China's grip on key food additive
Vitamin C prices have spiked this year. China controls 80 percent of the market.
from the July 20, 2007 edition
Page 3 of 4
"If they are selling in China it is not an issue, but they are selling most of their production on the international market, so they fall under different jurisdictions," says Townsend.
The Chinese companies named in the current antitrust case and a Chinese ministry have asked the judge to dismiss the lawsuit. That motion is pending.
The plaintiffs' lawyer, William Isaacson of Boies, Schiller & Flexner in Washington, says the current tightening in supplies "is the same conspiracy that is addressed in our lawsuit and it's obvious it's continuing."
"I know nothing about the current situation," says Joel Mitnick, a lawyer representing the Chinese Ministry of Commerce and a partner at Sidley Austin, a law firm. He says the allegations in the lawsuit concern actions taken several years ago. Stephen Bomse of Heller Ehrman in San Francisco, a lawyer for the companies, had no comment.
Ironically, the Chinese became the dominant exporters of vitamin C only after the US Department of Justice charged six Western companies with price fixing in 1999.
The so-called "vitamin cartel," which supplied 75 percent of the world's vitamins, was convicted and ordered to pay $1.5 billion in fines and restitution. Some executives received jail sentences. One of the largest fines was against Hoffmann-LaRoche of Switzerland. It eventually sold its vitamin subsidiary to DSM.
Until two years ago, DSM produced ascorbic acid in New Jersey. But the market was flooded with Chinese-made vitamin C. The price dropped to as low as $2 per kilo. DSM shifted its production to Scotland.
While the firms of the "vitamin cartel" colluded, the Chinese vitamin C industry was growing. Chinese leaders decided decades earlier that increased production of vitamins was critical to their countrymen's health. Chinese manufacturers were then well placed to take advantage of the breakup of the vitamin cartel, says Peter Kovacs, formerly CEO of NutraSweet Kelco and now a consultant to the food industry. They moved into the world market, taking market share by cutting prices, he says.
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