Vitamin Price-Fixing $335 Mil. Settlement Reached For Indirect Purchasers
This article was originally published in The Tan Sheet
Executive Summary
Twenty-four states and U.S. jurisdictions will use $145.6 mil. in proceeds from vitamin price-fixing settlements to fund health, education and scientific programs such as prenatal care and nutrition research.
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Twenty-four states and U.S. jurisdictions will use $145.6 mil. in proceeds from vitamin price-fixing settlements to fund health, education and scientific programs such as prenatal care and nutrition research. Overall, six vitamin suppliers have agreed to pay $335 mil. to resolve the claims of numerous states, as well as private class actions, related to indirect purchases of vitamins by the states, consumers and business entities. The six settling companies are Hoffman-La Roche, BASF, Aventis Animal Nutrition (formerly Rhone-Poulenc Animal Nutrition), Takeda Chemical Industries, Eisai and Daiichi Pharmaceutical. Collectively, the six firms control more than 80% of the world vitamin market, according to the states. In July, BASF and Takeda announced plans to combine their bulk vitamin businesses (1 (Also see "BASF Global Vitamin Presence Strengthened With Takeda Combination" - Pink Sheet, 7 Aug, 2000.)). The merger has passed Federal Trade Commission muster but awaits foreign antitrust approval. The settlements announced Oct. 10 by a coalition of state Attorneys General and the companies are multi-faceted. Twenty-one states, the District of Columbia and Puerto Rico will receive a total of $225.3 mil. to compensate businesses and consumers for higher prices paid on products fortified with vitamins made by the six companies, the Wisconsin AG's office said. Wisconsin served as the lead state in the case. Of that amount, $107.6 mil. will go into a multi-state fund for businesses, such as farmers and grocers, in the 23 jurisdictions that paid overcharges for vitamins and vitamin-fortified products. Affected businesses will be notified through newspapers and trade journals about filing claims to receive funds. Another $107.6 mil. of the proceeds, described as the consumer settlement, will be divided by the states and targeted toward programs that advance the general health, well-being and nutrition of the public. The states will distribute the funds to non-profit charitable groups and local governments. The remaining $10 mil. of the $225.3 mil. settlement constitutes a state economic impact fund that the participating jurisdictions can use at their discretion to augment either the consumer or business programs. In a separate settlement, 43 states, D.C. and Puerto Rico will share a $30 mil. fund for overcharges on governmental purchases of products containing vitamins. The state of California also reached a separate $80 mil. settlement with the six vitamin firms. The consumer portion of the deal provides $38 mil. to fund nutrition and aging research, food banks and health education. The remaining $42 mil. is for refunds to California businesses. The state will recoup another $5 mil. from the $30 mil. settlement covering state government purchases. Roche will pay the lion's share of the total settlement amount, contributing $187.2 mil., not including legal fees. The firm said the figure is in line with the amount Roche considered when provisions for the vitamin cases were recorded in 1999 consolidated financial statements. BASF will pay $82 mil., excluding legal fees. Aventis' $32.4 mil. share, which includes legal fees, "will be more than adequately covered through the risk accruals that Aventis has previously made," the company said. Takeda said its $27.3 mil. share, including $4.2 mil. in attorneys' fees, will be recorded as a one-time special charge against the company's mid-year FY 2000 earnings results. Eisai reported it will pay $11.9 mil., including legal fees, while Daiichi's share of the $335 mil. settlement is approximately 1.7%, or $5.7 mil., not including attorneys' fees. The settlements, which must be approved by various state and federal courts, also resolve numerous private class action lawsuits brought by indirect purchasers. The agreements substantially resolve most of the class litigation stemming from U.S. antitrust investigations against the six bulk vitamin firms. The six companies also are involved in a $242 mil. federal class action settlement regarding vitamin price-fixing brought by direct purchasers (2 (Also see "Vitamin Price-Fixing $242 Mil. Class Settlement Fund Approved" - Pink Sheet, 3 Apr, 2000.)). A D.C. federal appeals court rejected an appeal of that settlement in August. Five of the six firms have additionally pleaded guilty to federal criminal charges and paid fines. |