ARCHER DANIELS MIDLAND

&
THE FRIENDLY COMPETITORS

MAGISTER MANAJEMEN
UNIVERSITAS GADJAH MADA
EKSEKUTIF-23

RISANG CAHYO. G

UKY HAPSARI

YAYAN FADLANZA

BACKGROUND COMPANY

ARCHER DANIELS MIDLAND

Founded in 1902
Headquartered in Decatur, Illinois, USA

ADM is one of the Largest Agricultural Processors in the world

Worlds Largest Corn Processor

Each Day ADM Processes 66,000 MT of Corn

Fortune 28 Company (US)

Fortune 92 Company (Worldwide)
Fortune Most Admired Food Production Company (2009,2010, 2011)

PRODUCTS & SERVICES

PREMIER PLAYER IN GLOBAL AGRIBUSINESS

Serving Vital needs throughout the world

Key Facts
FY 12 Net sales:

$89 Billion

Employees:

30,000+

Facilities:

685+

Net Fixed Assets

~$10Bn

Market cap:

~$18 Billion

(10/26/12)

FY12 Segment Operating Profit

$2.9 Billion
Corn Processing
Oilseeds
Processing

21%
45%

1%

33%

Other

Ag Services

CASE ANALYSIS

IN EARLY 1989, Archer Daniels Midland decided to enter the Lysine Business

Cost on new plant $ 150 million (over 3 years to build)

Mark Whitacre was hired by ADM as a President

Of the Lysine division

What is Lysine??
ONE OF THE ESSENTIAL AMINO ACID
THEREFORE AN IMPORTANT ADICCTIVE TO ANIMAL FEED BECAUSE
IT IS A LIMITING AMINO ACID WHEN OPTIMIZING THE GROWTH
OF CERTAIN ANIMALS SUCH AS PIGS AND CHICKENS FOR THE
PRODUCTION OF MEAT

LYSINE MARKET
Perfectly homogeneous Product

Share of global production of 4 largest manufacturers of lysine in early 1990s

- 97% in US
- 95% world
Purchases of for largest buyer < 30%
Large infrequent purchases

 5 Competitor Firms
Ajinomoto, Kyowa Hakko, Archer-Daniels-Midland, Sewon,

Governing Agencies
FBI, U.S. Department of Justice (DOJ),
European Commission and antitrust authorities of Canada,
Mexico, Brazil

TIMELINE
1995
Oct 1993
1993

Price war

1991-1992
ADM enters
the market
19701980 Predatory
pricing
Ajino period
moto Collusion
and
begins
Kyowa
Hakko
domin
ate

FBI raid, collusion

Resolution end

THE MARK WHITACRE STORY

Hired to run high tech lysine division
-

ADM enters in 1992 with plant equal to 50% world production

Price war ensues, below costs of Asian Producers
Price Fixing Discussion begin
Division was losing $7 million/month
Plant was not working properly
Mark was embezzling

Sabotage story
- Mark claims that plant has been sabotage and he is being blackmailed for $10
million
- FBI investigates

 The Plot Thickens

- FBI finds no evidence of sabotage, but investigates
- Whitacres wife threatens to expose price fixing to FBI
- Whitacre tells FBI about price fixing

Mark goes undercover for Almost 3 years with tapes and videos
- Mark arranges meetings and video tapes everything

Marks division starts making U$ 7 million/month

Mark is star informant
- Is amazing manipulator, always gets the things on tape the FBI wants

 Marks starts losing it

Marks admits to Embezzling $500,000

Later revealed he took $9 million
Violates his immunity deal
Makes him liable for price-fixing

Marks is prosecuted
- His own tapes used to prosecute him
- Fires his lawyer for trying to bargain 3 years prison

VIDEO EVIDANCE

Video Cartel Meeting in Atlanta, Georgia

--The Lysine Cartel Members show disdain for customer and antitrust enforcement
Telephone call from ADM Headquarter
--Foreign co-conspirator expresses reluctance to meet in the US
Video Fixing Price in Hawaii
-- Sitting in Hawaii decided that the truckload price US & Canada would be $ 1.16
--Later in the meeting, they did the same thong for other countries

Video Worldwide Volume Allocation Agreement

--They determined how much each producer had sold in the prior year
Video Compensation Scheme
-- Any firm that sold that is allocated, they were under budget by purchasing that quantity of lysine

from any under budget firms

VIDEO

LYSINS CARTEL

Fix Price
Allocate market shares
Fix volume quotas
Compensation Scheme
Engage in meetings and Conversations to monitor
quotas
Results : Lysin price increase by 70% with 3 months of
reaching agreement

TOKOH YANG TERLIBAT DALAM KASUS

Mark E. Whitacre
president of ADM's
BioProducts Division.

Kazutoshi Yamada
managing director
of Ajinomoto Co. Inc.

Michael D. Andreas
executive vice president
of ADM
Terrance S. Wilson
vice president and president
of ADM's Corn Processing Division.

PRICE TREND LYSINE

PERGERAKAN HARGA LYSINE (1992-1995)

Kenaikan harga lysine terjadi pada
Tahun 1992 (September-Desember)
Tahun 1993 (Juli-Desember)
Sepanjang tahun 1994

Empat bulan awal tahun 1995

LYSINE MARKET PRICE

Table 1 : Average Selling Prices for Lysine (per Pound), 1990-1994
Month

1990

1991

Januari
February
March
April
May
June
July
August
September
October
November
December

$
$
$
$
$
$
$
$
$
$
$
$

1.32
1.19
1.15
1.08
1.01
0.99
0.99
1.00
1.06
1.15
1.24
1.23

$
$
$
$
$
$
$
$
$
$
$
$

Simple Average

1.12 $

1.19
1.17
1.13
1.09
1.04
1.03
1.01
1.08
1.11
1.12
1.07
0.97

1992
$
$
$
$
$
$
$
$
$
$
$
$

1.08 $

0.91
0.84
0.82
0.80
0.78
0.69
0.64
0.70
0.82
0.92
0.98
0.98

1993
$
$
$
$
$
$
$
$
$
$
$
$

0.82 $

0.98
0.94
0.89
0.78
0.66
0.62
0.76
0.88
0.98
1.08
1.10
1.13

1994
$
$
$
$
$
$
$
$
$
$
$
$

1.12
1.11
1.11
1.11
1.11
1.11
1.09
1.11
1.16
1.20
1.22
1.22

0.90 $

1.14

Source :
In re : Amino Acid Lysine Antitrust Litigation, Exhibit C to Plaintiff's Interim Report No. 1, April 29, 1996

ANTITRUST
Antirust adalah Hukum atau Undang-Undang persaingan, merupakan
peraturan melawan kebiasaan dagang yang merendahkan persaingan
atau dianggap tidak adil

Archer Daniels Midland Sherman Antitrust Act (15.U.S.C 1)

ANTITRUST OUTCOMES

Corporate Fines & Penalties

- Asian firms fines $ 21.25 million

- ADM fined $70 million
- Sued in other countries

Individual fines & Penalties

-

Andreas and Wilson get 2 years prisoned & 350 K fines

Whitacre gets 9 years for embezzlement and 30 months for fix pricing

Mimoto (Ajinomoto) , Yamamoto (Kyowa). and Kim (Sewon) plead guilty and heavy fines

Yamada indicted and remains international fujitive

OLIGOPOLY MARKET

JAWABAN PERTANYAAN

2. FAKTOR PENYEBAB TERJADINYA PRICE FIXING

1. Pressure
Mark Whitrace mendapat tekanan akibat dari ADM kehilangan $ 7
juta dollar per bulan dari bisnis Lysine tersebut.
Kapasitas produksi ADM yaitu sebesar 250 juta ton Lysine per tahun
atau hampir setengah dari seluruh permintaan didunia.

ADM memproduksi dalam jumlah yang sangat banyak di pasar, hal ini
mengakibatkan harga Lysine jatuh

2. Anti Competitive behaviour among Companies

Anti Competitive Behavior diantara produsen untuk mengurangi
persaingan diantara produsen

ADM, Ajinomoto, Kyowa Hakko dan Sewon memiliki

yang sangat besar di pasar

market share

Hal ini menyebabkan perusahaan-perusahaan tersebut menyetujui

untuk menjual lysine dengan harga yang sama, yang tidak merugikan
satu dengan yang lain

3. Opportunities
Mark Whitrace bersama Terry Wilson bersama sama mengatur meeting untuk
memecahkan masalah price war.
Semua perusahaaan yang datang menyetujui untuk memformulasikan win win
solution.
Perusahaan kompetiror menyetujui untuk mengatur harga (Fixed Pricing)
Jumlah Produksi yang tidak terkendali akibatnya harga jatuh lagi
Pengaturan jumlah kapasitas produksi guna menstabilkan harga lysine di pasar

THANK YOU