China's first lawsuit filed by companies against national market regulator over $47 million fine

The judges of China’s Beijing High People’s Court on November 22 heard the arguments in a dispute between two Chinese pharmaceutical companies and the State Administration for Market Regulation (SAMR), China’s highest market regulator.


The SAMR fined on April 9, 2020 three domestic pharmaceutical companies Shandong Kanghui Medicine Co., Ltd. (山东康惠医药有限公司), Weifang Puyunhui Pharmaceutical Co., Ltd. (潍坊普云惠医药有限公司), and Weifang Taiyangshen Pharmaceutical Co., Ltd. (潍坊太阳神医药有限公司) a total of 325.5 million yuan ($47 million) for abuse of dominance (i.e., excessive pricing and imposing unfair trading conditions) in the sale of injectable calcium gluconate active pharmaceutical ingredient (API). That had been the largest antitrust penalty imposed in China’s API sector.


The SAMR found that the three companies had a collective share of 94% on the Chinese calcium gluconate API market from August to December of 2015, 91% in 2016, and 87% in 2017. The SAMR found their products were priced 9.5 to 27.3 times their costs and 19 to 54.6 times the average market prices in 2014.


Kanghui and Puyunhui filed respectively lawsuits against the SAMR at the Beijing No. 1 Intermediate People’s Court claiming in June and July 2020 claiming that no concerted practice was conducted under a de facto “single economic entity” between the three companies and the penalties imposed were excessive. This is the first case where Chinese companies has taken legal action against the country’s highest market regulator.


After consulting with the Beijing High People’s Court, the Beijing No. 1 Intermediate People’s Court had transferred the case to the higher court for trial.