Lysine price-fixing conspiracy
Encyclopedia
The lysine price-fixing
conspiracy was an organized effort during the mid-1990s to raise the price of the animal feed additive lysine
. It involved five companies that had commercialized high-tech fermentation technologies, including American company Archer Daniels Midland
(ADM), Japanese companies Ajinomoto
and Kyowa Hakko Kogyo, and Korean companies Sewon America Inc. and Cheil Jedang Ltd. A criminal investigation resulted in fines and three-year prison sentences for three executives of ADM who colluded
with the other companies to fix prices
. The foreign companies settled with the United States Department of Justice Antitrust Division
in September through December 1996. Each firm and four executives from the Asian firms pled guilty as part of a plea bargain
to aid in further investigation against ADM. The cartel
had been able to raise lysine prices 70% within their first nine months of cooperation.
The investigation yielded $105 million in criminal fines, a record antitrust penalty at the time, including a $70 million fine against ADM. ADM was fined an additional $30 million for its participation in a separate conspiracy in the citric acid
market and paid a total fine of $100 million. Three former high-ranking ADM executives were convicted in September 1998 after a ten-week jury trial. Buyers of lysine in the United States and Canada sued and recovered $80 to $100 million in damages from the five cartel members, and ADM paid $38 million to settle mismanagement suits by its shareholders.
The lysine
cartel was the first successful prosecution of an international cartel by the U.S. Department of Justice in more than 40 years. Since then, the DoJ
has discovered and prosecuted scores of international cartels.
and citric acid
markets. Three of ADM's top officials, including vice chairman Michael D. Andreas, were eventually sentenced to federal prison in 1999 to a total of 99 months, an antitrust record at the time. Moreover, in 1997, the company was fined $100 million, the largest antitrust fine in U.S. history at the time. ADM was later fined almost $50 million by the antitrust authorities of Canada, Mexico, and the European Union.
The FBI
learned of the lysine price-fixing conspiracy from Mark Whitacre
, a former Divisional President of ADM's BioProducts Division, because his wife threatened to inform the FBI if he did not. Whitacre only then told the FBI that he and other ADM executives were involved in price-fixing agreements with other rival businesses around the world. The FBI and Whitacre attended and listened in on the cartel
’s meetings in cities such as Tokyo
, Paris
, Mexico City
, and Hong Kong
. During Whitacre's undercover tenure, the FBI collected hundreds of hours of video and audio tapes that documented crimes committed by executives from around the world fixing the prices of food additives in the largest price-fixing case in history at the time (1996).
ADM ultimately settled federal charges for more than US$100 million and paid hundreds of millions of dollars more ($400 million alone on the high fructose corn syrup
class action
case) to plaintiffs and customers. Furthermore, several Asian and European lysine
and citric acid
producers that conspired to fix prices with ADM paid criminal fines in the tens of millions of dollars to the U.S. government. Several executives, including the former Vice Chairman of ADM, did federal prison time. The ADM investigation, in turn, convinced antitrust prosecutor
s that price-fixing was a far more pervasive problem than they had suspected and led to prosecutions of cartels in vitamins, fax paper, and graphite electrodes. European and Canadian regulators have started to crack down on the problem, too. Once a crime that rarely attracted the notice of federal authorities, price-fixing is now under attack by governments around the world. Billions of dollars have already been paid in antitrust fines to the U.S. government since Whitacre first blew the whistle in 1992.
The investigation and prosecution of ADM and some of its executives has been reported to be one of the "best documented corporate crimes in American history". Whitacre was later charged with and pled guilty to committing a $9 million fraud that occurred during the same time period he was working for the FBI.
and published in 2000 by Random House
that documents the case and the involvement of ADM executive Mark Whitacre
. It has been adapted into the 2009 film The Informant! starring Matt Damon
, which was released September 18, 2009.
Price fixing
Price fixing is an agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand...
conspiracy was an organized effort during the mid-1990s to raise the price of the animal feed additive lysine
Lysine
Lysine is an α-amino acid with the chemical formula HO2CCH4NH2. It is an essential amino acid, which means that the human body cannot synthesize it. Its codons are AAA and AAG....
. It involved five companies that had commercialized high-tech fermentation technologies, including American company Archer Daniels Midland
Archer Daniels Midland
The Archer Daniels Midland Company is a conglomerate headquartered in Decatur, Illinois. ADM operates more than 270 plants worldwide, where cereal grains and oilseeds are processed into products used in food, beverage, nutraceutical, industrial and animal feed markets worldwide.ADM was named the...
(ADM), Japanese companies Ajinomoto
Ajinomoto
Ajinomoto Co. Inc. , is a Japanese food and chemical corporation which produces seasonings, cooking oils, TV dinners, sweeteners, amino acids and pharmaceuticals...
and Kyowa Hakko Kogyo, and Korean companies Sewon America Inc. and Cheil Jedang Ltd. A criminal investigation resulted in fines and three-year prison sentences for three executives of ADM who colluded
Collusion
Collusion is an agreement between two or more persons, sometimes illegal and therefore secretive, to limit open competition by deceiving, misleading, or defrauding others of their legal rights, or to obtain an objective forbidden by law typically by defrauding or gaining an unfair advantage...
with the other companies to fix prices
Price fixing
Price fixing is an agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand...
. The foreign companies settled with the United States Department of Justice Antitrust Division
United States Department of Justice Antitrust Division
The United States Department of Justice Antitrust Division is responsible for enforcing the antitrust laws of the United States. It shares jurisdiction over civil antitrust cases with the Federal Trade Commission and often works jointly with the FTC to provide regulatory guidance to businesses...
in September through December 1996. Each firm and four executives from the Asian firms pled guilty as part of a plea bargain
Plea bargain
A plea bargain is an agreement in a criminal case whereby the prosecutor offers the defendant the opportunity to plead guilty, usually to a lesser charge or to the original criminal charge with a recommendation of a lighter than the maximum sentence.A plea bargain allows criminal defendants to...
to aid in further investigation against ADM. The cartel
Cartel
A cartel is a formal agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production. Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products...
had been able to raise lysine prices 70% within their first nine months of cooperation.
The investigation yielded $105 million in criminal fines, a record antitrust penalty at the time, including a $70 million fine against ADM. ADM was fined an additional $30 million for its participation in a separate conspiracy in the citric acid
Citric acid
Citric acid is a weak organic acid. It is a natural preservative/conservative and is also used to add an acidic, or sour, taste to foods and soft drinks...
market and paid a total fine of $100 million. Three former high-ranking ADM executives were convicted in September 1998 after a ten-week jury trial. Buyers of lysine in the United States and Canada sued and recovered $80 to $100 million in damages from the five cartel members, and ADM paid $38 million to settle mismanagement suits by its shareholders.
The lysine
Lysine
Lysine is an α-amino acid with the chemical formula HO2CCH4NH2. It is an essential amino acid, which means that the human body cannot synthesize it. Its codons are AAA and AAG....
cartel was the first successful prosecution of an international cartel by the U.S. Department of Justice in more than 40 years. Since then, the DoJ
United States Department of Justice
The United States Department of Justice , is the United States federal executive department responsible for the enforcement of the law and administration of justice, equivalent to the justice or interior ministries of other countries.The Department is led by the Attorney General, who is nominated...
has discovered and prosecuted scores of international cartels.
ADM's role
The company and senior ADM executives were indicted on federal criminal charges for simultaneously engaging in price-fixing in the international lysineLysine
Lysine is an α-amino acid with the chemical formula HO2CCH4NH2. It is an essential amino acid, which means that the human body cannot synthesize it. Its codons are AAA and AAG....
and citric acid
Citric acid
Citric acid is a weak organic acid. It is a natural preservative/conservative and is also used to add an acidic, or sour, taste to foods and soft drinks...
markets. Three of ADM's top officials, including vice chairman Michael D. Andreas, were eventually sentenced to federal prison in 1999 to a total of 99 months, an antitrust record at the time. Moreover, in 1997, the company was fined $100 million, the largest antitrust fine in U.S. history at the time. ADM was later fined almost $50 million by the antitrust authorities of Canada, Mexico, and the European Union.
The FBI
Federal Bureau of Investigation
The Federal Bureau of Investigation is an agency of the United States Department of Justice that serves as both a federal criminal investigative body and an internal intelligence agency . The FBI has investigative jurisdiction over violations of more than 200 categories of federal crime...
learned of the lysine price-fixing conspiracy from Mark Whitacre
Mark Whitacre
Mark Edward Whitacre came to public attention in 1995 when, as president of the BioProducts Division at Archer Daniels Midland , he was the highest-level corporate executive in U.S. history to become a Federal Bureau of Investigation whistleblower...
, a former Divisional President of ADM's BioProducts Division, because his wife threatened to inform the FBI if he did not. Whitacre only then told the FBI that he and other ADM executives were involved in price-fixing agreements with other rival businesses around the world. The FBI and Whitacre attended and listened in on the cartel
Cartel
A cartel is a formal agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production. Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products...
’s meetings in cities such as Tokyo
Tokyo
, ; officially , is one of the 47 prefectures of Japan. Tokyo is the capital of Japan, the center of the Greater Tokyo Area, and the largest metropolitan area of Japan. It is the seat of the Japanese government and the Imperial Palace, and the home of the Japanese Imperial Family...
, Paris
Paris
Paris is the capital and largest city in France, situated on the river Seine, in northern France, at the heart of the Île-de-France region...
, Mexico City
Mexico City
Mexico City is the Federal District , capital of Mexico and seat of the federal powers of the Mexican Union. It is a federal entity within Mexico which is not part of any one of the 31 Mexican states but belongs to the federation as a whole...
, and Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
. During Whitacre's undercover tenure, the FBI collected hundreds of hours of video and audio tapes that documented crimes committed by executives from around the world fixing the prices of food additives in the largest price-fixing case in history at the time (1996).
ADM ultimately settled federal charges for more than US$100 million and paid hundreds of millions of dollars more ($400 million alone on the high fructose corn syrup
High fructose corn syrup
High-fructose corn syrup — also called glucose-fructose syrup in the UK, glucose/fructose in Canada, and high-fructose maize syrup in other countries — comprises any of a group of corn syrups that has undergone enzymatic processing to convert some of its glucose into fructose to produce...
class action
Class action
In law, a class action, a class suit, or a representative action is a form of lawsuit in which a large group of people collectively bring a claim to court and/or in which a class of defendants is being sued...
case) to plaintiffs and customers. Furthermore, several Asian and European lysine
Lysine
Lysine is an α-amino acid with the chemical formula HO2CCH4NH2. It is an essential amino acid, which means that the human body cannot synthesize it. Its codons are AAA and AAG....
and citric acid
Citric acid
Citric acid is a weak organic acid. It is a natural preservative/conservative and is also used to add an acidic, or sour, taste to foods and soft drinks...
producers that conspired to fix prices with ADM paid criminal fines in the tens of millions of dollars to the U.S. government. Several executives, including the former Vice Chairman of ADM, did federal prison time. The ADM investigation, in turn, convinced antitrust prosecutor
Prosecutor
The prosecutor is the chief legal representative of the prosecution in countries with either the common law adversarial system, or the civil law inquisitorial system...
s that price-fixing was a far more pervasive problem than they had suspected and led to prosecutions of cartels in vitamins, fax paper, and graphite electrodes. European and Canadian regulators have started to crack down on the problem, too. Once a crime that rarely attracted the notice of federal authorities, price-fixing is now under attack by governments around the world. Billions of dollars have already been paid in antitrust fines to the U.S. government since Whitacre first blew the whistle in 1992.
The investigation and prosecution of ADM and some of its executives has been reported to be one of the "best documented corporate crimes in American history". Whitacre was later charged with and pled guilty to committing a $9 million fraud that occurred during the same time period he was working for the FBI.
Popular adaptations
The Informant is a nonfiction thriller book written by journalist Kurt EichenwaldKurt Eichenwald
Kurt Alexander Eichenwald , an American writer and investigative reporter formerly with The New York Times and later with Condé Nast's business magazine, Portfolio...
and published in 2000 by Random House
Random House
Random House, Inc. is the largest general-interest trade book publisher in the world. It has been owned since 1998 by the German private media corporation Bertelsmann and has become the umbrella brand for Bertelsmann book publishing. Random House also has a movie production arm, Random House Films,...
that documents the case and the involvement of ADM executive Mark Whitacre
Mark Whitacre
Mark Edward Whitacre came to public attention in 1995 when, as president of the BioProducts Division at Archer Daniels Midland , he was the highest-level corporate executive in U.S. history to become a Federal Bureau of Investigation whistleblower...
. It has been adapted into the 2009 film The Informant! starring Matt Damon
Matt Damon
Matthew Paige "Matt" Damon is an American actor, screenwriter, and philanthropist whose career was launched following the success of the film Good Will Hunting , from a screenplay he co-wrote with friend Ben Affleck...
, which was released September 18, 2009.
External links
- This American Life episode on the conspiracy
- Video Segment Showing True Story of Lysine Price-Fixing Conspiracy