"Archer finds lawsuit not so sweetDidn't ADM get in trouble for fixing the price of Niacin or something just a few years back? If so, slapping ADM w/ fines doesn't seem to discourage them from engaging in this behavior. I continue to argue for criminal prosecutions of corporate officers in cases like these. With very stiff sentences in places where the genteel white executives will know they are a very small minority, and will have to become bitches to bubba, or have Rufus give 'em a shank. That, my friends, is deterrence. Not petty fines for a company that gets more in government subsidies in a single year, than the pittance that is $400 million in fines.
DECATUR, Ill. - Archer Daniels Midland Co. will pay $400 million to settle a federal antitrust lawsuit that claimed the company conspired to fix the price of high fructose corn syrup, a sweetener used in products from soft drinks to pasta sauces."
While the U.S. Department of Justice might be fond of perpetuating the myth that it is diligently ferreting out corporate criminals like ADM, its recent actions leave many in doubt of such a claim.So, I guess prostitutes don't send criminals to jail, they just get paid (oh, this is a pretty good article in it's entirety).
In a February 3, 1999 letter to Reno, David Hoech, of ADM's Shareholders Watch Committee and a persistent critic of the government's handling of the case, charged an 'ADM cover up engineered by the Department of Justice.' In the letter to Reno, Hoech recalled that as early as October 14, 1996 his committee asked the Department of Justice to use the ADM case as an opportunity 'to insure that justice be delivered and send a message to corporate America that corporate crime doesn't pay.'
'Instead,' Hoech continues, 'your office gave credence to the fact that if you are white, rich and influential, or work for a politically-connected company, you can break the law with impunity.' Hoech promised the Attorney General 'from this day forward we will be making more and more information available for the world to see just what your department tried to cover up.'
In a conversation, for example, he had with Ray Goldberg, a former ADM board member, and the man who originally coined the term 'agribusiness,' Hoech recalled that Goldberg, who now serves on the Smithfield Foods and Pioneer Hi-Bred boards of directors, told him 'that the deal cut with the Justice Department could only be accomplished if all the board members kept their lips sealed as demanded by the Justice Department.'
But, Hoech told Reno in his letter, 'people are talking . . . showing how your department has turned Lady Justice into a street prostitute with Justice for sale.'"
And, no I did not read this entire paper, but I probably should.
The purpose of this paper is to describe the operation of several large price-fixing conspiracies involving wet-corn milling products and to analyze a number of legal and economic issues raised by these events. The paper begins with a brief description of the markets for and market structures of lysine, citric acid, corn sweeteners, and vitamins. A short profile of Archer Daniels Midland (ADM) indicates a company with a leadership and corporate culture well suited to reckless collusive behavior and well positioned in markets that had nearly all the features necessary to carry out such a scheme. The next section chronicles the operation of the three conspiracies as far as that is possible from the public records. The final section of this paper examines the legal and economic issues surrounding the proper estimation of antitrust damages.
The importance of these topics is demonstrated by the paper's six major conclusions:Why do companies conspire to raise prices, divide markets, or restrain production? The answer is that all such actions boost profits to levels significantly higher than those that would be generated in the absence of collusive behavior. The impact on profits from even a modest increase in price (assuming costs remain the same) is quite large. Aristotle, perhaps the world=s first economic thinker, recognized that small changes in price or output levels would have large impacts on corporate income.1 For example, if a conspiracy causes prices to rise a modest ten percent, the percentage increase in net income will be enormously larger. The average pre-tax profits of semiprocessed food ingredients have historically been about 3 percent of sales. In the organic chemicals industry the comparable return was 6 percent of sales. Thus, a 10 percent price elevation translates into an increase of 167 percent to 333 percent increase in average profits for firms in those industries.
C ADM was at the center of at least two international price-fixing conspiracies
involving wet-corn-milling products, circa 1992-1995: lysine, citric acid, and
allegedly corn sweeteners. Buyers in the U.S. were overcharged $220 to $345
million for the first two products alone.
C Collusion began in the market for bulk vitamins in late 1999 and spread through the Hoffmann-La Roche and ADM companies to citric acid and lysine in 1991 and 1992, respectively. By the time that collusion ceased in early 1999, nearly $40 billion in global commerce had been affected.
C In terms of the monetary damages paid, these are by far the largest price-fixes in antitrust history. The huge fines paid by ADM and its co-conspirators were unprecedented; future fines and damages could reach more than five times the overcharges generated by a conspiracy.
C The events have spurred the Department of Justice (DOJ) into investigating more than 30 international commodity cartels for criminal price fixing. Since the ADM cases, four more cartels have been uncovered and prosecuted.
C ADM management practices have been called into question; ADM=s board of directors changed over night; the AAndreas= Era@ at ADM may be over; and three ADM managers were found guilty of criminal price-fixing.
C These events demonstrate that import competition is no longer sufficient condition for good domestic competition and that companies with vastly different corporate cultures and globally dispersed operations can easily learn to conspire. The extraterritorial reach of the antitrust laws is more needed than ever.
Why individuals conspire to fix prices, often in the face of legal or corporate proscriptions, is more complicated. Senior managers may receive bonuses that depend on their profit-center's financial performance, so personal greed may well play a role. More commonly, price fixers are trying to fix looming financial problems. The prospects of slow market growth, declining market share, or squeezed profits can be magically reversed by an effective price-fixing arrangement. Perhaps the sheer thrill of participating in a secret, dangerous activity motivates some. Merely moving markets, a power allegedly reserved for the Chairman of the Federal Reserve System and few other mortals, may be reason enough.