been pending for 14 years and is still working its way through U.S. courts, and the current state of play in this area. There, Chinese Vitamin C makers argue they are immune from U.S. antitrust liability because they are state-owned enterprises and their conduct was required by the Chinese government, arguments that the Chinese government has confirmed in its own court filings. As the law continues to develop and courts grapple with recent changes, Chinese companies will need to adjust to new realities, but in partnership with their counsel, will also have an opportunity to mold the direction that courts take on these complex issues.
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* Reprinted with permission of Legal 500 Cartels Countrywide Comparative Guide, where it was originally published.
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