EUROPEAN COMMISSION FINES FIVE COMPANIES IN CITRIC ACID CARTEL
CBGnetwork | 07.01.2002 19:23
The European Commission fined Hoffmann-La Roche AG, Archer Daniels Midland Co (ADM), Jungbunzlauer AG, Haarmann & Reimer Corp and Cerestar Bioproducts B.V. a total of $120.5 million for participating in a price-fixing and market-sharing cartel in citric acid
EUROPEAN COMMISSION FINES FIVE COMPANIES IN CITRIC ACID CARTEL
Subsidiary company of Bayer AG involved
The European Commission fined Hoffmann-La Roche AG, Archer Daniels Midland Co (ADM), Jungbunzlauer AG, Haarmann & Reimer Corp and Cerestar Bioproducts B.V. a total of $120.5 million for participating in a price-fixing and market-sharing cartel in citric acid. After a careful investigation which started in 1997, the European Commission found that US companies Archer Daniels Midland (ADM) and Haarmann & Reimer (H&R), the latter ultimately owned by Bayer AG, Dutch company Cerestar Bioproducts B.V., Hoffmann-La Roche and Jungbunzlauer (JBL), both Swiss, participated in a worldwide cartel between 1991 and 1995, through which they fixed the price and shared out the market for citric acid. Citric acid is one of the most widely used additives in the food and beverage industry both as an acidulent and preservative. It is found in non-alcoholic beverages as well as in jams, gelatine-based deserts and tinned vegetables and fruit. Citric acid is also used in household detergent products especially as a substitute for phosphates considered harmful for the environment.
The cartel started on March 6, 1991 at the Hotel Plaza in Basle (Switzerland), as stated by the companies in documents submitted to the Commission. There, and following on previous informal contacts, the founding members -- ADM, H&R, Roche and JBL -- agreed on the main features of their plan to eliminate competition between them. The cartel continued until May 1995 and pursued four main objectives:
1. Allocation of specific sales quotas for each member and adherence to these quotas;
2. Fixing 'target' and 'floor prices' for citric acid;
3. Exchanging specific customer information, and
4. Eliminating price discounts.
A limited exception was made to the last objective in relation to the five major consumers of citric acid world-wide, since it was considered unrealistic by the cartel members to expect them to pay the price published on the public price lists. It was, however, agreed that a discount of no more than three percent would be offered to these larger consumers. The companies held regular and frequent meetings, which were the hallmark of the cartel's organization. After 1993 and in order to resolve certain grievances and market "difficulties" additional, more technically oriented, meetings were organized that become known as 'Sherpa' meetings in contrast to the more high-level and strategic 'Masters' meetings.
A sophisticated monitoring system was established, whereby each company would report its monthly sales figures to a previously agreed member, who would then ensure the distribution of the confidential information to all the others. In order to ensure that each player would stick to the quotas assigned, a compensation scheme was created, obliging any member that over-sold its allocated quota to provide compensation to the others.
A further feature of the cartel was the concerted action taken by the companies against Chinese manufacturers, who had increased their exports to the European market as a result of the significant rise in prices for citric acid during the time the cartel operated. The cartel participants tried to regain some of the customers lost to the Chinese suppliers through a concerted and carefully targeted price war. The list of the clients lost and targeted by the cartel for "recovery" came to be known as the 'Serbia List' and was regularly monitored during the 'Sherpa' meetings.
Copyright: CORPORATE CRIME REPORTER, Washington D.C., USA
CBG/Coalition against BAYER-dangers collects information about BAYER and coordinates activities against violations of human and environmental rights caused by this company. Anyone who has information on possibly illicit activities of BAYER or who wants to receive our newsletter regularly - please let us know. Anyone who needs photos or information concerning BAYER is invited to contact us:
CBG/Coalition against BAYER-dangers, Postfach 15 04 18, 40081 Duesseldorf, Germany
E-mail:
CBGnetwork@aol.com
website: www.CBGnetwork.org
Fax: (+49) 211 333 940 Tel: (+49) 211 333 911
Subsidiary company of Bayer AG involved
The European Commission fined Hoffmann-La Roche AG, Archer Daniels Midland Co (ADM), Jungbunzlauer AG, Haarmann & Reimer Corp and Cerestar Bioproducts B.V. a total of $120.5 million for participating in a price-fixing and market-sharing cartel in citric acid. After a careful investigation which started in 1997, the European Commission found that US companies Archer Daniels Midland (ADM) and Haarmann & Reimer (H&R), the latter ultimately owned by Bayer AG, Dutch company Cerestar Bioproducts B.V., Hoffmann-La Roche and Jungbunzlauer (JBL), both Swiss, participated in a worldwide cartel between 1991 and 1995, through which they fixed the price and shared out the market for citric acid. Citric acid is one of the most widely used additives in the food and beverage industry both as an acidulent and preservative. It is found in non-alcoholic beverages as well as in jams, gelatine-based deserts and tinned vegetables and fruit. Citric acid is also used in household detergent products especially as a substitute for phosphates considered harmful for the environment.
The cartel started on March 6, 1991 at the Hotel Plaza in Basle (Switzerland), as stated by the companies in documents submitted to the Commission. There, and following on previous informal contacts, the founding members -- ADM, H&R, Roche and JBL -- agreed on the main features of their plan to eliminate competition between them. The cartel continued until May 1995 and pursued four main objectives:
1. Allocation of specific sales quotas for each member and adherence to these quotas;
2. Fixing 'target' and 'floor prices' for citric acid;
3. Exchanging specific customer information, and
4. Eliminating price discounts.
A limited exception was made to the last objective in relation to the five major consumers of citric acid world-wide, since it was considered unrealistic by the cartel members to expect them to pay the price published on the public price lists. It was, however, agreed that a discount of no more than three percent would be offered to these larger consumers. The companies held regular and frequent meetings, which were the hallmark of the cartel's organization. After 1993 and in order to resolve certain grievances and market "difficulties" additional, more technically oriented, meetings were organized that become known as 'Sherpa' meetings in contrast to the more high-level and strategic 'Masters' meetings.
A sophisticated monitoring system was established, whereby each company would report its monthly sales figures to a previously agreed member, who would then ensure the distribution of the confidential information to all the others. In order to ensure that each player would stick to the quotas assigned, a compensation scheme was created, obliging any member that over-sold its allocated quota to provide compensation to the others.
A further feature of the cartel was the concerted action taken by the companies against Chinese manufacturers, who had increased their exports to the European market as a result of the significant rise in prices for citric acid during the time the cartel operated. The cartel participants tried to regain some of the customers lost to the Chinese suppliers through a concerted and carefully targeted price war. The list of the clients lost and targeted by the cartel for "recovery" came to be known as the 'Serbia List' and was regularly monitored during the 'Sherpa' meetings.
Copyright: CORPORATE CRIME REPORTER, Washington D.C., USA
CBG/Coalition against BAYER-dangers collects information about BAYER and coordinates activities against violations of human and environmental rights caused by this company. Anyone who has information on possibly illicit activities of BAYER or who wants to receive our newsletter regularly - please let us know. Anyone who needs photos or information concerning BAYER is invited to contact us:
CBG/Coalition against BAYER-dangers, Postfach 15 04 18, 40081 Duesseldorf, Germany
E-mail:
CBGnetwork@aol.com website: www.CBGnetwork.org
Fax: (+49) 211 333 940 Tel: (+49) 211 333 911
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