Data About The Wholesale Vitamin Industry
U.S. Vitamin Probe Targets 3 European Companies
May 21st WSJ Advance Story (includes video link)
May 21, 1999, Final Story, Vitamin Firms Settle U.S. Charges, Agree to Pay $725 Million in Fines (below)
By JOHN R. WILKE
and SUSAN WARREN
Staff Reporters of THE WALL
STREET JOURNAL
WASHINGTON -- The world's two biggest vitamin makers agreed to pay a total of $725 million to settle Justice Department charges that they and other manufacturers engaged in a massive price-fixing conspiracy that inflated the cost of everything from breakfast cereal to hamburgers over the past decade.
Hoffmann-La Roche Ltd., a unit of the Swiss drug giant Roche Holding AG that has 40% of the global human and animal vitamin market, agreed in U.S. District Court in Dallas to pay a record $500 million fine and plead guilty as part of the settlement. BASF AG, a major German chemical maker that has 20% of the market, will pay $225 million and enter a guilty plea as well.
Rhone-Poulenc SA of France, the world's third-biggest vitamin maker with 15% market share, also participated in the price-fixing ring. But the company began cooperating with federal investigators a few months ago under an amnesty program and helped make the case against its co-conspirators, U.S. officials said.
Members of the ring, including Rhone-Poulenc, also face potentially massive damage claims in 25 private lawsuits now pending in four federal courts. The suits were brought by livestock farmers and other purchasers of bulk vitamins who allege they were forced to pay illegally inflated prices. The first of these cases was filed in U.S. District Court in Washington, D.C., in March 1998.
Wide Effect Cited
The cartel "is the most pervasive and harmful criminal antitrust conspiracy ever uncovered," declared Joel Klein, chief of the Justice Department's antitrust division. The price-fixing ring "hurt the pocketbook of virtually every American consumer, anyone who took a vitamin, drank a glass of milk, or had a bowl of cereal," he said.
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10 largest fines secured by the U.S. Justice Department in antitrust cases. |
| Company |
Fine (millions) |
Year |
Industry |
| Roche Holding | $500 | 1999 | Vitamins |
| BASF | 225 | 1999 | Vitamins |
| SGL Carbon | 135 | 1999 | Electricity conductors |
| Ucar International | 110 | 1998 | Electricity conductors |
| Archers Daniels Midland | 100 | 1996 | Feed supplements, food additives |
| Bayer | 50 | 1997 | Food additives |
| HeereMac | 49 | 1997 | Offshore oil and gas construction services |
| Showa Denko Carbon | 33 | 1998 | Electricity conductors |
| Fujisawa Pharmaceutical | 20 | 1998 | Industrial cleaners |
| Dockwise | 16 | 1997 | Offshore oil and gas construction, transportation |
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(same story, one day later, additional data)
Associated Press
WASHINGTON -- Two giant European drug and chemical companies agreed Thursday to plead guilty and pay a record $725 million criminal fine for engaging in a world-wide conspiracy to raise and fix the prices of vitamins, the Justice Department announced.
The $500 million fine to be paid by Roche Holding AG, the Swiss pharmaceutical giant, is the largest federal criminal fine ever imposed in any type of case, Justice spokesman Myron Marlin said.
A German firm, BASF AG, also agreed to plead guilty and pay a $225 million fine for its role in the scheme.
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The conspiracy lasted from January 1990 into February 1999 and affected the vitamins most commonly used as nutritional supplements or to enrich human food and animal feeds -- vitamins A, B2, B5, C, E and Beta Carotene, the government said.
The department also confirmed that Rhone-Poulenc, SA, a French pharmaceutical giant, has been cooperating with the investigation and been accepted into the antitrust division's corporate leniency program. That program protects companies from criminal prosecution if they voluntarily report their involvement in a crime before prosecutors learn of their role.
In a statement, the company said, "Rhone-Poulenc and its animal nutrition subsidiary, Rhone-Poulenc Animal Nutrition, have cooperated fully and voluntarily. .. Rhone-Poulenc Animal Nutrition has acknowledged there were instances in the past in which the company's global business practices did not meet U.S. legal standards. However, the company has since put into place practices and procedures and organizational changes to ensure compliance with applicable antitrust laws."
Gary R. Spratling, deputy assistant attorney general for criminal antitrust enforcement, said, "The information provided by Rhone Poulenc was what the division needed to crack the largest antitrust conspiracy uncovered to date." He added that Hoffmann-LaRoche and BASF also have begun cooperating with the probe.
In March, a Swiss vitamin manufacturer and five U.S. executives agreed to plead guilty to participating in a worldwide conspiracy to fix the prices of vitamins. The company agreed to pay a $10.5 million fine.
The corporation, Lonza AG, was charged in previously sealed court documents with scheming to fix the prices and allocate the sales of vitamin B3, also known as niacin and niacinamide, the department said.
The five executives were charged with plotting to fix prices and allocate customers and sales of vitamin B4, also known as choline chloride.
Both vitamins are used to enrich human and animal nutritional products and are sold around the world.
These were the first cases made public from the antitrust division's investigation of the vitamin industry. Both the company and the executives agreed to cooperate in the continuing probe, which is centered in Dallas, where the charges were filed in U.S. District Court.
Ensuring Compliance
Roche, BASF and Rhone-Poulenc issued statements Thursday admitting their wrongdoing and said they have put new measures in place to ensure future compliance with U.S. antitrust laws. Roche and BASF, which agreed to plead guilty to price fixing, said they have overhauled the management of the vitamins division to give a fresh start to those businesses.
Roche fired two of its top executives who were responsible for the company's vitamin operations. Roland Bronnimann, head of the vitamins and fine chemicals division, and Kuno Sommer, former director of the vitamins marketing division who has been serving as chief executive of Roche's Givaudan Roure unit, departed from the company, effective immediately, Roche said in a statement.
Dr. Sommer, the former director of world-wide marketing for Roche, agreed to plead guilty Thursday and pay a $100,000 fine, for lying to federal investigators in 1997 and other actions. Dr. Sommer, a Swiss citizen, agreed to serve four months in a U.S. prison and is the first foreigner to be prosecuted for U.S. criminal antitrust charges.
BASF also disclosed an executive shakeup, saying it had replaced the management of its vitamins unit in recent months but would not say if the people had been fired. "A new management team is now in place world-wide," BASF said.
Talks in Europe
The companies also acknowledged the numerous civil lawsuits and said they expect to meet with lawyers for the plaintiffs to find ways of resolving the lawsuits. BASF said it is "premature to discuss the likelihood of success or the financial costs which may be involved in any such settlement." Both companies also said they have begun talks with European antitrust authorities, which apparently had little role in the probe.
Vitamin makers have been under pressure from falling prices and shrinking profits since last summer -- about the time the conspiracy unraveled. Executives have previously blamed the weakening market on the Asian economic crisis and rising competition from China, which sharply undercut the cartel's prices for vitamin C.
Industry leader Roche said its vitamins and fine-chemicals sales, which make up about 15% of total revenue, fell 5% in 1998 to $2.5 billion, though it retained a firm grip on its huge market share and high profit margins. Samuel Isaly, an analyst with OrbiMed Advisors, said that while the $500 million fine, which was reported in Thursday's New York Times, is "big enough to make a dent" in Roche's 1999 earnings, it is only a tiny fraction of the company's $110 billion market capitalization.
"It doesn't put them in financial distress," he said. Vitamins are a smaller business for BASF, a huge industrial company in markets from gas pipelines to diet drugs.
A Rhone-Poulenc spokeswoman said the price-fixing settlement should have no effect on the company's planned merger with Germany's Hoechst AG later this year. Hoechst and Rhone-Poulenc are shedding most of their industrial chemical operations and combining their pharmaceutical, agrochemical and veterinary operations in one of Europe's biggest industrial marriages which, if successful, would create the world's biggest life-science group, to be called Aventis SA.
'Regret' From Roche
In an interview, Roche's chief executive officer, Franz B. Humer, said, "We deeply regret what happened."
"I am personally, absolutely shocked at what has happened," he said. "But we will put it behind us, and we will continue to grow [the vitamin] business very profitably." Mr. Humer also said the company will seek to settle civil suits stemming from the case. Civil suits in the 1997 price-fixing case cost Roche $10 million, though its involvement in that case was significantly smaller.
The talks with European antitrust authorities "may take some time to progress, and it is very difficult to predict what will happen at this point," he said.
WASHINGTON (November 19, 1997 1:06 p.m. EST http://www.nando.net) -- The Justice Department is investigating the $3 billion wholesale vitamin industry for possible antitrust violations, a spokeswoman said today.
A federal grand jury in Dallas is considering evidence from the probe of bulk sales of vitamins for humans and animals, the Wall Street Journal reported, citing industry executives and lawyers. The paper said investigators are looking at possible price-fixing and collusion.
"The antitrust division is looking into the possibility of anti-competitive practices by vitamin producers," Justice spokeswoman Gina Talamona said. She declined to identify any companies under investigation.
Spokesmen for two major vitamin makers, Hoffman-LaRoche Inc. and BASF Corp., said they were aware of the investigation but had not been contacted by law enforcement officials. A spokesman for the U.S. unit of Rhone-Poulenc SA of France said he was not aware of the probe.
Several companies dominate most of the bulk vitamin industry's production. Roche has about 40 percent of the market, BASF 20 percent and Rhone Poulenc 15 percent, according to the trade publication Chemical Market Reporter.
Bulk vitamins are sold in tablet form for humans, in food supplements in many packaged-food products, in animal feed and in cosmetics. Animal feed represents the largest market segment.
AP-ES-11-19-97 1146EST
U.S. Vitamin Probe Targets 3 European Companies
Wednesday, October 07, 1998
NEW YORK (Reuters) - Three U.S. affiliates of major European chemical and pharmaceutical concerns said they had been served with subpoenas by the U.S. Justice Department in connection with a global vitamin price fixing probe.
The three are Hoffman La-Roche Inc., the U.S. unit of Switzerland's Roche Holding Ltd.; BASF Corp., part of Germany's BASF AG; and Rhone-Poulenc Rorer, a unit of France's Rhone-Poulenc SA.
The Justice Department declined to comment on the progress of the investigation, which was started late last year.
The $3.0 billion a year global bulk vitamins market is dominated by Roche, which alone has 40 percent of the worldwide market for animal and human vitamins.
``I can confirm Hoffman has received a subpoena in connection with this investigation and we are fully cooperating,'' said a U.S. spokesman for the company.
He said that the Justice Department had requested information on bulk vitamins, but he declined to give any further details.
BASF said that it had been contacted by the Justice Department in May this year, asking for records, and has also undertaken an internal investigation of its own.
``We feel that everything is okay now,'' said a spokesman for BASF Corp. in the U.S.
A spokesman for Rhone-Poulenc Rorer here said that the company had been subpoenaed and had provided documents to the Justice Department.
He stressed, however, that Rhone-Poulenc was a relatively small player in the market in comparison with Roche and BASF.
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