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Vitamin companies fined
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May 20, 1999: 4:41 p.m. ET
Roche and BASF plead guilty in record-setting federal price-fixing case
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NEW YORK (CNNfn) - Two big vitamin producers will pay a record $725 million in fines to settle a price-fixing case brought by the U.S. Justice Department, Attorney General Janet Reno said Thursday.
Reno said Hoffman La Roche of Switzerland, which pleaded guilty to leading a nine-year, worldwide conspiracy to fix prices and allocate market shares, will pay $500 million.
Germany's BASF will pay $225 million for its role in the conspiracy. The companies are two of the largest drug and chemical producers in Europe.
"What they did was very wrong," Reno told reporters. "Their illegal actions affected billions of dollars of sales in the U.S. alone and forced higher prices worldwide."
Reno said the two companies and other co-conspirators agreed to fix and raise prices on vitamins A, B2, B5, C, E, beta carotine and vitamin pre-mixes, which are used to enrich breakfast cereals and other processed foods.
A Justice Department official said as many as 12 other companies are under investigation in the price-fixing case, but declined to identify them.
The Department also confirmed that French drug maker Rhone-Poulenc cooperated with its investigation, and qualifies for protection from prosecution under the Antitrust Department's Corporate Leniency Program. The company said it doesn't expect any action to be taken against it, however, Assistant U.S. Attorney Gary Spratling said the French company could be forced to pay restitution under any private civil cases.
"The victims here are not only the big companies with household names," Reno said. "In the end, on a daily basis for the last 10 years, every American consumer paid to eat, drink or use a product whose price was artificially inflated."
Reno vowed that the Justice Department will not allow "international cartels to prey on Americans."
Prior to this case, the largest antitrust fine was the $135 million penalty assessed to German graphite and carbon products producer SGL AG earlier this month.
Roche official charged
In addition to the fines, a former Roche official will serve four months in jail in connection with the case.
"The vitamin cartel case that we followed today is the most pervasive and harmful criminal antitrust conspiracy ever uncovered.," said Joel I. Klein, head of the Justice Department's antitrust division. "These companies hurt the pocketbook of virtually every American - anyone who took a vitamin, drank a glass of milk or took a bowl of cereal."
The government had charged that the companies engaged in a worldwide conspiracy to fix the price of vitamins, which comprise a $3 billion a year industry. Roughly 63 percent of Americans used dietary supplements in the last year.
Roche issued a statement Thursday saying that both the head and the marketing director of its vitamins and fine chemicals division were leaving the company immediately. The company also said the criminal investigation into the actions of the two executives and the former official is continuing.
Roche, which is also facing a number of class-action lawsuits involving vitamin prices, said the settlement amount will be recorded as a one time special charge against the company's 1999 earnings.
Yudi Bahl at U.S. Bancorp Piper Jaffray said he did not expect the settlement to have much of an effect on the price of vitamins.
"This investigation has been in the works for the last year," he said. "It's been common knowledge. What this really does is close the case more than anything else."
Bahl added that case did not have an impact on vitamin company stocks on Thursday.
"The sector is doing fine," he said.
--with staff and wire reports.
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