Vitamin Firms Are Close to an Agreement To Settle Lawsuits Over Price-Fixing

13 September 1999 00:00  [Source: ICB Americas]

By Glenn Hess

The federal judge overseeing a civil case against vitamin manufacturers said last week that court proceedings will continue while both sides try to negotiate a settlement.

"The court has been so advised by those participants that a settlement may be possible, but [one] has not yet" been reached, US District Judge Thomas Hogan said on September 8 at a status hearing with lawyers for both sides.

Judge Hogan, who will review a settlement if one is reached, scheduled future hearings on September 29, November 3, and December 8 for lawyers to report on their progress.

Hundreds of food and beverage manufacturers have filed a US civil lawsuit charging European and Japanese pharmaceutical companies with conspiring to fix prices for nearly a decade on some of the most common vitamins, including A, B2, B5, C and E.

Both sides say they are close to a settlement. A spokesperson for Swiss vitamin giant F. Hoffmann-La Roche & Co. says talks in the civil suit are "well advanced."

A plaintiff's attorney concurs that negotiators are close to forging an agreement. "We are working toward a settlement and feel like we are getting close," says Barry Barnett of the Houston law firm Susman Godfrey, one of the firms leading the suit.

Roche is one of six defendants in a class-action lawsuit brought by corporate buyers of bulk vitamins. The suit alleges that the six companies oversaw a nine-year conspiracy that caused food and beverage manufacturers to pay artificially high prices which, in turn, were passed on to consumers of products ranging from breakfast cereals to peanut butter.

Sources say that under a tentative agreement still being negotiated, Roche, BASF AG of Germany, RhÖne-Poulenc SA of France and three Japanese firms--Eisai Company, Daiichi Pharmaceutical Company and Takeda Chemical Industries Ltd.--would pay more than $1.1 billion to settle the price-fixing claims.

The six companies account for about 80 percent of bulk sales of the most popular vitamins. Under the agreement, nearly 1,000 corporate buyers of bulk vitamins would receive more than $1 billion, reflecting overcharges during the nine years. Fifty law firms would divide another $125 million.

The companies are accused of deliberately inflating and maintaining the prices of bulk vitamins in the US and other countries between 1990 and 1999. Earlier this year, Attorney General Janet Reno charged that the conspiracy touched every American consumer.

"In the end, on a daily basis for the past 10 years, every American consumer paid to eat and drink or use a product whose price was artificially inflated," she said.

In May, the Justice Department obtained $725 million in criminal fines from Roche and BASF on charges that they colluded to divide up markets and set wholesale prices.

Roche paid $500 million, the largest antitrust fine ever levied in the US, after admitting to the conspiracy, and BASF paid $225 million. RhÖne-Poulenc avoided criminal charges after agreeing to help US investigators crack the cartel.

According to the Justice Department, officials from the companies involved met four times per year to coordinate the conspiracy. In addition to setting prices, the companies would agree on which would offer the lowest bid on vitamin contracts, with rivals either staying out of the race or putting in deliberately high bids.

The scam has thus far led to the prosecution of at least 10 individuals in the US, including two former senior Roche executives. Similar investigations are underway in the European Union, Switzerland, Brazil and Mexico, and class-action suits have also been filed in Canada and Australia.

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