WASHINGTON – The U.S. Supreme Court sided with the Trump administration and against China on Thursday on a disputed aspect of their fraught trade relationship, throwing out a lower court ruling that had allowed two Chinese vitamin C makers to escape $148 million in damages for violating American antitrust law.
In a case that brought the trade conflict between the world’s two largest economies before the top U.S. court, the justices ruled 9-0 that the lower court gave too much deference to Chinese government filings explaining China’s regulatory policy.
The justices sent the case back for reconsideration by the New York-based 2nd U.S. Circuit Court of Appeals, which in 2016 threw out the damages won by two American companies that buy vitamin C.
Writing for the court, Justice Ruth Bader Ginsburg said that while U.S. courts should give “respectful consideration” to a foreign government’s interpretation of its own law, they are not “bound to accord conclusive effect to the foreign government’s statements.”
Lawyers for the U.S. and Chinese governments faced off in April before the justices. The Supreme Court took the unusual step of letting China present arguments even though it is not an official party in the case, a privilege typically reserved for the U.S. Justice Department.
Carter Phillips, China’s lawyer in the case, said the ruling means “we live to fight another day.” When the case returns to the lower court, Phillips said, he would show that what the Chinese companies did was “no more than comply with what was required by Chinese law.”
The price-fixing case dates back to 2005 when Texas-based Animal Science Products Inc and New Jersey-based The Ranis Co Inc accused Hebei Welcome Pharmaceutical, North China Pharmaceutical Group and other Chinese vitamin C makers of antitrust violations.
China asked the trial court to dismiss the allegations in part because its laws had forced Chinese companies to comply with government-mandated pricing regimes.
China and the United States are locked in a simmering trade dispute. President Donald Trump has accused China of unfair trade practices and threatened to impose tariffs on up to $150 billion in Chinese goods over allegations of intellectual property theft. China has warned of retaliation.
A U.S. Justice Department spokeswoman said the administration is “pleased with the decision.”
Michael Gottlieb, a lawyer representing the American companies, said his clients’ fight over the price-fixing allegations will continue.
“The decision will promote free and open markets, while protecting the independence of the U.S. courts,” Gottlieb added.
Jonathan Jacobson, a lawyer for the Chinese companies, expressed disappointment with the ruling but said that “we are confident of prevailing on remand because Chinese law clearly compelled price fixing of vitamin C during the relevant period, as our own (U.S.) government has made clear.”
A U.S. federal judge questioned the credibility of the Chinese submissions in the case and, after a 2013 jury trial, awarded the two American companies $147.8 million in damages.
The 2nd Circuit overturned the judgment in 2016, saying that when a foreign government directly participates in a case American courts are obligated to defer to that country’s characterization of its own laws.
The Supreme Court itself did not weigh in on the correct interpretation of Chinese law, but Ginsburg said questions remained over “whether Chinese law required the Chinese sellers’ conduct.”
Reporting by Andrew Chung; Additional reporting by Lawrence Hurley; Editing by Will Dunham