One example of price-fixing is the U.S. Department of Justice’s antitrust suit against Archer Daniels Midland (ADM). The lawsuit had to do with ADM engaging in price-fixing of citric acid and lysine with its other international competitors.
It was alleged in United States v. Archer Daniels Midland Company on October 15, 1996, that ADM and other corporations and individuals conspired to fix and maintain lysine and citric acid prices and to restrain or eliminate competing suppliers of these additives in violation of Section 1 of the Sherman Antitrust Act.
As an example, ADM’s President of the Corn Processing Division proposed in 1992 that the company make an agreement with its competition to raise the price of lysine to $0.80 per pound, then to $1.05 per pound, and eventually to $1.20 per pound.
In a plea agreement, ADM pleaded guilty to both antitrust counts and agreed to pay a combined fine of $100 million ($70 million for the lysine count and $30 million for the citric acid count). In current terms, this is equivalent to $199.70 million, the largest antitrust fine ever imposed.
U.S. charges against ADM were the second round of charges brought by the Justice Department’s antitrust investigation into the food and feed additives industries. The prior August 1996, the Japanese firms Ajinomoto Co., Inc. and Kyowa Hakko Kogyo Co. Ltd. and U.S.-based Korean subsidiary Sewon America, Inc. and their executives arranged to pay more than $20 million combined for their participation in the lysine conspiracy.
How Did the Justice Department Catch Archer Daniels Midland?
Mark Whitacre, president of ADM Bioproducts Division, falsely claimed that a Japanese competitor’s extortion threats led to problems with ADM’s new lysine plant. The FBI then investigated these allegations.
Whitacre admitted to the FBI that he had made false allegations and agreed to cooperate with the FBI to uncover ADM’s price-fixing schemes. Whitacre recorded several years of meetings between ADM and their competitor in which they plotted price-fixing. As a result of this evidence, the FBI was able to conduct its investigation, and eventually, the Department of Justice filed a criminal suit against ADM.
What Was the End Result of the Action by the Justice Department?
ADM pleaded guilty to fixing international prices for citric acid and lysine. ADM was fined $100 million, and three of its top executives were sent to prison.
Whitacre ended up in prison because he embezzled company funds and hid this fact from the FBI until the investigation was well underway.
Antitrust Violations: What Are They?
An enterprise can violate the antitrust law in several ways. The courts examine possible antitrust violations according to a standard called “per se violations.” Under this framework, all the accused has to prove is that they committed one of several “per se violations.” The intent and effects of their actions are irrelevant.
Among the most notable antitrust violations are:
Antitrust and Trade Regulation Laws
The U.S. antitrust law is composed of three main statutory schemes. Three federal statutes are primarily enforced by either the Justice Department’s Antitrust Division or the Federal Trade Commission.
The Sherman Act of 1890 prohibits contracts or conspiracies that restrain trade or create monopolies. Crimes can result in criminal penalties, substantial fines, and prison terms for individual transgressors.
Additionally, court orders can be obtained to prevent future violations. Sherman Act provisions are primarily enforced by the Antitrust Division of the Justice Department. It prohibits exclusive dealing arrangements, tie-in sales, price discrimination, mergers and acquisitions, and interlocking directorates, among other types of illegal restraints.
Both the Antitrust Division and the Federal Trade Commission enforce the Clayton Act jointly. In addition, the Act provides for a private lawsuit in Federal Court to recover damages and prevent future violations.
The Federal Trade Commission Act, governed by the Federal Trade Commission, encompasses all the prohibitions of the other antitrust laws as a catch-all enactment. Additionally, it may be used to fill in what may appear to be regulatory loopholes.
What Are Lockup Agreements?
Lockup agreements prohibit company insiders from selling their shares for a specific period of time. A lockup agreement is typically signed between a company and its backer before it makes its initial public offering to prevent insider shares from being offered too soon after the offering.
In a Lockup Agreement, What Terms Might Be Included?
Standard agreements usually contain a “no-sell clause” for the first 180 days. Other things that these agreements can limit include the number of shares an insider can sell within a specified period of time. Underwriters or backers generally determine the terms.
There are three parts to a lockup agreement.
Shares are locked up according to the terms of the agreement. Due to possible stock value changes, the date on which this happens is crucial to know. A 25-day period following the initial public offering during which the company, insiders, and analysts are not allowed to recommend the stock.
Does the Law Require a Lockup Agreement?
Companies are required to have them in some states. As a matter of federal law, such agreements must be disclosed in the company’s registration documents if they exist within the organization.
What Steps Do I Need to Take to Determine Whether a Company Has a Lockup Agreement?
Contact the company’s shareholder relations department or ask your broker to find out if a company has a lockup agreement. The SEC’s database is also useful if the company has filed its prospectus electronically.
New Lawsuits Against ADM
Wisconsin producers United Wisconsin Grain Producers, Didion Ethanol, Ace Ethanol, Fox River Valley Ethanol, Badger State Ethanol, and Iowa producer Pine Lake Corn have filed a new lawsuit in the United States District Court for the Central District of Illinois.
Three other similar lawsuits are pending in the same court, including one filed by Omaha-based Green Plains Inc. The Green Plains case was moved to Illinois by a federal judge in Nebraska earlier this year.
Midwest Renewable Energy and AOT Holdings, a Swiss energy-trading company, also sued Archer Daniels Midland.
According to the lawsuit, ADM violated several state and federal laws, including the Sherman Act and Illinois Anti-Trust Act, the Illinois Consumer Fraud and Deceptive Business Practices Act, the Wisconsin Deceptive Practices Act, and tortious interference with contractual relations.
“ADM, one of the largest ethanol producers in the United States, intentionally manipulated and artificially depressed the price of ethanol in the United States,” the lawsuit alleges.
What Should I Do if I Know My Employer is Engaging in Unfair Competition Like Price-Fixing?
Before taking any action, you may want to consult a business attorney. Your attorney can inform you of your rights, including those whistleblower laws that will protect you.
Your attorney can also guide you through the process and help you make decisions in such a way that you are able to act ethically but still look out for your own interests and make sure you do not endanger yourself legally.
Use LegalMatch to find the right business attorney for your needs today, especially if you think your employer is engaging in illegal price fixing.
