Published on: The Financial Express, 25 April, 2001
By Pradeep S Mehta, Anjali Bansal & Olivia Jensen
CUTS Centre for International Trade, Economics and Environment

US anti-trust authorities have recently brought to light a global conspiracy of leading drug manufacturers in the vitamins market to fix prices, allocate markets, supply contracts and sales volume, and engage in bid-rigging. The cartel controlled the most popular vitamins, including vitamins A, C and Betacarotene, over a nine-year period from 1990 to 1999.

The conspiracy led to artificial increases in prices for hundreds of food, beverage and medicine makers and has inflated the profits of these companies. Investigations done by US authorities revealed that the colluding companies acted as if they were working for a single corporation, known as ‘Vitamin Inc’ and reaped huge profits from the high prices.

The drug companies were also subjected to private civil suits for damages suffered by their customers, mainly food and drug businesses. Under the out-of-court settlement reached in November 1999, seven firms involved in the price-fixing of vitamins agreed to pay $1.05 billion to companies they supplied to. The costs of the conspiracy were passed on to consumers via intermediate producers of bread, milk, cereals and juices all of which use bulk vitamins. Consumers are being compensated by the cartel indirectly through a $107 million contribution to charity. Another $107 million will go to whole- salers and distributors, and state governments in the US will recover $30 million as reimbursement for the extra cost of foods they purchased for hospitals, prisons and other institutions.

Despite the international exposure of the cartel, no action has been taken in India. The Monopolies and Restrictive Trade Practices Commission tends to wait for complaints from consumers or businesses before launching an investigation. Questions surrounding the vitamin cartel in India must be answered. Does or did the international cartel operate in India? Who took part, where and over what period of time? Were subsidiaries of these companies in India involved in these cartels? How can antitrust laws be enforced in an international case like this?

We had begun a campaign for the investigation of the cartel in India. Letters were written to the subsidiaries of these companies in India or their head offices abroad, requesting information. They were asked whether they have been selling these bulk vitamins in India, either through direct sales or by way of exports. If yes, they were asked to provide figures on the extent of overcharging and sales levels. It was clearly stated in the letter that if the companies opined that they had not indulged in a similar activity in India, they should furnish a written undertaking to this effect. Despite numerous letters and reminders, the response was disappointing.

Keeping this in view, it can be said that unless and until a proper strategy is decided to uncover this cartel in India, no substantial results can be achieved. The strategy includes drafting a new competition law for future scams. It has been rightly said by former Assistant Attorney General Joel I Klein, head of the US Justice Department’s antitrust division: “The vitamin cartel is the most pervasive and harmful criminal antitrust conspiracy ever uncovered. The criminal conduct of these companies hurt the pocketbook of virtually every American consumer—anyone who took a vitamin, drank a glass of milk, or had a bowl of cereal.”