US Steel makes strategic choice to take Chinese steel price-fixing case to US ITC, not court
20 June 2016. By Leah Nylen and Richard Vanderford, with additional reporting by Adam Sigal.
In selecting the US International Trade Commission as the forum for its price-fixing complaint against Chinese steelmakers, US Steel can avoid a problem for other plaintiffs who have sued Chinese manufacturers for price-fixing: an inability to make them pay up.
Last month, the US trade agency agreed to institute an investigation into some of China’s largest steel manufacturers based on a complaint by US Steel that the companies violated US antitrust laws by coordinating prices and supply, among other claims.
The investigation came as something of a surprise to many trade lawyers. US Steel’s novel approach, though, may bypass difficulties that plaintiffs in other antitrust cases against Chinese defendants have found after victory in US courtrooms: The defendants, with no assets in the US, simply ignored demands to pay.
Under Chinese law, the party with a legally effective judgment must apply to the people’s court of the People’s Republic of China for recognition and enforcement of the judgment.
In some instances, a foreign court may request recognition of the judgment. However, China and the United States don’t have a treaty establishing such reciprocity. In addition, the same Chinese law indicates that judgments will not be enforced in instances where they would violate the country’s national interests.
That has made collecting on wins in US antitrust cases difficult.
In March 2013, a federal jury in Brooklyn found one of the world’s leading vitamin-C producers, Hebei Welcome Pharmaceutical, and its parent company, North China Pharmaceutical Group, liable for price-fixing.
The companies, backed by China’s Ministry of Commerce, had argued that the case should never have been considered because Chinese law required the companies to fix prices. An appeal focused on that argument is pending.
A New York judge last October found the vitamin-C makers in contempt for failing to pay more than $150 million they owed in connection with the case.
The companies argued that Chinese law prevented them from even turning over information that would help plaintiffs locate their assets, an argument that US District Judge Brian Cogan called akin to “instant nationalization.”
In that case, the plaintiffs won a court order aimed at forcing New York affiliates of Chinese banks to turn over money belonging to the two defendants, but it’s unclear whether that worked. The docket in the case has languished since the contempt order last year.
In bypassing the federal courts for the ITC, US Steel can avoid those issues altogether.
The ITC can’t order damages, but it has a more potent tool: should the agency find merit in US Steel’s claims, the ITC can issue an exclusion order barring further Chinese steel imports or a cease-and-desist order that would prohibit certain behaviors by the Chinese manufacturers or their US distributors. Depending on how narrowly or broadly the order is written, it could prevent everything from certain types of sales to, essentially, any business within the US.
An ITC exclusion or cease-and-desist order comes with its own drawbacks. While the agency’s commissioners can issue orders, the US president can veto them on policy grounds. Vetoes are extremely rare — only six have ever been issued.
At least two of those, though, including President Barack Obama’s 2013 veto of an order that would have barred Apple imports, included concerns about the antitrust implications of the decisions.