In a recent ruling in a long-running litigation saga, on August 10 the U.S. Court of Appeals for the 2nd Circuit dismissed an antitrust lawsuit against Chinese exporters of Vitamin C, citing “international comity” as the basis for its ruling. The case already went to the Supreme Court once, and an appeal of this latest ruling is possible as well. This piece provides background on the litigation prior to the 2nd Circuit’s ruling, and then offers a summary of the key reasoning of the majority and the dissent.


As set out in the 2nd Circuit Court of Appeals opinion in Animal Sci. Prods. v. Hebei Welcome Pharma. Co. Ltd., China has long been a leading producer of Vitamin C. As China began to integrate into the world economy in the late 1970s, the Chinese government “implemented various export controls to gain a competitive edge over other producers of Vitamin C on the international market.” In the 1990s, “following a price war between producers in China,” the government “facilitated industry-wide consolidation and implemented regulations to control the prices of Vitamin C exports.”

The plaintiffs in this litigation, Animal Science Products, Inc. and The Ranis Company, Inc., are American purchasers of bulk Vitamin C. They filed this antitrust action in 2005, alleging that four Chinese exporters of Vitamin C conspired to inflate prices and restrict supply in violation of the Sherman Act and the Clayton Act.

In the district court, the defendants moved to dismiss the case based on “the foreign sovereign compulsion doctrine, the act of state doctrine, and principles of international comity.” The district court rejected all three grounds for dismissal and the trial went forward. The district court subsequently denied the defendants’ motion for summary judgment, or, alternatively, a motion for a determination of foreign law under Federal Rule of Civil Procedure 44.1. In denying the defendants’ motion for summary judgment, the district court “again rejected application of the act of state doctrine and the foreign sovereign compulsion doctrine.” It also concluded that “there was no bar to the exercise of its jurisdiction due to international comity principles.”

Two of the Chinese defendants settled the claims against them, but for the other two defendants, a jury returned a verdict for the plaintiffs in March of 2013, finding the remaining defendants—Hebei and NCPG—liable for damages. The district court “entered a trebled damages award of $147,831,471.03 plus interest from the date of judgment, as well as a permanent injunction against future anticompetitive behavior.”

In a 2016 ruling by Judges Cabranes, Wesley, and Hall, the 2nd Circuit Court of Appeals reversed, finding that the district court erred “by failing to abstain on international comity grounds in light of the [Chinese Commerce] Ministry’s submissions showing a true conflict between U.S. antitrust law and Chinese export regulations for Vitamin C.” The Court of Appeals “held that when a foreign government directly participates in U.S. court proceedings by providing an official representation regarding the proper interpretation of its laws, the U.S. court is bound to defer to that interpretation so long as it is reasonable under the circumstances.”

The Supreme Court then reversed this finding in a unanimous 2018 ruling authored by Justice Ginsburg, holding that the 2nd Circuit “gave too much deference to the Ministry’s submissions.” The Supreme Court remanded the case back to the 2nd Circuit for the court “to carefully consider the Ministry’s views without giving them dispositive effect.”

It is the 2nd Circuit’s consideration on remand that is at issue here. In this opinion, the majority ruling was authored by Judges Cabranes and Nardini; Judge Wesley wrote a dissent.

The 2nd Circuit’s Ruling: The District Court Should Have Dismissed This Antitrust Action for Reasons of International Comity

At the outset of its discussion, the 2nd Circuit majority explained that “[t]he central issue we address is whether the district court should have dismissed this antitrust action for reasons of international comity.” The comity analysis, it noted, “begins by asking whether Chinese law required defendants to engage in anticompetitive conduct that violated U.S. antitrust laws, such that a true conflict exists.” As part of that inquiry, and pursuant to the Supreme Court’s direction to the court on remand, the 2nd Circuit said it would “carefully consider the statements from the Chinese government as to the proper interpretation of its laws and what requirements those laws imposed on the defendants.”

The 2nd Circuit began its discussion with the doctrine of international comity, paying particular attention to the “true conflict” standard. Comity, it said, “is both a principle guiding relations between foreign governments and a legal doctrine by which U.S. courts recognize an individual’s acts under foreign law.” It is the “recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or other persons who are under the protection of its laws.” To determine whether international comity principles require dismissal of a lawsuit, the 2nd Circuit said, it would “apply a multi–factor balancing test.”

In applying the balancing test, the 2nd Circuit noted the Supreme Court’s explanation that, “to warrant dismissal on the basis of international comity, the two countries’ legal demands must be irreconcilable.” In other words, it said, there must be a “true conflict” between U.S. law and that of the foreign nation. At the same time, it said that while its analysis “centers on the existence of a true conflict, … other international comity factors remain relevant.”

After distinguishing the true conflict inquiry from the foreign sovereign compulsion doctrine, the 2nd Circuit said it would “look to the laws of each country in turn to determine whether, taking those laws at face value, a true conflict exists.” In doing so, it noted that “[p]rice-fixing agreements between two or more competitors, otherwise known as horizontal price-fixing agreements, fall into the category of arrangements that are per se unlawful,” and thus if Chinese law required defendants to enter into horizontal price-fixing agreements, “compliance with the laws of both countries [would be] impossible,” and there would be a true conflict.

The 2nd Circuit said it would begin its inquiry by asking whether Chinese law governing the Vitamin C industry, on its face, “required defendants to engage in conduct that violates U.S. antitrust laws.” It therefore scrutinized whether defendants “could have sold and distributed Vitamin C while in compliance with both Chinese and U.S. antitrust law” or “whether Chinese law required the Chinese sellers’ conduct” in violation of U.S. antitrust law. It began by examining whether Chinese law “facially required” Vitamin C price-fixing.

On the issue of the Chinese law on its face, the 2nd Circuit noted that “China’s regulations for its Vitamin C industry evolved considerably between the founding of the Chamber of Commerce of Medicines & Health Products Importers & Exporters (the ‘Chamber’) in 1989 and the filing of this antitrust action in 2005.” A key change was that in 1997, the Ministry and the State Drug Administration promulgated a “Notice Relating to Strengthening the Administration of Vitamin C Production and Export by Ministry of Foreign Trade and Economic Cooperation and State Drug Administration,” which provided that the “scale of Vitamin C production shall be strictly controlled,” including through production quotas set by the Ministry, a licensing system for all exporters, and, within the Chamber, the creation of a “Vitamin C Coordination Group”—later known as the Vitamin C Sub-Committee (the “Sub-Committee”)—which was formally established in March 1998. The Sub-Committee’s function was to “coordinate and administrate market, price, customer and operation order of Vitamin C export.” Reviewing the full scope of the Chinese laws here, the 2nd Circuit concluded that, “[t]aken at face value, the applicable Chinese law during the relevant period— including both the PVC regime and the Chamber’s 2002 delegation of price-coordination authority to the Sub-Committee—required the defendants, as Vitamin C manufacturers and exporters, to fix the price of Vitamin C sold on the international market.”

The 2nd Circuit said that various other records corroborate this conclusion, citing to administrative documents from the period, contemporaneous industry records, and Sub-Committee meeting records. In this context, an important disagreement between the majority opinion and the dissent was whether the Chinese government was pushing for price coordination or for minimum prices. On this point, the majority took the view that Chinese law required the companies to fix market prices for Vitamin C exports. While implementation was not perfect, the majority said, the instructions from the government were clear.

Next, the 2nd Circuit turned to the Chinese Commerce Ministry’s submissions in the case, noting that it would “carefully consider,” but not defer conclusively to, the Ministry’s statement on the meaning of Chinese law, as the Supreme Court had instructed. In particular, the 2nd Circuit said it would “weigh that explanation’s ‘clarity, thoroughness, and support; its context and purpose; the transparency of the foreign legal system; the role and authority of the entity or official offering the statement; and the statement’s consistency with the foreign government’s past positions.’”

In terms of the content of those submissions, the Ministry made clear that, in its view, the Chinese exporters’ actions were taken to comply with Chinese law.

As to the proper deference the 2nd Circuit should give to these submissions, it went through the factors identified by the Supreme Court. First, as to the submissions’ “clarity, thoroughness, and support,” the 2nd Circuit said that “each submission articulated a coherent view of Chinese law based on the relevant supporting regulations.” Second, while the submissions’ “context and purpose” give some “cause for caution” in evaluating the picture painted of Chinese law, as the Ministry “has unambiguously staked out a common interest with defendants,” the 2nd Circuit said “it is significant that this litigation represents the first official appearance by the Chinese government in a U.S. court, and the Ministry’s submissions bespeak broader principles of international comity informing China’s interest in this litigation” and it is “appropriate to give some weight to these invocations of international comity.” Third, the 2nd Circuit found it “significant that a governmental agency in the Ministry’s position has ‘attached great importance’ to this litigation, as evident in its unprecedented appearance on behalf of the Chinese government and repeated filings as an amicus in the district court, this Court, and the Supreme Court.”

The 2nd Circuit then turned to the “the transparency of the foreign legal system” factor, finding it “inconclusive.” While it said China’s legal system is “something of a departure from the concept of ‘law’ as we know it in this country,” it noted that “this ambiguity cuts both ways”: “a reasonable interpretation offered by the responsible governmental authority is especially helpful in understanding a system that would be difficult for a U.S. court … to piece together on its own,” but it was “less inclined to trust the representations of a regime lacking transparency or democratic accountability.” As a result, it did not assign this factor “significant weight among the relevant factors when considering the deference due to the Ministry’s submissions.”

Finally, the 2nd Circuit was “mindful of the Supreme Court’s instruction that we consider the Ministry’s ‘statement’s consistency with [China’s] past positions,’ given ‘the submissions made by the U.S. purchasers casting doubt on the Ministry’s account of Chinese law.’” In particular, it said it “must assess the credibility of the Ministry’s account of the 2002 Notice as compulsory in light of China’s representation to the WTO in 2002 that it ‘gave up export administration of vitamin C.’” Here, it could not be confident about whether China has in fact “ma[de] conflicting statements,” but even assuming a material contradiction, it found it “entirely plausible that China sought to exaggerate to the WTO its compliance with that organization’s accession principles in becoming a WTO member.” It also considered “the prospect that, in this litigation, the Ministry may have an incentive to exaggerate the compulsory nature of its Vitamin C export regime in avoiding application of U.S. antitrust law to the defendants’ conduct.” But to the extent there is such a contraction, it undercuts “only the Ministry’s argument that the 2002 Notice subjected all of the defendants’ conduct to the kind of coercive control that would potentially implicate considerations of the FSC doctrine,” and the “international comity analysis focuses on whether Chinese law, taken at face value, requires the defendants to act in a way that violates U.S. law.” Here, the 2nd Circuit said, “the persuasiveness of the Ministry’s submissions regarding the specific requirement that Chinese export firms coordinate market prices as well as adhere to minimum prices remains intact.”

On this basis, the 2nd Circuit concluded that “the Ministry’s submissions, when afforded careful consideration, support our determination that Chinese law required the defendants … to be directly responsible for implementing price controls.” It also concluded that the defendants “were required to engage in price-fixing conduct violative of U.S. antitrust law.” In this context, the majority disagreed with the dissenter’s conclusion that the defendants could leave the Sub-Committee and avoid their obligation under Chinese law to fix prices.

Having found that a true conflict exists, the 2nd Circuit then considered other comity factors in the balancing test:

  • As the defendants are companies owned by Chinese nationals, located and headquartered in China and primarily doing business there, and the anticompetitive conduct at issue took place among these companies in China and was thus extraterritorial, the fact that “the nationalities of the parties and the location of the anticompetitive conduct are foreign weigh in favor of dismissal under international comity principles.”
  • With regard to effectiveness of enforcement and alternative remedies, although an award and injunction would be likely to deter defendants from future anticompetitive behavior, China will continue to set minimum prices; and recourse to the WTO or another international forum remains available to the United States; thus, “these aspects of the comity inquiry do not weigh heavily either in favor of or against dismissal.”
  • Harm to American commerce was foreseeable, which “weighs against dismissal for reasons of international comity.”
  • As to reciprocity, “if U.S. companies fixed prices in the United States pursuant to such a policy and a Chinese party sued in China for a violation of Chinese law, the U.S. Government would undoubtedly expect the Chinese court to recognize as a valid defense that U.S. law required the American exporter’s conduct,” which “weighs heavily in favor of dismissal on comity grounds.”
  • In terms of the impact on foreign relations, “to the extent the record reflects protestations of the Chinese government at the application of U.S. antitrust law to Chinese companies implementing export policy in China, and no contrary view of the Executive Branch is expressed, this factor tips in favor of dismissal for reasons of international comity.”

Balancing out all of these factors, the 2nd Circuit declined to construe U.S. antitrust law as reaching defendants’ conduct in the circumstances presented here, and concluded that principles of international comity warrant dismissal. (It found it unnecessary to reach a decision on the applicability of the act of state or foreign sovereign compulsion doctrines).

The Dissent: Because It Was Not Impossible for the Defendants To Comply with both Chinese and U.S. Law, This Case Should Not Be Dismissed on International Comity Grounds

Judge Wesley began his dissent by asking, “[d]id ‘Chinese law require[] the Chinese sellers’ conduct[?]’” He stated that “[t]he majority never really answers,” and instead “improperly applies the doctrine of international comity to avoid a finding it cannot contest: that Chinese law did not require the defendants to fix prices above the minimum of $3.35/kg, which is what Hebei and NCPG ... did.” Because it was not impossible for the defendants to comply with both Chinese and U.S. law, Judge Wesley stated, “this case should not be dismissed on international comity ground.”

In support of this conclusion, Judge Wesley noted that the “plain text” of the regulations and agency charter did not require the Chinese exporters to “coordinate” prices and quantities. In addition, members of the Sub-Committee were free to withdraw from it, and thus they were not required to “engage in any concerted action.” Judge Wesley did not think the Commerce Ministry’s submissions “merit deference,” and in this regard did “not see how this being the Chinese government’s first official appearance in a U.S. court mitigates the fact that the Ministry has only taken this –– as the majority recognizes –– self-serving position for the first time in the context of this litigation.” Moreover, he said, “the record makes clear that Chinese law did not require the defendants to agree on prices above the minimum of $3.35/kg, which is what the defendants did.”

He also stated that “[i]nternational comity is a careful balancing act,” and that: “Even accepting for argument’s sake that Chinese law required the defendants to coordinate on a minimum price to achieve its concern about anti-dumping claims, applying comity for agreements above the minimum goes above and beyond accommodating the central interests of the foreign state.” On this point, he further noted that “[n]othing in the international comity precedents implies a true conflict exists where only part of the defendants’ conduct was required under foreign law.”

He concluded by saying that “this is not the ‘rare’ case presenting ‘extraordinary circumstances’ that warrants dismissal on the basis of comity.”