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Douglas Bernheim testifies in landmark vitamin C price-fixing case

March 19, 2013

Dr. B. Douglas Bernheim offered testimony in US District Court for the Eastern District of New York on behalf of plaintiffs in In re Vitamin C Antitrust Litigation, a case alleging price-fixing agreements between Chinese suppliers. The testimony of Dr. Bernheim, Stanford University Economics Professor and Bates White Partner, facilitated a speedy verdict in favor of the plaintiffs, according to one anonymous juror on the case. “He taught us,” said the juror in comments to MLex US Antitrust. “He ran through the whole procedure in language we could understand.” Jurors deliberated for less than one day before awarding damages of $54.1 million, the total amount of damages estimated by Dr. Bernheim.

Dr. Bernheim’s analysis demonstrated that price increases for vitamin C during the alleged cartel period between 2001 and 2006 were disproportionate compared to the prices of production inputs and other changes in supply and demand conditions. He also discredited the defendants’ argument that the 2003 SARS epidemic was responsible for the sharp price hikes. Specifically, Dr. Bernheim testified that SARS had some modest effect on vitamin C prices, but that price elevation during the cartel period was not explained by any of the numerous supply or demand factors he considered, including SARS. Based upon his analysis, Dr. Bernheim concluded that vitamin C prices were inflated during the cartel period, primarily because of the activities of the cartel.

North China Pharmaceutical Group and its vitamin C manufacturing unit, Hebei Welcome Pharmaceutical, were found liable for entering into agreements with competitors to fix prices during the cartel period. The defendants, who did not deny the existence of the agreements, argued that they were compelled by the Chinese government to fix prices and were subject to punishment, including nullification of export contracts if they disobeyed. However, the defense’s claims ran counter to Chinese declarations to US government and international agencies that it did not compel price-fixing for any exported product. The case marks the first time that Chinese companies have faced a trial on US antitrust claims.

The $54.1 million verdict (trebled to $162.3 million under US law) meets the full damages requested by plaintiffs, including American food and beverage companies, vitamin packagers, wholesalers, and distributors who purchased the vitamins. The other codefendants in the case had already reached settlements with plaintiffs at the time of the verdict.