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

Training Programme in Competition Law & Policy

30th – 31st March 2011Savannah Hotel, Barbados

Agreements II

Fair Trading Commission

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Overview of PresentationIntroductionWhat is a Cartel?Cartel ConductThe Lysine CartelInvestigation of Cartels by the FTC

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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:PricesOutput levelsDiscountsCredit termsWhich customers they will supplyWhich areas they will supplyWho should win a contract (bid rigging).

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Cartels: The BasicsContributors in developing countries:

High concentration levels Fragile markets Entry barriers are higher (regulatory

restrictions, capital scarcity, etc.)

Harmful effects include: Artificial increases in priceDecreased product choiceSlower rate of technological changeDeterioration of efficiency, quality

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

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You TubeVideo

Video Presentation

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The Lysine CartelOne of the most high-profile cartels to be

uncovered in recent timesResult of undercover investigations by the

US DoJ, with assistance from an informant5 companies including ADM had colluded

on lysine prices worldwide for 3 years

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The Lysine Cartel

Video Presentation

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The Lysine Cartel: Characteristics

Brazen or lawless nature of the conspirators

Fear of DetectionUse of Covers (e.g. Trade Associations)(Global) Price FixingUse of (Worldwide) Volume-allocation

AgreementsAudits and the Use of Score SheetsAdoption of Compensation SchemesCoordination of Budget Meetings

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The Lysine Cartel: The Outcome

Treble-damages class action – settled in 1996DOJ 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 filed400 plaintiffs $45 million settlement

15 additional suits filed by farmers, consumers etc.

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OFT Video

Video Presentation

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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 premisesLimitations on the use of the powers of

investigationOffences relating to the powers of

investigationExemptions

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Fair Trading Commission‘Good Hope’Green HillSt. Michael

[email protected]

Agreements II

Training Workshop in Competition Law & Policy 31 March 2011

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