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IN RE HIGH FRUCTOSE CORN SYRUP ANTITRUST LITIGATION

May 13, 2003

IN RE: HIGH FRUCTOSE CORN SYRUP ANTITRUST LITIGATION THIS DOCUMENT RELATES TO GRAY & CO.
v.
ADM ET AL.,



The opinion of the court was delivered by: Michael M. Mihm, United States District Judge

ORDER

This matter is now before the Court on various motions for summary judgment by Defendants. For the reasons set forth below, Cargill's Motion for Summary Judgment [#193] is DENIED; A.E. Staley's ("Staley") Motion for Summary Judgment [#196] is DENIED; American Maize/Cerestar USA Inc.'s Motion for Summary Judgment [#192] is DENIED; and Archer Daniels Midland's ("ADM") Motion for Summary Judgment [#191] is DENIED.

BACKGROUND

I. The Parties

Plaintiff, Gray & Co. ("Gray") is an Oregon corporation that manufactures maraschino cherries, glaced fruits, and chocolate covered cherries. It has plants in Oregon and Michigan.

During the relevant time period, the major manufacturers of corn syrup were ADM, Cargill, Staley, American Maize, CPC International, Minnesota Corn Processors ("MCP"), and Hubinger (later acquired by Roquette America). Cargill was the largest producer of corn syrup, with approximately double the capacity of the next largest competitor. Staley, ADM, and CPC had approximately equal shares of the market, with American Maize having the next largest capacity share. Together, the top four producers of corn syrup accounted for approximately 75% of total finishing capacity in the market. From 1989 to 1995, Gray purchased approximately $19 million worth of corn syrup directly from the Defendants to use as ingredients in its food products.

Gray brought suit against the seven major manufactures of corn syrup, as well as Golden Technologies, in federal district court in Oregon, alleging price fixing conspiracies in both the corn syrup and high fructose corn syrup markets. Gray has since settled with CPC, MPC, Hubinger, and Golden Technologies. ADM, Cargill, Staley, and American Maize will hereinafter be referred to as "Defendants".

II. The Product and Process

Corn syrup is a sweetener produced from corn that was historically substituted for sugar and is sometimes referred to as "glucose" or "glucose corn syrup". However, corn syrup is not as sweet as sugar and is used primarily to give body and consistency to the various products in which it is used. In the initial milling process, corn is separated into "starch slurry" and corn co-products, which include corn gluten feed, corn gluten meal, and corn oil. Starch slurry can then be used to make a variety of products including high fructose corn syrup ("HFCS"), ethanol, dextrose, crystalline fructose, potable alcohol, industrial starch, and corn syrup.

Although corn syrup and HFCS are both produced from corn in wet milling plants, they are quite different products. Corn syrup does not contain fructose and is less sweet than HFCS. There is very little substitutability between corn syrup and HFCS, and the end uses for corn syrup differ from the end uses for HFCS. For example, while some products use both corn syrup and HFCS, HFCS is generally used in soft drinks, while corn syrup is used in glazes, brewing, cannings, confectionary products, baked goods, and the dairy industry.

Most large corn wet millers produce at least seven or eight different grades of corn syrup, each grade having a different level of sweetness, maltose content, sodium content, and other characteristics. Within each grade, the corn syrup may have different chemical properties depending on whether the producer uses an acid-enzyme or carbon-based refining process. While there may be specific issues of substitutability in some cases, by and large, corn syrup is a homogeneous, commodity-type product.

III. The Industry

During the relevant time, the sellers of corn syrup and HFCS were essentially the same few companies. With the exception of Golden Technologies, all of the sellers of HFCS also sold corn syrup. Both products were marketed and sold together under the general category of corn sweeteners. The same people who set prices for HFCS also set the prices for corn syrup and the process was generally the same. ADM's Terrance Wilson, who was convicted of fixing prices of lysine from 1992 to 1995, assumed control of pricing for corn syrup at the same time that he assumed control of pricing for HFCS. Moreover, the same people who marketed and sold HFCS also marketed and sold corn syrup.

Each of the Defendants was a member of the Corn Refiners Association ("CRA"), a trade association for members of the corn refining industry, and had been a member prior to 1988. The CRA stems from a predecessor organization that was founded in 1913 and has a professional staff of nine persons, including a President, a Vice President, and directors of congressional affairs, communications, and technical affairs. The CRA's activities are conducted through a Board of Directors and several committees. Between 1988 and 1995, the members of the CRA sent their monthly grind and shipment figures for corn syrup and other products (such as HFCS, starch, and dextrose) to the accounting firm of Ernst & Young ("E&Y"), which was retained by the CRA to gather members' statistical data. E&Y combined the individual producers' data and transmitted only the aggregate numbers to the individual producers. Only the independent accountants at E&Y saw individual company data; none of the CRA staff or representatives of the corn refiner members saw individual company data. Monthly shipment information was then provided by the CRA to the U.S. Department of Agriculture and the Federal Reserve.

During the relevant time, sellers issued price announcements only for "base grade" corn syrup. Base grade corn syrup had a dextrose equivalent of approximately 42 and a baume' of approximately 43.*fn1 Variations from base grade wee the same price as base grade or were priced by adding standard "product premiums" that were the same for all sellers. Product premiums were not negotiated. Buyers and sellers negotiated the price of base grade corn syrup and assumed standard product premiums, or sellers ensured that the difference in price between different grades was ...


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