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

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

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). 3

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 4

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

You TubeVideo Video Presentation 6

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 7

The Lysine Cartel Video Presentation 8

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 9

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. 10

OFT Video Video Presentation 11

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 12

Fair Trading Commission ‘Good Hope’ Green Hill St. Michael Agreements II Training Workshop in Competition Law & Policy 31 March