In a recent antitrust case, one of few to appear in front of China’s Supreme People’s Court (SPC), Brattle experts provided analyses and expert testimony on behalf of HIPI Pharma Tech (HIPI) in their successful appeal of a lower court’s verdict charging HIPI with abuse of dominance.
HIPI is a Chinese supplier of raw materials for pharmaceutical products. In 2019, HIPI’s downstream customer, Yangtze River Pharmaceutical Group, alleged that HIPI had abused its dominance in the active pharmaceutical ingredient (API) market through exclusive dealing and excessive pricing conducts. In Nanjing Intermediate People’s Court, the court of the first instance sided with the plaintiff Yangtze River Pharma, ordering HIPI to compensate the pharmaceutical group for approximately RMB 68.3 million in economic losses. HIPI appealed and brought the matter to the SPC in July 2020.
Retained by HIPI and Tian Yuan Law Firm, Principal and Leader of Brattle’s Asian Antitrust & Competition practice Dr. Vanessa Yanhua Zhang and Academic Affiliate Professor Jiong John Gong analyzed HIPI’s supply contracts and pricing scheme. Dr. Zhang and Professor Gong submitted a series of expert reports and testified before the SPC on behalf of HIPI in the appeal.
The two experts justified the exclusivity clause in the long-term supply contracts at issue as legitimate conduct due to patent protection on innovative drugs. Dr. Zhang and Professor Gong also estimated HIPI’s internal rate of return (IRR) based on its R&D data and production costs and analyzed the economic value of the API products, demonstrating that HIPI’s price increases were reasonable and did not constitute excessive pricing.
In a decision released on May 25, 2023, the SPC completely overturned the lower court’s verdict, finding that HIPI did not abuse its market dominance and had legitimate reasons for its pricing scheme. In its decision, the SPC quoted the expert reports of Dr. Zhang and Professor Gong extensively and relied on the methods and results submitted by the two experts.
Dr. Zhang and Professor Gong were supported by Dr. Nina Yin, Dr. Yumin Li, Rita Li, and Robyn Xu. The Tian Yuan law firm team included Wei Huang, Bei Yin, Wen Zhou, and Yi Yang.