Orange juice giants become defendants in a lawsuit that charges BRL 12.7 billion per cartel – 06/04/2023 – Market

The Federal Court of São Paulo decided to make defendants giants of the concentrated orange juice industry in Brazil, the largest producer and exporter of the drink, in a lawsuit filed by the Federal Public Prosecutor’s Office that charges those involved to pay R$ 12.7 billion in reparation of damages caused by a cartel scheme that would have been in force between 1999 and 2006.

The Federal Public Prosecutor Karen Kahn confirmed to Reuters the decision of the Justice to have accepted the initial request of the action presented against companies that answer for a great part of the global production and export of orange juice, such as Citrosuco, Cutrale and Louis Dreyfus Company (LDC) .

Complaints about the cartel, which focused on the combination of fruit prices between industries, which harmed citrus growers, have already been the subject of proceedings at Cade (Administrative Council for Economic Defense). In 2016, the antitrust agency concluded an agreement for the payment of R$301 million by the companies involved.

The lawsuit was filed by the MPF this year, more than 20 years after the first complaints were filed, given the risk of statute of limitations for the case in Brazil, which parallels a lawsuit in the United Kingdom, where citrus growers are suing Cutrale.

The decision of the Federal Court, which is under secrecy, still involves Cargill, which sold operations to Cutrale and Citrosuco, in a deal announced in 2004, and Citrovita (of the Votorantim group), which merged with Citrosuco, in an agreement approved by regulators in 2011.

The value of the share exceeds the industry’s annual revenue from exports of orange juice, which already surpassed US$ 2 billion in its best years. In the 2021/22 season, sales totaled US$ 1.62 billion.

The MPF, which is considering contesting the judicial secrecy imposed on the process, set compensation for financial damages at around R$ 8.5 billion and R$ 4.2 billion for collective moral damages.

In the process, there is also a citation of a former leader of the defunct Abecitrus (Brazilian Association of Citrus Exporters), in addition to names such as businessman José Luís Cutrale Junior.

QUANTIFICATION OF DAMAGES

The MPF filed a public civil action last month to collect billionaire compensation from 16 people involved for having, according to the agency, illegally exercised control over almost 80% of national production and excluded about 75% of small and medium-sized companies in the segment only in São Paulo, the largest producing state, in addition to other regions of the country.

The action was based on a procedure conducted by Cade on practices of predatory competition and abuse of economic power to the detriment of rural producers.

In the process, the MPF highlighted that the objective of the cartel was to obtain a vertiginous drop in the purchase price of the fruit as a way of eliminating competition in the producing segment, causing losses and even the bankruptcy of dozens of small and medium citrus growers in the country and affecting the consumers.

To Reuters, the prosecutor said that the action filed by the MPF is based on the premise that the cartel already existed, after the conclusion of the administrative process conducted by Cade, and that the case now involves the quantification of damages and losses to the sectors of the economy.

According to her, there was the creation of a predatory culture of the economic activity of competitors, rejecting companies that did not join the cartel.

Despite the billionaire value, the action is based on calculations made taking into account losses only at the beginning of the production chain.

The prosecutor also said that the MPF is analyzing whether the damage remains to this day.

“It cannot be discarded, considering that they really swallowed up the entire production process, Cade himself says that they ended up dominating 80% of the producer’s market and there was no news of this reversal”, he pointed out.

The multinational agricultural sector Louis Dreyfus Company, one of the largest in the sector and which also operates in the processing and trading of grains, stated that it was not officially notified of the action.

Dreyfus also said that “it complies with all applicable laws and regulations in the countries in which it operates and informs that it will evaluate any action when formally notified, taking the appropriate measures in a timely manner”.

Citrosuco, which now accounts for 20% of the global orange juice market and around 40% of Brazilian exports after the merger with Citrovita, did not immediately comment on the issue after being contacted.

Cutrale, another giant of the sector trifecta formed by Citrosuco and Dreyfus, also had no immediate comment.

CitrusBR, the association of exporters that brings together Citrosuco, Dreyfus and Cutrale, founded in 2009, is not part of the lawsuit, and chose not to comment on the matter.

Cargill said it would not comment on the matter at the moment.

Flávio Viegas, president of Associtrus, which represents independent orange producers, also chose not to comment on the matter, citing issues related to the British court case.

There is no possible imprisonment for those involved in civil proceedings in case of conviction.

(Contributed by Roberto Samora, from Reuters)