The US Supreme Court on Thursday ruled unanimously against a group of Chinese vitamin C producers in a long-running antitrust battle that has pitted the US Justice Department against China’s central government.
The ruling leaves the Chinese companies, accused of colluding to fix the price and supply of their products, vulnerable to a US$148 million award in favour of the plaintiffs in the case against Hebei Welcome Pharmaceutical Co and other Chinese manufacturers.
China’s commerce ministry has called the legal moves against Chinese parties “hostile” and disrespectful”.
The Supreme Court ruling comes amid a high-profile battle within the US government about the fate of ZTE, another Chinese entity accused of breaking US laws, and as China and the US are embroiled in a trade dispute.
The US-based plaintiffs that purchased the imported vitamins – an animal-feed company and a vitamin distributor – have argued, since the case was first heard by a federal district court in 2006, that Chinese law did not force the two producers to collude on prices.
The plaintiffs won that round, but the verdict was overturned by an appellate court in 2014. It ruled that the lower court did not provide the proper “binding deference” regarding China’s own laws. Foreign governments’ interpretations of their own laws, the appellate court said, should be respected in the interest of “international comity”.
At each stage of the case, China’s commerce ministry – or “Mofcom” – filed an amicus brief with the US courts arguing that the defendants were only following Chinese law and could not obey both that and American law. The Supreme Court even took the highly unusual step of allowing China to present arguments even though it was not an official party to case.
But Justice Ruth Bader Ginsburg, writing the 9-0 Supreme Court decision announced on Thursday, said US courts “should accord respectful consideration to a foreign government’s submission, but the court is not bound to accord conclusive effect to the foreign government’s statements.”
The opinion continued: “In ascertaining foreign law, courts are not limited to materials submitted by the parties, but may consider any relevant material or source.
“In the spirit of ‘international comity’ … a federal court should carefully consider a foreign state’s views about the meaning of its own laws. The appropriate weight in each case, however, will depend upon the circumstances; a federal court is neither bound to adopt the foreign government’s characterization nor required to ignore other relevant materials.”
The justices’ decision sends the case back to a federal appellate court in New York.
Lawyers for the plaintiffs called the ruling a victory for open markets.
“We are thrilled that our effort will continue following today’s unanimous decision that our case should not have been dismissed on the say-so of the Chinese government,” said Michael Gottlieb, a partner at Boies Schiller Flexner.
“The decision will promote free and open markets while protecting the independence of the US courts.”
The Supreme Court ruling comes as the other two branches of the US government forge ahead with initiatives that are testing Washington’s relationship with China.
Senator Chris Van Hollen, Democrat of Maryland, and Senator Tom Cotton, Republican of Arkansas, are trying to push through Congress an amendment that would undo US President Donald Trump’s deal giving a reprieve to ZTE, one of China’s largest telecom equipment makers.
Trump’s agreement releases ZTE from a ban on US sales to the company, implemented in April to punish it for selling products to Iran and North Korea in violation of US sanctions.
Meanwhile, Trump is expected to announce as early as Friday that he will impose punitive tariffs on US$50 billion worth of annual Chinese imports to address a record trade imbalance in China’s favour.