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Agreements II

Fair Trading Commission. Agreements II. Training Programme in Competition Law & Policy 30 th – 31 st March 2011 Savannah Hotel, Barbados. Overview of Presentation. Introduction What is a Cartel? Cartel Conduct The Lysine Cartel Investigation of Cartels by the FTC. What is a Cartel? .

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Agreements II

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  1. Fair Trading Commission Agreements II Training Programme in Competition Law & Policy 30th – 31st March 2011 Savannah Hotel, Barbados

  2. Overview of Presentation • Introduction • What is a Cartel? • Cartel Conduct • The Lysine Cartel • Investigation of Cartels by the FTC

  3. 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: • Prices • Output levels • Discounts • Credit terms • Which customers they will supply • Which areas they will supply • Who should win a contract (bid rigging).

  4. Cartels: The Basics • Contributors in developing countries: • High concentration levels  Fragile markets • Entry barriers are higher (regulatory restrictions, capital scarcity, etc.) • Harmful effects include: • Artificial increases in price • Decreased product choice • Slower rate of technological change • Deterioration of efficiency, quality

  5. Cartels: Examples • George Weston Foods (Australia) • The Power Transformer Cartel (Australia) • Metro Bricks (Australia) • EU Steel Beam Market (EU) • Graphite Electrode Producers (USA)

  6. Video Presentation You TubeVideo

  7. The Lysine Cartel • One of the most high-profile cartels to be uncovered in recent times • Result of undercover investigations by the US DoJ, with assistance from an informant • 5 companies including ADM had colluded on lysine prices worldwide for 3 years

  8. Video Presentation The Lysine Cartel

  9. The Lysine Cartel: Characteristics • Brazen or lawless nature of the conspirators • Fear of Detection • Use of Covers (e.g. Trade Associations) • (Global) Price Fixing • Use of (Worldwide) Volume-allocation Agreements • Audits and the Use of Score Sheets • Adoption of Compensation Schemes • Coordination of Budget Meetings

  10. The Lysine Cartel: The Outcome • Treble-damages class action – settled in 1996 • DOJ 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 filed • 400 plaintiffs • $45 million settlement • 15 additional suits filed by farmers, consumers etc.

  11. Video Presentation OFT Video

  12. 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 premises • Limitations on the use of the powers of investigation • Offences relating to the powers of investigation • Exemptions

  13. Training Workshop in Competition Law & Policy 31 March 2011 Agreements II Fair Trading Commission ‘Good Hope’ Green Hill St. Michaelinfo@ftc.gov.bb

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