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Chinese vitamin C makers lose antitrust ruling

By Andrew Longstreth

NEW YORK (Reuters) - In a long-running case that has tested the limits of antitrust law, four Chinese companies accused of fixing vitamin C prices have been stripped of a key defense.

The defendant manufacturers had argued that Chinese law required them to coordinate production and prices of their exports. But in a decision made public on Tuesday, District Judge Brian Cogan in Brooklyn rejected that defense.

"The Chinese law relied upon by defendants did not compel their illegal conduct," Cogan said.

It's unclear whether the case will now proceed to trial. William Isaacson, an attorney for the plaintiffs, said his expert estimates damages to be $58.4 million. Under the law, plaintiffs can seek triple damages.

"Chinese companies are now going to be subject to the same antitrust rules as other international cartels, and that's the way it should be," said Isaacson.

The plaintiffs, two commercial buyers of vitamin C, alleged that the defendants agreed to fix prices in 2001. After the agreement was made, the plaintiffs said, spot prices for vitamin C shot to as high as $7 per kilogram in December 2002 from $2.50 per kilogram in December 2001.

The defendants did not contest the antitrust allegations but instead invoked the foreign sovereign compulsion doctrine, which protects foreign companies that are compelled by their own government to break U.S. law.

The defendants received support for their position from the Chinese government itself. In 2006, China's Ministry of Commerce filed a brief on behalf of the defendants. It was believed to be the first time the Chinese government had made an official appearance in a U.S. court.

The ministry argued that Chinese law compelled them to coordinate their production and pricing. It also argued that a ruling against the manufactures would "improperly penalize" them for "the sovereign acts of their government and would adversely affect implementation of China's trade policy."

Cogan rejected that argument.

"Although defendants and the Chinese government argue to the contrary, the provisions of Chinese law before me do not support their position, which is belied by the factual record," said Cogan. "I decline to defer to the Chinese government's statements to the court regarding Chinese law."

Attorneys for the defendants declined to comment or did not respond to messages seeking comment.

The case is Animal Science Products and The Ranis Company v. Hebei Welcome Pharmaceutical Co. Ltd. et al, U.S. District Court for the Eastern District of New York, No. 05-00453.

(Editing by Steve Orlofsky)