Page 362 - The Principle of Economics

368 PART FIVE FIRM BEHAVIOR AND THE ORGANIZATION OF INDUSTRY
IN THE NEWS
The Short Step from Millionaire Executive to Convicted Felon
BUSINESS EXECUTIVES ARE SUPPOSED TO maximize their company’s profits, but as the following article makes clear, they have to play within the rules es- tablished by the antitrust laws.
Jury Convicts Ex-Executives in ADM Case
BY SCOTT KILMAN CHICAGO—A federal jury found Michael D. Andreas and two other former Archer-
Daniels-Midland Co. executives guilty in a landmark price-fixing case.
The unanimous decision by the six- woman, six-man jury, reached here after a week of deliberations in the two-month trial, is a blow to the Andreas family, whose decades-long control of the De- catur, Ill., grain-processing giant has made it one of the Midwest’s wealthiest and most politically influential families.
The verdicts also give the Justice Department its biggest convictions in a push against illegal global cartels. The department has 30 grand juries around the country considering international price-fixing cases, and more are expected. . . .
Mr. Andreas, who didn’t take the stand in his defense, sat stone-faced as U.S. District Judge Blanche M. Manning read the verdict to the packed court- room. Before the scandal, Mr. Andreas, 49 years old, was earning $1.3 million
annually as the No. 2 executive at ADM and was being groomed to suc- ceed his 80-year-old father, Dwayne Andreas. . . .
The most prominent American exec- utive ever convicted for international price-fixing, the younger Mr. Andreas faces sentencing on Jan. 7. Prosecutors said they will seek the maximum sen- tence of three years in prison for violat- ing the Sherman Antitrust Act. The jury determined that Mr. Andreas helped or- ganize a cartel with four Asian compa- nies to rig the $650 million world-wide market for lysine, a fast-selling livestock- feed additive that hastens the growth of chickens and hogs. [Author’s note: Andreas was eventually sentenced to spend two years in prison.]
SOURCE: The Wall Street Journal, September 18, 1998, p. A3.
PUTNAM: We can’t talk about pricing!
CRANDALL: Oh @#$%, Howard. We can talk about any &*#@ thing we want to talk about.
Putnam was right: The Sherman Antitrust Act prohibits competing executives from even talking about fixing prices. When Howard Putnam gave a tape of this conversation to the Justice Department, the Justice Department filed suit against Robert Crandall.
Two years later, Crandall and the Justice Department reached a settlement in which Crandall agreed to various restrictions on his business activities, in- cluding his contacts with officials at other airlines. The Justice Department said that the terms of settlement would “protect competition in the airline industry, by preventing American and Crandall from any further attempts to monopolize passenger airline service on any route through discussions with competitors about the prices of airline services.”
CONTROVERSIES OVER ANTITRUST POLICY
Over time, much controversy has centered on the question of what kinds of behavior the antitrust laws should prohibit. Most commentators agree that price- fixing agreements among competing firms should be illegal. Yet the antitrust laws