China’s role in US antitrust litigation: When should a US court defer to a foreign government’s interpretation of its law?

In a high-profile antitrust case with significant international implications, the US Supreme Court recently announced that it would review the Second Circuit’s decision in In re: Vitamin C Antitrust Litigation. In September 2016, the Second Circuit vacated a US$147 million antitrust price-fixing judgment against two Chinese corporations on comity grounds, deferring to the Chinese government’s interpretation of its laws and regulations. Plaintiffs seek to have the Supreme Court overturn the Second Circuit’s ruling that vacated the district court’s judgment against the Chinese corporations. The defendants were found liable in the district court after trial for fixing the price and supply of vitamin C sold to US companies.

The Supreme Court limited its review solely to the question of “[w]hether a court may exercise independent review of an appearing sovereign’s interpretation of its domestic law . . . or whether a court is ‘bound to defer’ to a foreign government’s legal statement, as a matter of international comity.” The Court will likely hear the case during its April 2018 sitting, although no argument date has been set.

In 2005, plaintiffs brought a class action against the Chinese corporations in the United States District Court for the Eastern District of New York, alleging the Chinese companies engaged in a conspiracy to fix vitamin C prices and volumes in violation of the Sherman Act. Defendants moved to dismiss based on several defenses, including the principle of international comity. To support this argument, the Ministry of Commerce of the People’s Republic of China (MOFCOM) filed an amicus brief, declaring that Chinese law required the defendants to fix prices and restrict output. The district court denied the motion to dismiss. A jury found in favor of plaintiffs. The court awarded the plaintiffs US$147 million. The Second Circuit vacated the judgment, finding that the lower court’s exercise of jurisdiction constituted an abuse of discretion. In doing so, the court arguably created a circuit split over whether a US court must defer to a foreign government when the foreign government directly participates in court proceedings by offering sworn statements explaining the construction and effect of its laws and regulations.

The Supreme Court invited the US Solicitor General to weigh in on whether to hear the appeal. In November 2017, the Solicitor General urged the Court to review the decision. The Solicitor General argued that the Chinese government’s interpretation was not conclusive, and the Second Circuit should have considered other factors, including the fact that the Chinese companies admitted to agreeing on prices and volumes without any intervention from the Chinese government.

In today’s ever-global marketplace, the Supreme Court’s decision will not only have significant implications in the antitrust context but may also shed light on the Supreme Court’s stance on comity generally with implications in all kinds of international disputes. The outcome of this case probably will define the role foreign governments can play in US litigation and guide courts on how to deal with foreign governments that attempt to shield their companies from US litigation. Foreign-based companies doing business affecting the United States and US companies engaged in international commerce should closely review the Supreme Court’s decision, which is anticipated to be released by the end of June 2018.