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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

Fair Trading Commission

Agreements II

Training Programme in Competition Law & Policy

30th – 31st March 2011

Savannah Hotel, Barbados

overview of presentation
Overview of Presentation
  • Introduction
  • What is a Cartel?
  • Cartel Conduct
  • The Lysine Cartel
  • Investigation of Cartels by the FTC
what is a cartel
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).
cartels the basics
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
cartels examples
Cartels: Examples
  • George Weston Foods (Australia)
  • The Power Transformer Cartel (Australia)
  • Metro Bricks (Australia)
  • EU Steel Beam Market (EU)
  • Graphite Electrode Producers (USA)
video presentation

Video Presentation

You TubeVideo

the lysine cartel
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
video presentation1

Video Presentation

The Lysine Cartel

the lysine cartel characteristics
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
the lysine cartel the outcome
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.
actions of the ftc under the fca
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
agreements ii1

Training Workshop in Competition Law & Policy

31 March 2011

Agreements II

Fair Trading Commission

‘Good Hope’

Green Hill