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US coop settles over 'price fixing' amidst market turmoil

By Neil Merrett , 19-Dec-2008

A leading US dairy cooperative hopes to close the book on allegations of price fixing by agreeing a multi million-dollar settlement that it says is not an admission of guilt or innocence.

Dairy Farmers of America (DFA), along with two of its former officers, says that it has agreed to pay $12m (€8.5m) as part of civil monetary penalty following discussions with the Commodity Futures Trading Commission (CFTC).

With continued unpredictability in the global market for milk prices, major processors across both the US and Europe have faced investigations into pricing of goods with a number of settlements being made in recent years.

According to the DFA, in addition to the financial settlement with the CFTC, which relates to investigation into the group’s trading on the Chicago Mercantile Exchange (CME) in 2004, the cooperative will also avoid speculative buying of milk futures contract for two years.

Best interests

Group president and chief executive officer Rick Smith claimed that while the agreement was not a statement of wrongdoing, it had been taken in the interests of the cooperative to prevent further diversions of cost and time.

“The transactions addressed by the settlement took place over a one-month period more than four years ago,” stated Smith. “We have fully cooperated with the CFTC’s investigation and wanted to put this matter behind us.”

Even before the settlement had been reached, the cooperative claims that it had voluntarily adopted new polices and procedures linked to its trading as part of measures designed to prevent further trouble.

Despite the DFA settlement, the dairy industry is still expected to face unpredictable pricing for its milk supplies, according to recent findings from Financial group Rabobank.

Inflated prices, volatile markets, and shifting trade patterns are all predicted to characterise a new era for the dairy market, according to the ‘Global Dairy Industry – Reshaping in a New Market Era’ report.

“In the medium-term, we expect to see more frequent shocks to the demand and supply side of the market, given more volatile costs of grain and fertiliser, climate change and the more prominent role played by less stable import and export regions like China and Brazil,” stated Rabobank.

Settled past

The DFA has not been the only group to come under accusations of alleged price fixing though.

Back in December 2007, Nestle and Vivartia were named among a number of processors facing fines imposed by the Greek competition authority for allegedly fixing dairy prices in the country.

The charges, which totalled about €48m, were put in place following the findings of a year-long investigation that claimed a number of dairy groups had shared price information in the country.

In the same month, a number of UK-based retailers and dairy processors also admitted involvement in suspected price collusion for powdered milk, butter and cheese, resulting in combined fines of about £116m (€161m).

The country's Office of Fair Trading (OFT) said it had entered into early resolution with Asda, Dairy Crest, Sainsbury's, The Cheese Company and Robert Wiseman Dairies over their involvement in sharing sensitive information.

Arla Foods escaped punishment for cooperating with the enquiry.

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