Cargill Responds to KFTC Ruling
Cargill is disappointed with the Korea Fair Trade Commission’s ruling against the company on the issue of unfair trade practices
Cargill said it is disappointed with the Korea Fair Trade Commission’s (KFTC) ruling against the company on the issue of unfair trade practices. The company maintains that there was never an agreement between Cargill and its competitors to coordinate prices in Korea’s highly competitive and fragmented animal feed market, and that its Korean animal feed customers were not harmed. The company further maintains that pricing decisions were driven by raw ingredient costs, formulation of products, and customer volume, not competitor communications. Because each contract is unique, pricing for each customer is unique. Cargill is carefully reviewing next steps in the process, including whether to appeal this decision in the Korean courts.
The case, which is nearly five years old and involves only the company’s feed business in Korea, centers on industry meetings and social gatherings attended by certain employees during 2006 to 2010 at which pricing became a topic of discussion.
Economic analysis demonstrates that 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.
“We take this matter very seriously,” said Sarena Lin, president, Cargill Feed and Nutrition. “While we do not believe there were any agreements made on pricing or that our customers were harmed in any way, we acknowledge that it was inappropriate for our employees 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.”
Cargill routinely conducts trainings around the world to reinforce its Guiding Principles and compliance policies to ensure its business is conducted in a responsible way, consistent with the highest ethical standards. The company is conducting additional training for its employees to reinforce learnings from this situation, and to provide guidance for employees attending industry meetings. In addition to its internal programs on competition law, Cargill in 2010, created a policy that provides oversight and guidance for Cargill’s Korean feed business employees attending industry meetings with competitors. Cargill also worked with the Korea Feed Association to develop the industry’s first ever Antitrust Compliance Policy that was adopted by members in May 2013.
During its nearly 50 years of service in Korea, Cargill has acted transparently with and in the best interest of its customers and the community. The business donates 2 percent of its earnings and employees volunteer more than 3,500 hours annually to improve the community. The business also funds a scholarship program in Korea supporting students interested in pursuing agriculture careers. Since its inception in 1993, the program has provided scholarships for more than 1000 Korean students. In addition, the business has taken a leadership position in helping the industry combat and rebound from the devastation caused by Foot and Mouth Disease in 2010. Cargill provided a USD $15 million fund to help animal producers rebuild herds and upgrade farm sanitation and worked with the government to introduce improved sanitation and bio-security measures.
“Our focus on our customers and our commitment to Korea remain unchanged,” said Lin. “We will continue to support our valued customers and deliver solutions that help them succeed. Our brand new state-of-the-art feed mill in Pyeongtaek is evidence of the fact that during this long investigation we have remained undeterred and have continued to invest in Korea.”