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Training Programme in Competition Law & Policy
30th – 31st March 2011Savannah Hotel, Barbados
Agreements II
Fair Trading Commission
1
Overview of PresentationIntroductionWhat is a Cartel?Cartel ConductThe Lysine CartelInvestigation of Cartels by the FTC
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What is a Cartel? A cartel is an agreement between businesses
not to compete with each other. The agreement is usually secret, verbal and often informal.
Cartel members may agree on:PricesOutput levelsDiscountsCredit termsWhich customers they will supplyWhich areas they will supplyWho should win a contract (bid rigging).
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Cartels: The BasicsContributors in developing countries:
High concentration levels Fragile markets Entry barriers are higher (regulatory
restrictions, capital scarcity, etc.)
Harmful effects include: Artificial increases in priceDecreased product choiceSlower rate of technological changeDeterioration of efficiency, quality
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Cartels: ExamplesGeorge Weston Foods (Australia)The Power Transformer Cartel (Australia)Metro Bricks (Australia)EU Steel Beam Market (EU)Graphite Electrode Producers (USA)
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The Lysine CartelOne of the most high-profile cartels to be
uncovered in recent timesResult of undercover investigations by the
US DoJ, with assistance from an informant5 companies including ADM had colluded
on lysine prices worldwide for 3 years
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The Lysine Cartel: Characteristics
Brazen or lawless nature of the conspirators
Fear of DetectionUse of Covers (e.g. Trade Associations)(Global) Price FixingUse of (Worldwide) Volume-allocation
AgreementsAudits and the Use of Score SheetsAdoption of Compensation SchemesCoordination of Budget Meetings
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The Lysine Cartel: The Outcome
Treble-damages class action – settled in 1996DOJ obtained convictions for price fixing
All corporate members pleaded guilty ADM fined $100M
DOJ prosecuted four lysine executives in 1998 3 convicted
Companies also investigated and fined by the antitrust divisions in Brazil, Canada, European Union, Brazil
More than 40 civil antitrust suits filed400 plaintiffs $45 million settlement
15 additional suits filed by farmers, consumers etc.
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Actions of the FTC under the FCA
Trigger for the use of the powers of investigation
Production of specified documents and information
Power to enter business premisesLimitations on the use of the powers of
investigationOffences relating to the powers of
investigationExemptions
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Fair Trading Commission‘Good Hope’Green HillSt. Michael
Agreements II
Training Workshop in Competition Law & Policy 31 March 2011
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