No decision on South Korean cartel ruling appeal yet: Cargill

By Jane Byrne contact

- Last updated on GMT

No decision on South Korean cartel ruling appeal yet: Cargill

Related tags: South korea

Cargill has not yet decided if it will appeal a ruling by South Korea’s competition authority claiming the firm was part of an animal feed price rigging cartel over several years.

A spokesperson for Cargill told FeedNavigator today it is still waiting for the written decree from South Korea's Fair Trade Commission (KFTC) before confirming if it will challenge that executive’s judgement in the Korean courts.

In July, the KFTC levied fines totaling US$68.7m at Cargill Agra Purina and 10 other feed firms including CJ Cheijedang and Jeil Holdings over what it alleged was their collusion on pig, cattle and poultry feed prices.

The same Cargill representative told this publication at the time of the ruling that the Seoul High Court has to accept an appeal: "It’s not like the US Supreme Court that gets to decide what appeals it will take. So, if any of the respondents decide to appeal the decision, there would be an appeal process.”

The 11 feed businesses fined control 43% of the South Korean market with the KFTC contending they took part in a cartel to control feed prices between October 2006 and November 2010, to the detriment of livestock producers’ profit margins.

Harim Holdings and Farmsco were among the other feed firms fined.

‘Little evidence’

The South Korean competition authority, in an English language version of the ruling on its website​, wrote: “There was very little evidence and circumstantial materials to prove the cartel agreement, because the agreement was made covertly and verbally. Against all the odds, however, the KFTC succeeded in finding the existence of the cartel.”

The South Korean trade watchdog said domestic feed prices jumped 60% during those years.

But Cargill said there was never an agreement between it and its competitors to coordinate prices in Korea’s highly competitive and fragmented feed market, and that its feed customers there were not harmed.

“We further maintain that pricing decisions were driven by raw ingredient costs, formulation of products, and customer volume, not competitor communications,”​ said the US agribusiness giant.

The KFTC alleged the cartelists had had a meeting named ‘Samokhoe’ for the purpose of discussing and sharing their opinions on prices concerning their joint purchase of feed ingredients from Korea’s National Agricultural Cooperative Federation (Nonghyup) or from sources related to Nonghyup.

The authority claimed: “The cartelists collectively purchase raw materials from Nonghyup, and this has resulted in them sharing a similar business environment. Most of them were a member of Korea Feed Association and many were from the same university or had worked at the same company before. These circumstances had led them to discuss and agree on prices.”

Feed prices study

But Cargill argued that economic analysis demonstrated there was no effect on pricing from the conduct that is the subject of the KFTC decision.

“Dr Seong-Hoon Jeon, professor of economics at Sogang University in Korea, provided a 75-page econometric analysis to the KFTC that concluded that the economic evidence was inconsistent with cartel behavior. Dr Jeon’s report demonstrated there was no statistically significant difference between Cargill’s actual or list prices during the period the KFTC challenged and the nearly five years thereafter,” ​said the US group.

However, Sarena Lin, president, Cargill Feed and Nutrition, did acknowledge that it was inappropriate for Cargill staff to remain in meetings where pricing was being discussed. “This behavior is a violation of our internal guiding principles and compliance policies, and is not tolerated. We cannot allow even the appearance of impropriety,”​ she said. 

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