The VC anti-monopoly case was born again and the defendant was deeply puzzled
While the VC antitrust case had gradually faded from public attention in the industry, it has now resurfaced in a long and complex legal battle. On April 3, North China Pharmaceutical Co., Ltd. announced that its subsidiary, Hebei Wellcome Pharmaceutical Co., Ltd., is involved in a three-year U.S. antitrust case related to vitamin C. After four domestic defendants previously defended the case, the plaintiff recently amended the complaint, adding North China Pharmaceutical as a new defendant.
The "unexplained" defendant, North China Pharmaceutical, stated in its announcement that it has hired U.S. lawyers with extensive experience in antitrust litigation to fully defend the case. However, the inclusion of North China Pharmaceutical as a defendant has raised questions, especially since Huayou Pharmaceutical was also added, despite not being directly linked to the original case.
Huaxing’s chairman, Chang Xing, expressed confusion: “We are also puzzled. We don’t know why they included North China Pharmaceuticals. It’s unclear what their intentions are.†Some legal experts believe that the addition of Huayou may be due to the high cost and lengthy nature of the case, which attracts U.S. law firms seeking high-risk, high-reward litigation. In the U.S., risk-based legal fees can reach up to 90% of the settlement, making such cases highly profitable for attorneys.
According to sources, Huayou was added because, as the parent company of Wellcome Pharmaceuticals, it was involved in the sales of vitamin C. From the U.S. perspective, any participation in the sales process could imply involvement in pricing, potentially suggesting price manipulation.
This case took a major turn two years ago when, in February 2007, Ranis Corporation filed a "Notice of Voluntary Withdrawal of the Action" in the U.S. District Court for the Eastern District of New York, voluntarily dropping its lawsuit against Northeast Pharmaceutical. That victory gave hope to other Chinese companies still entangled in similar legal battles. However, this time, North China Pharmaceutical's involvement means the case will likely take much longer to resolve.
Despite the legal challenges, China’s vitamin C exports have not been significantly affected. In fact, prices have remained high since last year. According to analyst Bao Yanfeng from Health Network, the current price of vitamin C is around $11 per kilogram. Statistics from the China Medicare Association show that in 2007, China exported nearly 70,000 tons of vitamin C, with an export value of $330 million, and average prices rose by 40%.
The United States remains the largest market for China’s vitamin C exports, accounting for a significant portion of global trade. According to the Medicare Chamber of Commerce, developed countries like Europe and North America make up about 70% of the global vitamin C market, with North America alone taking up a quarter of that share.
However, there are growing concerns. Last year, as vitamin C prices continued to rise, some companies started expanding production. In August, it was reported that Huaxing, known as the "industry salt killer," began producing 2,000 tons of vitamin C annually. While this is small compared to the combined capacity of other major producers, it has still raised market concerns.
Analyst Bai Yanfeng noted, “From this year’s perspective, vitamin C prices won’t be extremely high or low, but the average should be higher than previous years.†This relatively stable but elevated price is partly driven by rising costs of energy, water, electricity, and raw materials.
On April 9, the central parity exchange rate of the RMB against the U.S. dollar broke through the 7.0 level, marking the start of the “Ben 6†era for the yuan. This has increased pressure on export-oriented enterprises, particularly those in the Pearl River Delta region, where many companies engaged in processing trade are struggling. This trend is also causing concern for the domestic pharmaceutical export industry, including vitamin C.
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