Sweetener price-fixing suit can proceed

Justices refuse to hear appeal seeking to halt case against ADM, Cargill

February 25, 2003|By BLOOMBERG NEWS

WASHINGTON - Archer Daniels Midland Co., Cargill Inc. and another maker of corn sweeteners must face a trial over price-fixing claims, after the U.S. Supreme Court refused yesterday to hear an appeal seeking to throw out a $4 billion lawsuit by food companies.

The lawsuit says the producers colluded to fix the price of a corn sweetener used in soft drinks, candy and baked goods. In a separate case, Archer Daniels, the world's largest grain producer, paid a then-record $100 million fine in 1996 and three executives were sent to prison for conspiring to fix the price of lysine, an animal feed additive.

Archer Daniels and closely held Cargill are the two biggest rivals in the $3 billion U.S. market for the high-fructose corn syrup. Archer Daniels' purchase of Minnesota Corn Processors LLC last year put it ahead of Cargill, which had surpassed it earlier in the year by buying Cerestar.

"We don't think there's any basis to the suit, us and everybody else," said Dwight Grimestad, vice president of investor relations at Archer Daniels. The high court refused to hear the case "so we're in trial," he said.

The justices, without comment, declined to hear arguments by Archer Daniels, Cargill and A.E. Staley Manufacturing Co., the Illinois corn processor owned by Tate & Lyle, the British carbohydrate processor. The companies had argued that the food and beverage companies didn't provide enough evidence of a price-fixing conspiracy to go to trial.

"While we're disappointed by the court's decision not to review the case, it wasn't a ruling on the merits," Cargill spokesman Bill Brady said. "Cargill observed the law in its business practices, and we look forward to presenting our case at trial."

Shares of Archer Daniels fell 31 cents to close at $10.83 on the New York Stock Exchange.

The 1995 class action lawsuit was filed on behalf of several thousand food companies, such as PepsiCo Inc. and Coca-Cola Co. The companies estimate they suffered $1.4 billion in damages and will ask a jury to triple that amount, said their lawyer, Robert Kaplan.

"There are thousands of people, bakeries, dairies, bottlers, canners" who would benefit if the lawsuit is successful, Kaplan said yesterday.

The food makers say the corn-sweetener producers agreed in 1988 to raise prices. The lawsuit claims the companies implemented the policy the next year and the conspiracy continued until the Federal Bureau of Investigation raided Archer Daniels in 1995 over the lysine price-fixing case.

Kaplan said that after the raid, corn-sweetener prices went down, even though corn prices rose.

Former Archer Daniels Vice Chairman Michael Andreas was among the three executives sent to prison for the lysine conspiracy. The company cooperated in a federal investigation of the sweetener producers, which ended in 1999 without charges.

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