Brazilian Orange Producers File Lawsuit in UK Alleging Juice Industry Cartel

RIO DE JANEIRO, BRAZIL – Orange producers in Brazil lodged an international lawsuit against the three largest juice industries, claiming the establishment of a cartel for the purchase price of fruit.

Currently, the national export industry is made up of three large companies: Cutrale, Citrosuco, and Louis Dreyfus. Brazil is the largest global exporter of oranges and the three companies own 50 percent of the fruit production, process 90 percent of the juice and control 80 percent of the domestic market.

Associtrus (Brazilian Association of Citrus Growers), which is coordinating the case, expects the compensation to reach US$3 billion (R$12 billion). The lawsuit has already had the endorsement of some 180 producers.

According to the president of the association, Flávio Viegas, Brazilian producers are paid approximately R$20 per box of oranges. He compares it with the amount paid to Americans, who earn R$60 for the sale of fruit with the same quality and for the same quantity.

The low price that has been practiced in the national market, says Viegas, was one of the main reasons for the dramatic decrease in the number of producers in the country. According to him, two-thirds of orange producers stopped planting the fruit in the past 20 years. “By the late 1990s there were nearly 30,000, today there are about 7,000.”

The debate on the establishment of a cartel is not new. Associtrus had already denounced the same issue in Brazil in 1992, 1994 and 1999.

In 2017, ALESP (Legislative Assembly of São Paulo) opened a CPI (Parliamentary Commission of Inquiry) on Citriculture Price-fixing. The report made by the deputies at the time pointed to “evidence of cartel persistence” on the part of the juice processing and production industry between 2006 and 2016.

“São Paulo is the world’s largest orange producer, in an increasingly vertical and centralized model. The sector’s major challenge is to continue to grow, distributing income and employment to rural producers,” says state congressman Marco Vinholi, who was the CPI rapporteur at ALESP.

Last year, CADE (Administrative Council for Economic Defense) closed three lawsuits that had been brought in 1999. Following CADE’s decision, the São Paulo deputies also terminated the CPI.

According to a statement issued by CADE at the time, “the parties acknowledged the involvement in the investigated conducts, committed themselves to discontinue the practice, to cooperate with the investigations and to pay a cash contribution based on the total amount of the oranges purchased from third parties in 1998 (updated by the Selic). In total, R$301 million was paid into the Fund for Diffuse Rights”.

According to Viegas, the amount of compensation is incorrect, since it would have taken into consideration only one year of price-fixing practice. In his opinion, there is evidence that the companies have been controlling the sector’s prices for decades.

However, this evidence only came to light after the companies admitted to CADE their anti-competitive practices. “The damages caused by this cartel increased after companies established their own orchards [which corresponds to about 50 percent]. And this was only possible due to the money they amassed from under-invoicing exports after years of abusive price control,” Viegas says.

The lawsuit was brought on Friday, September 27th, in the United Kingdom. Among the plaintiffs are several sector leaders. “We decided to sue in international courts because justice in Brazil is very slow. There is a group of producers that brought a lawsuit in 2005 and the case has remained in the first instance until today,” says Viegas.

According to him, there is still time for other producers affected at the time to join the proposed lawsuit. In addition to Associtrus, FAESP (Federation of Agriculture and Livestock of the State of São Paulo) is also supporting the cause.

CitrusBR, which represents the companies, failed to respond to contacts until the publication of this story.

Source: Folhapress