Commission Decision

of 7 June 2000

relating to a proceeding pursuant to Article 81 of the EC Treaty and Article 53 of the EEA Agreement

(Case COMP/36.545/F3 - Amino Acids)

(notified under document number C(2000) 1565)

(Only the German, English and French texts are authentic)

(Text with EEA relevance)

(2001/418/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community,

Having regard to the Agreement on the European Economic Area,

Having regard to Council Regulation No 17 of 6 February 1962, First Regulation implementing Articles 85 and 86 of the Treaty(1) as last amended by Regulation (EC) No 1216/1999(2),

Having regard to the Commission decision of 29 October 1998 to open a proceeding in this case,

Having given the undertakings concerned the opportunity to make known their views on the objections raised by the Commission pursuant to Article 19(1) of Regulation No 17, Commission Regulation No 99/63/EEC of 25 July 1963 on the hearings provided for in Article 19(1) and (2) of Council Regulation No 17(3), and subsequently Commission Regulation (EC) No 2842/98 of 22 December 1998 on the hearing of parties in certain proceedings under Articles 85 and 86 of the EC Treaty(4),

After consulting the Advisory Committee on Restrictive Practices and Dominant Positions,

WHEREAS:

I. THE FACTS

A. SUBJECT OF PROCEEDINGS

(1) This case concerns agreements on prices, sales volumes and the exchange of firm specific information on sales volumes of undertakings, producing and offering for sale synthetic lysine to distributors and/or industrial users established in the EEA, for the use in animal feeds. The present Decision covers the period September 1990 to June 1995.

B. THE UNDERTAKINGS AND THE ASSOCIATION CONCERNED

1. Archer Daniels Midland Company

(2) Archer Daniels Midland Company (ADM) is the ultimate parent company of a group of companies processing cereals and oil seeds worldwide. Worldwide ADM has over 200 plants including substantial assets in the EEA, among which are the world's largest soya bean processing facility in Europoort, the Netherlands, the world's largest multi-seed complex in Hamburg, Germany, and the world's largest soft-seed crushing plant in Erith, United Kingdom.

(3) ADM is a manufacturer of starch and starch products and entered into the biochemicals market because they expected higher returns from the production of chemicals based on starch products than on their traditional products. ADM's BioProducts Division was formed in 1989. At about that time, ADM's management decided to start producing lysine when it became aware that two other undertakings were about to set up production facilities in North America (but both undertakings gave up on ADM's expansion announcement). ADM's production facilities for lysine were completed in June 1992.

(4) Archer Daniels Midland Ingredients Ltd (ADM Ingredients) is a wholly owned subsidiary of ADM, dealing with ADM's European amino acids business during the period covered by the present investigation.

(5) In the year ending 30 June 1995, all companies belonging to the ADM group had a total turnover of approximately USD 12,6 billion (EUR 12,6 billion); in the year ending 30 June 1998, the total turnover was approximately USD 16,1 billion (EUR 16,1 billion). In 1995, ADM's worldwide turnover for lysine was approximately USD 202 million (EUR 202 million), of which approximately USD 41 million (EUR 41 million) was made in the EEA.

2. Ajinomoto Company, Incorporated

(6) Ajinomoto Company, Inc. (Ajinomoto) is the ultimate parent company of a group of companies manufacturing chemicals, including lysine, and food products. Backed by capabilities in amino acid technology, the group of companies is also engaged in the development and manufacture of pharmaceuticals. Ajinomoto's operations encompass manufacturing and marketing bases in 21 countries.

(7) Ajinomoto operates amino acid feed grade production plants in Japan, the EEA (Eurolysine SA - "Eurolysine"), in the United States, Thailand, China, and Brazil.

(8) In 1974, Eurolysine was established as a joint venture between Ajinomoto and Orsan to manufacture and market feed grade lysine in Europe. In 1976, Eurolysine built a plant in Amiens. Eurolysine also started producing lysine in Italy through its wholly owned subsidiary Bioitalia Biopro Italia SpA. The total number of employees of Eurolysine is currently 338. Eurolysine is the sole producer of feed grade lysine in the EEA.

(9) Ajinomoto and Orsan each owned 50 % of Eurolysine until September 1994. At that time, Ajinomoto increased its interest to 75 % by purchasing additional shares from Orsan. In 1996, Ajinomoto acquired all of the Eurolysine shares then held by Orsan, and made Eurolysine its wholly owned subsidiary.

(10) In the year ending 31 March 1995, all companies belonging to the Ajinomoto group had a total turnover of approximately JPY 725,7 billion (EUR 5,1 billion). In the year ending 31 March 1998, the total turnover was approximately JPY 836,0 billion (EUR 5,8 billion). In 1995, Ajinomoto's world-wide turnover for lysine was approximately USD 239 million (EUR 239 million), of which approximately FRF 483 million (EUR 75 million) was made in the EEA.

3. Kyowa Hakko Kogyo Company Limited

(11) Kyowa Hakko Kogyo Company Limited (Kyowa) is the ultimate parent company of a group of companies established and operating worldwide, and involved in the development, production and marketing of pharmaceuticals, food, chemicals, agricultural and animal health products, alcohol, and alcoholic beverages. Kyowa has amino acid production plants in Japan, Hungary and Mexico. Kyowa introduced the lysine fermentation process in 1958.

(12) Kyowa's European subsidiary is Kyowa Hakko Europe GmbH (Kyowa Europe), which is responsible for the marketing of lysine in the EEA.

(13) In 1995, all companies belonging to the Kyowa group had a turnover of approximately JPY 375 billion (EUR 2,8 billion). In that year, Kyowa's worldwide turnover for lysine was approximately JPY 10 million (EUR 73 million), of which approximately DEM 30 million (EUR 16 million) was made in the EEA. In the year ending 31 March 1998, the total turnover of the Kyowa group was approximately JPY 398 billion (EUR 2,8 billion).

4. Daesang Corporation

(14) Daesang Corporation is a Korean undertaking and the ultimate parent company of a group operating worldwide, the activities of which include the manufacture of seasonings, animal feeds, and amino acids. It was created through a merger of Daesang Industrial Limited and Miwon Corporation Limited. Daesang Industrial Limited was formerly known as Sewon Corporation Limited and Miwon Foods Corporation Limited (together Sewon). In the first half of 1998, Sewon transferred its worldwide lysine business to an undertaking belonging to a group of companies unrelated to any addressees of this Decision.

(15) At the beginning of 1992, Miwon Handels GmbH was established and dealt with Sewon's amino acids business in Europe. In November 1994, Miwon Handels GmbH changed its name to Sewon Europe GmbH (together Sewon Europe).

(16) In 1995, Sewon's worldwide turnover was approximately Korean Won 225 billion (EUR 227 million). In that year, its worldwide turnover for lysine was approximately DEM 125 million (EUR 67 million), of which approximately DEM 28 million (EUR 15 million) was made in the EEA. In 1998, Sewon's worldwide turnover was approximately Korean Won 1,47 trillion (EUR 946 million).

5. Cheil Jedang Corporation

(17) Cheil Jedang Corporation (Cheil) is the ultimate parent company of a group of companies established and operating worldwide. It was established as the Korean Samsung Group's first manufacturing affiliate in 1953. In 1993, Cheil became independent. Cheil is a diversified company focusing among other things on pharmaceuticals and foodstuffs.

(18) Cheil entered the lysine market in 1991. In 1995, Cheil had a turnover of approximately USD 1,9 billion (EUR 1,9 billion). In that year, Cheil's worldwide turnover for lysine was approximately USD 52 million (EUR 52 million), of which approximately EUR 17 million was made in the EEA. In 1997, Cheil had a turnover of approximately USD 1,4 billion (EUR 1,4 billion).

6. Fefana

(19) The Federation Européene des Fabricants d'Adjuvants pour la Nutrition Animale (Fefana) has its central office in Brussels. It is a body that represents and promotes the scientific, technical and economic interests of animal feed additive manufacturers.

(20) Fefana was conceived in order to deal with the numerous Community legislative proposals impacting on the area of animal nutrition. The existing national professional associations dealing with the feed additive industry considered that the industry required a representation at European level and, for this reason, Fefana was founded in 1963.

C. THE PRODUCT

(21) Lysine is an essential amino acid. Amino acids are building blocks of protein, a major component of body tissues. Animals synthesise body proteins from amino acids released during digestion. Twenty-two different amino acids account for all the proteins found in life. Animals can synthesise only some of these. The others, designated as essential, must be supplied by the diet, either bound naturally to protein or in a chemically pure form. The main sources of amino acids for animals are proteins of vegetal or animal origin: soybean meal, rapeseed meal, corn gluten feed, peas, fishmeal, meat and bonemeal, skimmed milk and other products. Another source of certain amino acids is industrial production. These amino acids are identical to those amino acids found in feed protein.

(22) In most cases, a single feedstuff or the combination of feedstuffs does not supply each amino acid in the precise amount required by animals to exactly meet their dietary requirements. Hence, certain amino acids end up being supplied in excess of requirements to provide an adequate amount of other amino acids. The addition of amino acids in pure form provides a better balance to the dietary protein.

(23) Significant progress has been made in defining the precise amino acid requirements of different classes of livestock and nutritionists have long realised the benefits of formulating diets. Supplementing diets with individual amino acids allows for a reduction in crude protein content in the diet while maintaining amino acids at adequate levels. Research has shown that the level of dietary protein in a standard maize soybean meal can be reduced if the diet is adequately fortified with lysine, tryptophan and threonine.

(24) The availability of synthetic amino acids provides nutritionists with the flexibility to formulate diets with amino acid profiles that more closely resemble those of the animal's requirements than would be the case if only conventional raw materials were available. This has the effect of not only reducing the usage of relatively expensive protein sources, but also animal performance is enhanced.

(25) There is increasing pressure in European countries to reduce the amount of nitrogen and phosphorous effluent arising from intensive animal production systems. According to Fefana, increased use of amino acids combined with reduced crude protein levels in feeds is estimated to have the potential to reduce nitrogen excretion by up to 20 % to 25 %.

(26) The removal of government subsidies on cereals in the Community under the common agricultural policy reforms is expected to reduce the cost of cereals in the European countries. This could be expected to increase the proportion of cereals relative to oilcakes in European livestock diets. The net effect of this is that demand for synthetic amino acids will increase, everything being equal, as amino acids are no longer supplied by high levels of oilcakes in these diets.

(27) The production of synthetic amino acids is one of the oldest and probably the most widely used applications of biotechnology in the animal feed industry. It involves the fermentation of a suitable carbohydrate source, such as sugar and starch, by an organism which has been genetically modified to produce an excess of the amino acid in question.

(28) Feedgrade lysine has been produced commercially for some 30 years and the growth in the use of this amino acid worldwide has been remarkable. Whereas total world usage was approximately 30000 t in 1979, consumption is currently in the region of 250000 t per annum. Although this rise in consumption is partially attributable to the increase in pig and poultry production that has occurred worldwide, it also reflects an increasing sophistication in the formulation of livestock diets.

D. THE MARKET FOR LYSINE

1. Supply side

(a) Production

(29) The production process of synthetic amino acids employs a high level of technology whereby a genetically modified bacterium is used to ferment carbohydrates. The major challenges to the process are the creation and maintenance of sterile conditions that allow for growth of the organism while preventing contamination by any other micro-organism. The technology for the production has improved significantly over the years, leading to substantial cost reductions.

(30) The carbohydrate source used in fermentation process constitutes by far the largest production cost. As production requires substantial amounts of electrical energy to agitate and aerate the fermentors, access to cheap electrical power is also crucial. Manufacture of amino acids is highly capital intensive. Production requires heavy investment in equipment for fermentation, extraction and purification, and pollution control.

(31) Before 1991, there were only three lysine producers, these being: Ajinomoto/Eurolysine, Kyowa, and Sewon. Ajinomoto/Eurolysine was the biggest producer, with a manufacturing capacity of around 80000 t. Kyowa and Sewon had smaller capacities of around 50000 t and 30000 t respectively. In 1994, Sewon started to expand its capacity up to 50000 t.

(32) In 1991, ADM entered the lysine market. ADM's plant essentially doubled the world's lysine production capacity. In addition, it was known that ADM had a very strong financial background and cheap access to raw material resources.

(33) Also in 1991, Cheil entered the lysine market with a production capacity of around 10000 t. At the end of 1993, Cheil started expansion of its production capacity up to 40000 t. This continued through the beginning of 1994 and was finally completed in July 1995.

(34) During the period covered by the present proceeding, there was no other significant entry into the lysine market.

(35) Eurolysine is the sole lysine producer in the EEA.

(b) Distribution

(36) In the EEA, the lysine producers concerned by this Decision have operated various distribution systems, ranging from direct sales to industrial users (feed mills) to indirect sales by appointed agents and/or independent distributors established in different Member States.

(37) Until May 1995, ADM Ingredients had two sales agents. One of them, BASF, was then replaced by direct sales and a number of other distributors or sales agents.

(38) Eurolysine sold amino acids through a number of distributors. Ajinomoto's direct involvement in the European lysine market was confined to its interest in Eurolysine (see paragraphs 8 and 9).

(39) Kyowa Europe appointed two Japanese trading houses as sales agents for lysine who had offices and representatives in various EEA Member States.

(40) Sewon Europe sold lysine to distributors and industrial users.

(41) Cheil has no sales subsidiary in the EEA. Its lysine business in this region is run by a sales office selling mainly to industrial users.

2. Demand side

(42) The European compound feed industry turns out more than 150 million tonnes of animal feed every year in thousands of feedmills spread over the continent. Feedmills formulate, mix and, if needed, further process feedstuffs and micro-ingredients into compound feeds that meet quantitative and qualitative nutritional needs at the lowest possible cost per tonne of feed. In particular, the feed formula must ensure adequate content of each essential amino acid.

3. Market information

(a) Factors influencing the determination of lysine prices

(43) Synthetic lysine is, to a large extent, used to add lysine to feedstuffs that do not, or not sufficiently, contain natural lysine, e.g. cereals. Feedstuffs to which lysine is added are therefore substitutable to feedstuffs which naturally contain sufficient lysine, e.g. soybean. Therefore, the amount of synthetic lysine demanded by the European feed industry and, consequently the price, is influenced in particular by European cereal prices and world soybean prices, the latter being quoted by the Chicago Board of Trade. The price of soybean minus the price of cereals is known as the lysine "shadow price".

(44) Nutritionists use computers to optimise feed formulas via a least-cost formulation technique. After inputting data on available feedstuffs and their current prices, successive substitutions are made between feedstuffs until the cheapest formula is found that supplies all nutritional requirements.

(45) When a change occurs on the market, the feed industry reacts quickly to movements in the price of ingredients, and immediately recalculates new formulae for the same sets of nutritional constraints. This can prompt swings in the volumes of lysine supplemented to feeds. If the cost of the feedstuff to which synthetic lysine is added exceeds the price of alternative naturally amino acid-rich feedstuffs, synthetic amino acids will only be used in so far as it is necessary to better balance the diet in general, and in particular to prevent protein excesses.

(b) Average monthly lysine prices

(46) From the beginning of 1981 until the end of 1988, lysine prices had almost doubled. After this period lysine prices started to fall.

(47) The average monthly lysine prices which Eurolysine, ADM Ingredients, Kyowa Europe, and Sewon Europe charged their customers from 1991 to 1995 were the following:

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(c) Annual lysine sales

(48) The quantities of lysine which the undertakings concerned by this Decision sold each year were as follows (in tonnes):

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E. DESCRIPTION OF EVENTS

(49) Until the early 1990s Ajinomoto/Eurolysine, Kyowa and Sewon were the only producers of synthetic lysine. Ajinomoto/Eurolysine was the market leader worldwide and also in Europe. At the beginning of the 1990s, ADM and Cheil were investing in lysine production capacity and prepared for their entry into the lysine market.

1. Asian/European cartel

(50) The Commission has indications, that in the 1970s and 1980s, the incumbent Asian lysine producers, Ajinomoto, Kyowa and Sewon, in one form or the other cooperated with the aim of fixing prices and volumes in Europe.

(51) The first collusion the Commission is able to prove took place in July 1990. Moreover, when it became apparent that ADM and Cheil were investing in lysine production capacity in order to enter the lysine market, the Asian/European cartel was the forum used to monitor closely the development of the new entrants' potential to influence the competitive situation on the market.

(a) The beginning

(52) In a letter to Ajinomoto dated 6 December 1990, Sewon refers to a meeting between these two undertakings, which took place in July 1990. In this letter Sewon stated that, after the meeting, it was able to raise sharply the price of lysine, "with the help of (Ajinomoto)". In the light of the cooperation between the two companies on lysine prices and sales volumes, which followed the meeting of July 1990, the Commission takes the view that Ajinomoto and Sewon during this meeting agreed on lysine prices to be applied in the world market.

(53) On 20 September 1990, Ajinomoto and Sewon met in Seoul. Ajinomoto informed Sewon that, the day before, its US subsidiary had announced a price increase, and that the new price would be the worldwide standard price (the European price was DEM 4,60/kg). Ajinomoto also referred to Kyowa's intention to announce, on 24 September 1990 and in the USA, a corresponding price increase. Ajinomoto, Kyowa and Sewon had discussed the new prices by telephone prior to meeting and reached a tentative agreement. It was Sewon's understanding that Ajinomoto requested Sewon to follow the price move. Sewon agreed to follow the prices indicated by Ajinomoto.

(54) In December 1990 Ajinomoto and Sewon discussed the possibility for a further price increase. On 12 December 1990 Sewon informed Ajinomoto that it agreed to the worldwide increase of the lysine price.

(55) From the events concerning the price fixing of 20 September 1990 it is clear that Kyowa also participated in price agreements concerning Europe, as the American price was considered the standard world price. Moreover, the Commission takes the view that the price agreements reached between Ajinomoto and Sewon in July and December 1990 were not limited to these two companies. Firstly, the sharp raise of the lysine price in July 1990, to which Sewon's letter of 6 December 1990 referred, would not have been possible without the involvement of the second largest lysine producer. Secondly, the operation of the Asian/European cartel demonstrates that Kyowa's participation in the cartel was essential. Finally, in an internal document setting out the market allocation within the Ajinomoto/Orsan Group as discussed during the 23 June 1992 Mexico meeting, which Ajinomoto prepared in view of the 10 July 1992 Tokyo meeting, Kyowa is included under the title Old Club along with Ajinomoto, Sewon and Cheil. This is consistent with Ajinomoto's suggestion that in the period prior to mid-1992 the initiative for discussions of the European market did not come from Ajinomoto but rather from Sewon and Kyowa.

(b) Meeting of 18 February 1991

(56) On 18 February 1991, representatives of Ajinomoto, Kyowa and Sewon met and fixed the world market price for lysine, and in particular the price for Europe, being the then current Eurolysine sales price (i.e. DEM 4,70/kg).

(57) As to quantities, Sewon agreed to limit its sales to the level of the previous year until ADM achieved full-scale production and sales, which was expected to happen in April or May 1991, in order to maintain the price. Kyowa insisted on the home-market principle. The participants agreed to sell, in 1991, within the export quantities of 1990.

(c) Meeting of 12 March 1991 in Tokyo

(58) The meeting took place in the Okura Hotel. The participants included representatives of Ajinomoto, Kyowa, and Sewon. The agenda for the meeting was prepared by Ajinomoto who also arranged the meeting.

(59) At this meeting, Kyowa disclosed the following information on ADM: ADM's 24 fermentors would be running normally by the middle of April; ADM would start to sell at around the beginning of May; ADM's production plan was 27000 t in the first year, 45000 t the second year, and 60000 t the third year; ADM planned to sell one half of its production on the US market leaving the other half for export. Kyowa reported that ADM intended to sell its product by following the other manufacturers' selling prices.

(60) Ajinomoto disclosed information on Cheil's production plant in Indonesia, gathered during a business trip to Indonesia.

(61) Thereafter, the participants discussed their own market behaviour. Sewon informed the other participants, that it wanted to sell, in the USA in 1991, the same quantity as in 1990, and that they would definitely maintain the base price. As to Europe, the other participants complained about Sewon selling under the agreed price, i.e. DEM 4,70/kg. Sewon was requested not to sell under the agreed price and to maintain last year's sales volume. It was noted that European local meetings dealt with the European price. The participants promised to keep the agreements on sales quantity and price made at this meeting until ADM and Cheil began significant market sales. In case of violations of the agreement, each company agreed to immediately contact the other parties by a "hotline", proposed by Ajinomoto.

(d) Meeting of 4 July 1991 in Tokyo

(62) The meeting took place at the premises of Ajinomoto. The participants included representatives of Ajinomoto, Kyowa, and Sewon.

(63) The participants exchanged information on ADM's and Cheil's production capacity and sales volumes. Some days before the meeting Cheil communicated the information on its production capacity and sales volumes to Ajinomoto by telephone.

(64) The participants then exchanged information on their own prices and sales volumes. In relation to Europe they referred to a regional meeting of 3 July 1991 where a price of DEM 4,30/kg was announced. The participants fixed the price for the USA and for Europe (DEM 4,30/kg). The price for Asia and Oceania was to be discussed at a later stage. As to quantities, the participants concluded that "controlling volume will be a very tough issue".

(e) Follow-up

(65) After ADM had commenced significant sales at low prices, Ajinomoto, Kyowa and Sewon met in Seoul, on 11 February 1992. They discussed ADM's and Cheil's market potential and prices. On 10 March 1992, Ajinomoto and Kyowa agreed to follow ADM's prices, so as to maintain market shares. On 12 March 1992 the Asian producers met again to discuss ADM's impending full entry into the lysine market. Prices were also discussed by telephone during this period.

(66) On 30 March 1992 Sewon Europe reported to the Sewon headquarters in Korea on a "trilateral meeting" which apparently took place some days before. During this meeting Ajinomoto, Kyowa and Sewon evaluated the then current European lysine market. In particular, it was noted that the price increased by 5 % for Germany, Great Britain, the Netherlands, Luxembourg, and France, where prices were relatively lower (around DEM 3,25/kg) than in other countries. The participants agreed that the price for the European market should be maintained at DEM 3,76/kg. The next meeting was scheduled to be held on 30 April 1992 in Basel. In its report to its headquarters, Sewon Europe expressed doubts as to the likelihood that the discussed prices would be kept, "because the opinions of the participating companies were different, and ADM and Cheil were not attending".

(67) On 5 May 1992 Sewon Europe reported to the Sewon headquarters in Korea on another trilateral meeting (probably held on 30 April 1992 in Basel) where Ajinomoto, Kyowa and Sewon had evaluated the then current European lysine market. In particular, the participants confirmed that the price for the European market should be maintained at DEM 3,76/kg. The next meeting was scheduled to be held on 3 June 1992 at a location to be chosen by Sewon. In its report to its headquarters, it apparently seemed meaningless to Sewon Europe to discuss price increases in meetings that ADM and Cheil did not attend.

(68) On 19 June 1992 Ajinomoto, Kyowa and Sewon met. They concluded that the possibility of increasing prices by reducing the sales volumes of each company should be reviewed. In particular, the participants agreed that the problem of raising the price could be solved by having ADM agree to operate at only 80 % capacity. Moreover, Ajinomoto and Kyowa requested Sewon to reduce substantially its sales to the USA and Europe on the principle that the local producer should sell as much as possible in its region.

2. Global cartel

(a) Background

(69) ADM's plant essentially doubled the world's lysine production capacity. Already before and shortly after its market entry, ADM sent signals to the incumbent producers that, though it intended to be a big player in the lysine market, it preferred to achieve its part of the market by coordination, rather than by a price war. In this context, ADM met Ajinomoto on 12 December, and Kyowa on 13 December 1991. On 11 February 1992, Ajinomoto and Kyowa informed Sewon of their respective meetings with ADM.

(70) In order to convince the incumbent producers of the seriousness of its intentions and the penalties of not agreeing, ADM granted Ajinomoto, Kyowa, and Sewon the possibility of inspecting its production plant, and commenced significant sales at low prices. This caused the incumbent lysine producers, as of the beginning of 1992, to drastically lower lysine prices in an attempt to keep market shares. In response to this situation, Ajinomoto and Kyowa agreed on 10 March 1992 that they should cooperate with ADM and begin meeting with ADM in order to prepare an agreement on prices and sales quantities (meetings of 14 April 1992 between ADM and Ajinomoto in Tokyo, of 16 and 17 April 1992 between ADM and Kyowa in Hawaii, and of 19 June 1992 - the same day that Ajinomoto, Kyowa and Sewon met - between ADM and Sewon in Decatur).

(71) These discussions led to the 23 June 1992 meeting in Mexico, which constitutes the beginning of ADM's collusion with the members of the Asian/European cartel.

(b) Meeting of 23 June 1992 in Mexico

(72) The meeting was attended by ADM, Ajinomoto/Eurolysine and Kyowa representatives. Kyowa arranged and chaired the meeting. The participants decided that the Ajinomoto and Kyowa representatives would convey any results of the meeting to Sewon and Cheil after the meeting.

(73) ADM's primary goal was to have the same production share as that of the largest competitor, which would result in one third of total world demand for ADM, one third for the Ajinomoto group and, one third for Kyowa and the Korean producers. Kyowa and Ajinomoto expressed their disagreement with this proposal at least as far as the timing was concerned. ADM then suggested that it would implement its quota proposal over the second year, by allocating to it all extra market growth until it has reached Ajinomoto's market share. For 1992, the proposed quota scheme was: Ajinomoto 66000 t; ADM 48000 t; Kyowa 34000 t; Sewon 18000 t and Cheil 6000 t. Ajinomoto was prepared to accept 48000 t for ADM in 1992 with the prospect of growth over time. ADM indicated that it would, in any event, implement the proposal on quantity as from 1 October 1992.

(74) The participants also discussed what mechanism could be used to allocate quantities. ADM explained that competitors in the citric acid industry used both formal and informal means for keeping track of sales figures.

(75) The participants agreed on the lysine price levels until October: USD 1,05/lb delivered (at the time USD 0,70/lb) with regard to North America (concerning Europe the participants considered that the price could be "a little higher" than in North America). Conditional on final agreement to the sales allocation proposal, the price was fixed at USD 1,20/lb for the end of the year. For the other territories, the target price was USD 2,30 cif (at that time below USD 2,00/kg cif).

- Follow-up

(76) On 2 July 1992 Kyowa received a telephone call from ADM which indicated that it agreed to a production quota of 48000 t for 1992, provided it achieved parity with Ajinomoto in three years.

(77) On 10 July 1992, Ajinomoto and Kyowa met with the two Korean lysine producers in Tokyo at Ajinomoto's premises. Ajinomoto informed the Korean producers on the sales allocation discussions with ADM of 23 June 1992. Ajinomoto and Kyowa presented an allocation plan based on every supplier's market power and level of investment. It was proposed that Ajinomoto should have 73500 t, Kyowa 37000 t, ADM 48000 t, Sewon 20500 t, and Cheil 6000 t for the first year. As to Europe, the allocation proposal was (out of 58000 t): Ajinomoto 34000 t; Kyowa 8000 t; ADM 5000 t; Sewon 13500 t, and Cheil 5000 t. If the demand in North America increased, the increased sales volume would belong to ADM, and any future increased sales in Europe would belong to Eurolysine. Ajinomoto said that if agreement between participants was reached, the final allocations would be agreed upon with ADM at the end of July. For quantity control purposes, all the companies should have quarterly meetings together to review and collect information concerning the production volume and sales figures of each company. Sewon was against a local quota system based on competitiveness. It proposed that each party's future allocation should be based on each party's proportion of last year's sales. Cheil requested a worldwide quantity allocation of 15000 t. As no agreement was reached, each participant was to return to headquarters to reconsider the subject and inform Ajinomoto of the results of their reconsideration by 17 July. Ajinomoto then explained the details of the meeting with ADM concerning prices, in particular to adjust the price to USD 1,05/lb in both Europe and America by 30 September 1992, and then further adjusting it to USD 1,20/lb by 30 December 1992.

(78) On 7 August 1992, the Asian producers met again in Tokyo at Ajinomoto's premises. They continued the discussion in order to reach agreement on the reduction of lysine production volume. Ajinomoto informed the other participants that ADM was prepared to invite employees of its competitors to its production plant in Decatur in order to prove its production capacity. Sewon proposed a general reduction of production of 20 %. It suggested a revised quantity allocation plan as follows: Ajinomoto 64800 t, ADM 48000 t, Kyowa 33600 t, Sewon 26600 t, and Cheil 12000 t. This revised plan was not agreed either, because Ajinomoto was not happy with the amount proposed for itself, and because Cheil insisted on 15000 t. The participants nevertheless agreed to continue the discussion as to reduction of production. The proposed price increase was favourably received, but it was decided to discuss this matter further at the next meeting with ADM. Ajinomoto suggested that before the five companies met, it would be better to formulate a plan with different scenarios, and all the participating companies readily accepted this suggestion. Ajinomoto suggested that a further meeting should take place in Seoul.

(79) On 27 August 1992, the Asian producers met again, this time in Seoul at Cheil's premises. They continued the discussions of 10 July and 7 August 1992. The participants could not reach a conclusion on the next steps in the discussion with ADM concerning the sales quota allocation for lysine. The participants set out what in their view should be the purpose of the meeting with ADM: it is not the decision of the quantity allocation, but the confirmation of the price increase and the discussion of how, practically, to implement the price increase. Regarding the price, the participants agreed to the ADM plan to increase the American price to USD 1,05/lb as of 31 August 1992. The participants noted that ADM had already offered this price to customers. Ajinomoto's and Kyowa's US subsidiaries intended to announce the new price as from the middle of September. A price adjustment for Europe was to be decided by a Europe meeting.

(80) On 8 September 1992 ADM and Ajinomoto met in Chicago. Ajinomoto suggested the allocation of lysine sales quotas not on a worldwide basis, but to restrict production according to the local market situation. ADM agreed but insisted on a total production quota of 48000 t. Both participants confirmed the price increase to USD 1,05/lb, initially agreed by ADM and the Japanese producers at the Mexico meeting of 23 June 1992 and accepted by the Korean producers at the Seoul meeting of 27 August 1992.

(c) Meeting of 1 October 1992 in Paris

(81) The meeting was held in the Pullman Windsor Hotel, in Paris. The participants included representatives of ADM, Ajinomoto/Eurolysine, Kyowa, Sewon, and Cheil. The meeting was arranged by Ajinomoto/Eurolysine, which prepared a fake Fefana agenda. The participants discussed only prices. The five companies evaluated the impact of the agreed price levels and exchanged information on the acceptance of the price increases in the different regions.

(82) The participants referred to the price increases in Europe, which had been fixed, first, at DEM 3,50/kg, and then at DEM 3,75/kg in the context of the Seoul meeting (27 August 1992). At the time of the meeting, the price announced by the producers was DEM 4,00/kg. All participants, however, admitted that this price was not yet applied in practice. The participants considered in particular that the European price at that time was 22 % higher than the US price. They were concerned that parallel importers would be attracted if the price differential increased and concluded that it was not possible to increase the European price further at that moment. Therefore the participants agreed to keep the price at DEM 4,00/kg, and to discuss a possible further increase at the next meeting.

(83) ADM wanted to have fewer people in the price meetings for Europe, so ADM proposed that it would not attend the European local meeting. Ajinomoto/Eurolysine considered the local manager meetings the most effective forums. Therefore, these meetings would continue, and the President of Eurolysine would himself report to ADM directly.

(84) The participants fixed the prices for the other regions, too.

(85) The participants also discussed the possibility of the formation of an amino acid working group within Fefana. Ajinomoto was asked to find out how to set this up.

- Follow-up

(86) On 29 October 1992 Kyowa discussed with Ajinomoto/Eurolysine the prices for lysine in Europe.

(87) On 2 November 1992 Ajinomoto/Eurolysine and Sewon met in Seoul. The participants discussed ADM's behaviour in the lysine market. Ajinomoto informed Sewon that ADM would try to increase the price to the point where market demand started to shrink, and that at that time ADM was happy with the allocation of 48000 t sales volume. This was the reason why ADM did not mention quantity allocation in the Paris meeting of 1 October 1992. Ajinomoto expected that ADM would ask for a maximum quantity in 1993 and even more at the end of 1993. The absence of a comprehensive agreement on production quotas was felt to be a destabilising factor in terms of the relationship between the producers. However, this was attenuated by the fact that everybody including ADM exercised self-restraint in its sales. Nevertheless the participants agree that more cooperation on quota would be necessary. Sewon was prepared to give in even to a 40 % reduction.

(88) At this meeting Ajinomoto/Eurolysine requested Sewon to stop sales in Europe for the next two weeks, to keep the price at DEM 4,25, and to limit sales quantity to 6000 t per year. Unless Sewon reduced its sales volume in Europe, Eurolysine would institute an anti-dumping action against Sewon. Sewon confirmed its willingness to stick to the agreed prices, and agreed to limit its sales to Europe to 6000 t per year. The participants agreed to have open and direct communication at the highest level if staff broke the agreement.

(89) On 4 November 1992, ADM and Ajinomoto discussed their lysine sales policies by telephone. The prices for Asia, North America and Oceania were confirmed in accordance with the Paris meeting of 1 October 1992. The price for Europe was set at DEM 4,25/kg. The participants noted that Sewon deviated from the agreed price levels in some respect. They considered that ADM should sell lysine in Korea "so that Sewon will behave elsewhere".

(90) On 2 and 5 November 1992 Ajinomoto met Cheil in Seoul. Cheil informed Ajinomoto that in terms of cooperation, the lysine price increase was a substantial success and expressed their intention to continue the cooperation with regard to lysine prices. Concerning lysine quotas, however, the companies continued to disagree.

(91) After the Mexico and Paris meetings, prices increased in some places, and in particular in the USA and in Europe, but not everywhere. Accordingly, the undertakings concerned by this Decision blamed each other for not respecting the price agreements. Consequently, the relationships among the producers deteriorated.

(92) On 30 November 1992, Ajinomoto, Kyowa, Sewon and Cheil met at Cheil's premises in Seoul. They noted that ADM was offering very low prices. However, the communication with ADM was interrupted due to a FBI search at ADM (which caused the then President of ADM's Bioproducts Division to cooperate with the FBI in the US lysine investigation). The participants noted that they had no other choice than to wait until ADM re-established the communication.

(93) Because the producers believed their inability to come to a comprehensive volume agreement helped initiate and prolong the return to low prices, talks on sales quantity allocation resumed. It was ADM's and Ajinomoto's intention to have a meeting on the "global (lysine) market" around mid-January 1993. On 21 January 1993, ADM proposed to Kyowa a regional volume allocation.

(94) On 26 February 1993, Ajinomoto, Kyowa, Sewon and Cheil met at Ajinomoto's premises in Tokyo. As there was no specific agenda, Ajinomoto proposed exchanging ideas about the lysine price decline on the world market and how prices could be raised again. Concerning Europe, the participants noted that the price was maintained, because Ajinomoto and Sewon restricted their sales volumes. As to the global situation, the participants concluded that no progress could be made.

(95) In order to revive the quota discussion, ADM's and Ajinomoto's upper management arranged to meet to enhance the relationship between the two market leaders and accelerate the process of developing a comprehensive volume agreement. Since Kyowa and Eurolysine wanted to express their views prior to the intended meeting between ADM and Ajinomoto, meetings were arranged between ADM and Kyowa on 15 April 1993, and among ADM and Eurolysine on 28 April 1993.

(96) In the course of its meeting with ADM on 15 April 1993, Kyowa argued that the volume should be cut by all competitors.

(97) At their meeting on 28 April 1993, Eurolysine raised the possibility with ADM of dividing sales volumes only in those regions in which the price-fixing agreement had effectively raised prices in 1992. Concerning Europe, ADM and Eurolysine agreed that if the prices went up in Europe, it was because of the price agreement concluded in Mexico (23 June 1992), and that the only place where it was fully implemented was this region.

(98) On 30 April 1993, Ajinomoto and ADM met at ADM's premises in Decatur. The purpose of the meeting was to enable the top executives from the two biggest lysine producers to restore the relationship between the two companies and begin the process of developing a comprehensive volume agreement. During this meeting, ADM alluded to the importance of a company controlling its sales force in order to maintain high prices, and explained that its sales people have the general tendency to be very competitive and that, unless the producers had very firm control of their sales people, there would be a price-cutting problem. Ajinomoto indicated that everybody now understood it is necessary to adjust supply. ADM and Ajinomoto representatives arranged for another meeting which occurred on 14 May 1993 in Tokyo.

(99) Both ADM and Ajinomoto informed Kyowa on their Decatur meeting.

(100) On 14 May 1993 ADM and Ajinomoto/Eurolysine met in Tokyo in order to continue the discussion commenced in Decatur. The participants argued over the size of the current market and ADM's share of that market. ADM requested 65000 t for 1993. They again discussed the mechanism needed to obtain and police a sales volume agreement. ADM stated that the way for them to communicate is through a trade association. ADM explained by way of example that ADM reported its citric acid sales every month to a trade association, and every year, Swiss accountants audited those figures. ADM said lysine sales could likewise be reported to, e.g. Ajinomoto, which could then report back to each member every member's results. ADM stated this reporting must be very confidential.

(101) Ajinomoto reported to Kyowa on its Tokyo meeting with ADM. Both producers agreed that ADM's 1993 volume allocation request was unacceptable and that Sewon should be involved in the volume discussion.

(102) On 27 May 1993 Ajinomoto and Kyowa met Sewon and informed Sewon of ADM's volume request for 1993. Ajinomoto referred to the good results of cooperation in the past, but ADM's entrance in the market has complicated matters. Sewon confirmed that it always was ready to negotiate and to proceed by discussion with Ajinomoto and Kyowa. The participants felt the need to convene a meeting between the five producers in order to adjust volume. Ajinomoto wanted to take initiative in negotiating with ADM, whilst Sewon should persuade Cheil.

(103) On 1 June 1993 ADM informed Kyowa that it had decided to stop the decrease of the lysine price in Europe, and that it had announced the day before a price increase to USD 0,81/lb.

(104) On 18 June 1993 Ajinomoto, Kyowa, Sewon and Cheil met in the Sankei-Kaikan Hotel in Tokyo to discuss the tactics to be followed in the next five producers' meeting scheduled to take place in Vancouver on 24 June 1993. The participants exchanged price and volume information by region. On that basis, they discussed different sales allocation schemes on the basis of Ajinomoto's first proposal (54000 t for ADM) and ADM's request (65000 t). The plan for the meeting with ADM was to insist on 54000 t in order to reach an agreement on 60000 t. The final allocation would then be the following: Ajinomoto 81200 t, ADM 60000 t, Kyowa 44400 t, Sewon 32900 t, and Cheil 13500 t. Ajinomoto proposed to hold quarterly meetings by each region and to have a communication system. The participants confirmed the price increases in the different regions. In relation to Europe, the price was set at DEM 3,20/kg (on the basis of the confirmed price of USD 0,81/lb) and at DEM 4,20/kg when the US price rose to USD 1,05/lb.

(d) Meeting of 24 June 1993 in Vancouver

(105) The meeting was held in the Hyatt Regency Hotel in Vancouver. The participants included representatives of ADM, Ajinomoto/Eurolysine, Kyowa, Sewon, and Cheil.

(106) The following points were on the agenda: 1. examination of recent market conditions, 2. production/sales volume adjustment for each company, 3. price increase schedule, 4. communication system (especially regional meetings), and 5. establishing the lysine cooperative organisation.

(107) The participants noted that the price increases in the USA and in Europe were successful, but that the agreements for South and Central America, as well as for Asia were not properly executed. Participants envisaged having a stepped increase in prices from USD 0,81/lb, to USD 0,95/lb, to USD 1,10/lb, and, if possible, finally to USD 1,20/lb.

(108) Ajinomoto presented a table on volume allocation on the basis of 54000 t allocation for ADM. ADM insisted on maintaining its current production volume, i.e. 65000 t. Cheil insisted on 15000 t, instead of the 14000 t proposed by Ajinomoto. It was agreed to have a president's meeting to solve the problem.

(109) Concerning the communication system, the Japanese wanted to have local meetings; ADM was opposed and requested direct communication to its headquarters.

(110) All except Cheil agreed to form an official lysine corporation, to be managed by Ajinomoto and ADM.

- Follow-up

(111) Ajinomoto and ADM agreed to have a meeting on 5 October, in Paris, to be arranged by Ajinomoto. The main agenda points were to be price/quantity and association. ADM informed Ajinomoto that its production levels in the past nine months were the equivalent of 65000 t per annum, which was an acceptable minimum quantity for ADM. ADM stated that parity in market shares with Ajinomoto, which ADM wanted to achieve, could be delayed for another two or three years.

(e) Meeting of 5 October 1993 in Paris

(112) The meeting was held in the Grand Hotel in Paris. The participants included representatives of Ajinomoto/Eurolysine, ADM, Kyowa, Sewon, and Cheil. The meeting was arranged by Ajinomoto, which also prepared the agenda and chaired the meeting. The subjects of the meeting were the establishment of an amino acid producers' association under the umbrella of Fefana, agreement on prices for the fourth quarter of 1993, and sales volume allocation for the next year.

(113) Ajinomoto reported the progress made in creating a producers' association.

(114) Concerning market trends, the participants noted that the Mississippi flood in the summer of 1993, which destroyed the US soybean crop, caused an increase in grain prices but resulted at the same time in excessive lysine stocks. They therefore expected a decrease in orders, and in order to prevent a price decrease, supplies had to be reduced. Concerning Europe, the participants envisaged a 40 % to 50 % reduction.

(115) In the framework of the price review by region, the participants realised that the European price agreed at a regional meeting, i.e. DEM 5,30/kg, was much higher than the price in other regions. It was agreed to keep the European price at this level.

(116) For the period October 1993 to September 1994 each company claimed its production volume. It was noted that Cheil claimed 22000 t, which was different from the quantity that this company alluded to at the Vancouver meeting (24 June 1993). ADM could not decide at that time on a reduction of production volume, so it was determined that top management at ADM and Ajinomoto would become directly involved in the quantity discussion.

- Follow-up

(117) On 25 October 1993, the top management of ADM and Ajinomoto met in Irvine. The participants discussed how to allocate 1994 sales volumes for each lysine producer. They analysed the volume of lysine each producer would sell by the end of 1993, and then ADM proposed using those figures to calculate 1994 sales volume allocations for each lysine producer. They discussed how much the market would grow in 1994 and how much of the growth in the market each producer would be allocated. ADM stated that the other lysine producers could each sell 2000 t more than they sold in 1993, and that ADM and Ajinomoto would share the remaining growth in worldwide lysine sales in 1994. ADM agreed to this plan and was charged to get the other producers to agree to this allocation scheme.

(118) After the Irvine meeting, the Asian producers discussed the volume proposal reached in Irvine. Both Cheil and Sewon wanted more volume. As a result, Cheil did not attend the next meeting, which took place on 8 December 1993 in Tokyo.

(f) Meeting of 8 December 1993 in Tokyo

(119) The meeting was held in the Palace Hotel in Tokyo and included representatives of Ajinomoto/Eurolysine, ADM, Kyowa, and Sewon.

(120) The participants reviewed lysine prices region by region. They noted that the prices agreed at the Paris meeting (5 October 1993) were not fully implemented. Concerning Europe, the current price was DEM 5,00/kg instead of DEM 5,30/kg as agreed, and this in spite of the fact that each producer had limited its sales. It was agreed to keep the European price at DEM 5,30/kg for the first quarter of 1994.

(121) During the meeting, the producers fine-tuned the volume allocation plan developed by ADM and Ajinomoto in Irvine. Sales quantities were allocated by supplier worldwide and by region, including Europe. Worldwide, ADM was allocated 67000 t (plus a portion of 1994 growth); Ajinomoto, 84000 t; and Kyowa 46000 t. ADM, Ajinomoto and Kyowa each agreed to the volume allocation scheme. Sewon was to receive either 34000 t or 37000 t, depending on whether Ajinomoto and Kyowa agreed to an audit of their 1992 sales volumes. Sewon agreed to this proposal.

(122) ADM named Ajinomoto as the office to which each lysine producer would provide monthly sales figures. Ajinomoto's job would be to keep track of the figures so that the producers could make adjustments in their sales to limit the overall annual sales to the agreed maximums. Regarding the submission of monthly sales numbers, ADM told the others that they had "to watch their telephones and to be very careful". ADM further proposed that the producers attend trade association meetings quarterly to adjust their price and sales volumes according to their agreements. It explained how forming an industry association could provide a seemingly legitimate, but artificial, reason to meet, and thus conceal the fact that purported competitors were secretly meeting to discuss prices and sales volumes. ADM described how to have "official" and "unofficial" meetings. ADM explained that while attending an official industry association meeting, one person would book a hotel suite and quietly notify the others, and then they would secretly meet to discuss prices and sales volumes away from the official meeting. The participants agreed to proceed in this way.

- Follow-up

(123) There was discussion between the Asian producers about the audit of sales figures.

(124) On 1 February 1994 ADM Ingredients met with Eurolysine. They discussed the price level at that time and decided to slow down deliveries in order to maintain the price. This was the first meeting between European representatives of lysine producers after the "trilateral meetings" in the first half of 1992 (paragraphs 75 and 76), of which the Commission possesses direct evidence. However, it is clear from the evidence directly concerning other meetings (27 August 1992; 1 October 1992; 5 October 1993), that during the whole period covered by the present investigation European representatives of the lysine producers fine-tuned the decisions taken at world level.

(125) On 26 January 1994 the first official meeting of the Fefana amino acid working party was held in the Fefana offices in Brussels. On 15 February 1994, Eurolysine invited the other lysine producers to a fake Fefana "task force meeting" in Honolulu.

(g) Meeting of 10 March 1994 in Honolulu

(126) The meeting was held in the Sheraton Makaha Resort Hotel. The participants were representatives of Ajinomoto/Eurolysine, ADM, Kyowa, Sewon and Cheil, Kyowa chaired the meeting.

(127) The meeting in Hawaii was the first meeting held since Ajinomoto/Eurolysine, ADM, Kyowa and Sewon had decided to submit their sales volume numbers to Ajinomoto. During the morning Ajinomoto/Eurolysine, ADM, Kyowa and Sewon discussed and analysed their sales figures in relation to the target sales figures established at the Tokyo meeting (8 December 1993). They then discussed whether or not to submit their figures for verification through an audit. Since there was no progress on this issue, the participants agreed that the upper management of the Asian companies would decide the audit issue at a later meeting.

(128) In the afternoon Cheil, which had not participated in the morning meeting because Cheil wanted a larger sales volume allocation as previously agreed by the other producers, was offered a quota of 17000 t. Cheil agreed on this offer and the report of sales figures.

(129) The participants (including Cheil) then discussed and agreed upon prices to charge for lysine for the second quarter of 1994 on a country-by-country basis within each of the following regions: North America, Central and South America, Europe, the Middle East, Africa and Asia.

(130) In the European market, it was noted that the current price was below DEM 5,00/kg and end-users seemed to be waiting for it to drop further. Furthermore, stock levels seemed to have dropped, apparently due to manipulation by traders. The participants agreed, with immediate effect, that the price for Europe was to be DEM 5,20/kg.

(131) ADM and Ajinomoto suggested that the next official amino acid working party meetings could be used as a "cover" for the producers' conspiratorial meetings.

- Follow-up

(132) On 15 March 1994, Ajinomoto, Kyowa and Sewon met in the Royal Hotel in Tokyo. The participants discussed the selection of accounting firms to verify the sales volumes. The Japanese companies wanted each company to use their own accounting firms, Sewon proposed the appointment of one accounting firm to examine each company. They agreed to continue the discussion at the next meeting. Sewon's sales allocation quantity for 1994 was once again discussed. The Japanese companies referred to 34000 t, based on Sewon's actual sales volume of 1992. Sewon claimed 37000 t. If, however, the accounting firm's auditing results indicated Ajinomoto and Kyowa's 1992 sales result to be 84000 t and 46000 t respectively, then Sewon would agree to sell 34000 t in 1994, but over 37000 t in 1995.

(h) Meeting of 19 May 1994, in Paris

(133) On 19 May 1994 at the occasion of the second official Fefana amino acids working party meeting, which took place in Paris, the five lysine producers met unofficially at the Grand Hotel.

(134) The participants discussed and analysed their sales figures, which they had reported to Ajinomoto, in relation to the target sales figures established at the Tokyo meeting (8 December 1993). Ajinomoto stated that Sewon had exceeded the proportionate quantity of the annual total of 34000 t and that they must buy from other companies the exceeding quantity at the end of the year. Sewon stated that it had only agreed to 34000 t, on condition of an independent audit of the 1992 sales figures of each of the other producers. Given that ADM, Ajinomoto and Kyowa claimed that any accounting firm other than the ones currently used by these producers was not acceptable, Sewon insisted on 37000 t. ADM warned Sewon to reduce its sales or there would be pressure on price.

(135) The participants then discussed prices by region. In relation to Europe, the participants agreed on a minimum price of DEM 5,10/kg starting from the 25 May of that year. The participants expected these prices to hold until the next time they met.

- Follow-up

(136) At the end of May/beginning of June 1994 ADM set its sales targets and target prices in an internal meeting held in St Louis. The European sales organisation was disciplined to stay at the target price of DEM 5,10/kg.

(137) On 16 June 1994 at the occasion of an official Fefana meeting in Düsseldorf, ADM Ingredients, Eurolysine, Kyowa Europe and Cheil met unofficially. Eurolysine commented on the current European market situation, including prices country by country. The participants noted that prices were dropping below DEM 4,70/kg. Everyone agreed to keep the price at DEM 5,10/kg.

(138) On 30 June 1994 Eurolysine met Sewon Europe. Eurolysine gave explanations concerning the Düsseldorf meeting of 16 June. Sewon noted that actual market prices had always dropped after the announcement of price increases, because Eurolysine announced a price increase after securing orders from big customers at the old price. It concluded that the actual price could not be increased. The participants also exchanged their views concerning the market situation in different countries.

(139) On 19 July 1994 at the invitation of Eurolysine, which prepared a fake Fefana agenda, ADM Ingredients, Eurolysine, Sewon Europe and Cheil met at the Hyatt Regency Hotel. The participants agreed to keep the following prices (per kg) until the end of the year: Germany DEM 5,10, France FRF 17,50, Belgium BEF 105, the Netherlands NLG 5,70, the United Kingdom GBP 2,10, Spain and Portugal ESP 430 (minimum 425), Italy ITL 5200, Austria ATS 36. They agreed to coordinate their attitudes toward certain clients, which were difficult to approach individually by each supplier. There was some discussion of US cargo entering Europe at about DEM 4,60 and the impact of the weak US dollar.

(i) Meeting of 23 August 1994 in Sapporo

(140) The meeting was held in the Hiroshima Prince Hotel in Sapporo. The participants were representatives of Ajinomoto/Eurolysine, ADM, Kyowa, Sewon and Cheil. Eurolysine had invited the other lysine producers to a fake Fefana "task force meeting".

(141) The participants discussed and analysed their sales figures, which they had reported to Ajinomoto, in relation to the target sales figures established at the Tokyo meeting (8 December 1993).

(142) Sewon's sales allocation quantity for 1994 was once again discussed. Ajinomoto understood that Sewon's quota of 37000 t was limited to 1994 and not the basis for the 1995 allocation. Sewon replied that unless its 1995 sales volume allocation was 50000 t, it had no intention to further negotiate any sales quantities. Because the quantity Sewon demanded was beyond the expectations of the other companies the meeting was discontinued for consultation purposes.

(143) After the meeting resumed ADM threatened the other participants with a new price war and predicted that Sewon would be severely damaged not only in the overseas markets but in the Korean market too. Kyowa reminded the others that it was possible to maintain high prices based on cooperation and mutual efforts. Kyowa asked Sewon if they were going to instigate another price war. Sewon responded that it could not cooperate with the other companies on production quantities but it could cooperate on pricing. It was concluded that Sewon's future status could be that of an observer and not a participant in the quota allocation scheme. It was decided to leave this question to a top management meeting.

(144) The participants further discussed actual and future price strategies and market developments for each region. In relation to Europe the participants decided not to increase the price due to the German mark's appreciation compared to the US dollar.

- Follow-up

(145) On 7 September 1994 ADM Ingredients, Eurolysine, Sewon Europe and Cheil met at the Hotel Frankfurter Hof in Frankfurt. The participants reviewed the results of the Sapporo meeting (23 August 1994). ADM Ingredients, Eurolysine and Cheil expressed concerns regarding Sewon's sales quantity claim. The participants then discussed and analysed their sales figures in relation to the agreed sales quotas. ADM Ingredients proposed that the total 1994 sales quantity in Europe should be reduced from 91400 t to 80000 t. Eurolysine supported the proposal, saying that demand in Europe was down (largely due to the cheap availability of soybean meal). However, both Cheil and Sewon Europe disagreed with the proposal, on the basis that 80000 t was far too little for the European market. The participants finally decided on the lysine price (per kg): the United Kingdom GBP 2,10 to 2,25; Spain at least DEM 5,10 to 5,20; other countries around the DEM 5,00 to 5,10 level.

(146) On 13 October 1994 ADM met with Ajinomoto at the Four Seasons Hotel in Chicago. The participants discussed the problems they were facing because Sewon was now insisting on expanding its lysine plant capacity in 1995. Ajinomoto informed ADM that Sewon had stopped submitting its sales volume figures.

(j) Meeting of 26 October 1994 in Zurich

(147) The meeting was held in the Dolder Grand Hotel in Zurich. The participants were representatives of Ajinomoto/Eurolysine, ADM, Kyowa, Sewon and Cheil.

(148) Deviating from the initial agenda, Ajinomoto asked Sewon, at the beginning of the meeting, whether its volume policy announced at the Sapporo meeting (23 August 1994) had changed and what its 1995 sales target would be. Sewon answered that its policy had not changed and that its sales target was 50000 t. Ajinomoto then made a quantity allocation proposal that was accepted by all participants except Sewon. Sewon claimed that it could not agree to that proposal because its priorities for 1995 were 50000 t and 20 % market share. Sewon informed the other participants that its 1995 budget price was USD 2,20/kg. The other participants said that if Sewon persisted in implementing its increase, then they would all increase their sales as well. Moreover, ADM threatened to increase its sales on the Korean market from 1000 t per year to 5000 t per year if Sewon persisted in raising its worldwide sales to 50000 t. ADM also said that it could force the standard price of lysine down to USD 1,30/kg in order to force Sewon back to the negotiating table. ADM referred to the fact that Sewon was financially the weakest company, implying that it could be the target of a take-over. Kyowa also suggested buying out Sewon if the latter insisted on a 50000 t capacity. It directly inquired as to who was the second largest shareholder in the company. Sewon proposed to discuss prices without further quantity negotiations. The other participants rejected this on grounds that price negotiations were meaningless without having a quantity agreement first. The meeting was dissolved after ADM had left the meeting.

- Follow-up

(149) On 23 and 24 November 1994 Ajinomoto met Sewon in Seoul in order to clarify the situation after the Zurich meeting (26 October 1994) and to prepare for the next meeting. Sewon indicated that a new plant was being built for the Chinese market and that it intended to increase its capacity to 50000 t by 1995/96 as the 39000 t proposed in Zurich was not acceptable considering its level of investment. However, it was agreed that Sewon should continue to cooperate on prices with its competitors. Moreover, it was agreed that Sewon should maintain its production at 37000 t for 1994, and continue to send monthly sales reports over the next year (at this point Ajinomoto had received the August and September reports). Ajinomoto reported the results of the meeting to ADM, Kyowa and Cheil.

(150) On 1 December 1994, at the occasion of an official Fefana meeting in Amsterdam, ADM Ingredients, Eurolysine, Kyowa Europe and Cheil met unofficially. They exchanged information on prices and quantities. It was suggested that there was no reason to have a lower price in Europe than in the USA and that therefore a European price of DEM 4,90/kg was justified. The participants agreed to set DEM 4,90/kg as the offer price and DEM 4,80 as the minimum price. They furthermore agreed to minimise supplies at the existing price of DEM 4,40 to 4,50.

(151) On 6 December 1994 ADM Ingredients and Eurolysine met Sewon Europe in Frankfurt. The purpose of the meeting was in particular to explain to Sewon the price discussion that took place at the Amsterdam meeting (1 December 1994). The participants also compared the actual sales (January to September), the expected sales (by end of December), and the allocated quantities for Europe. Sewon Europe stated that basically it did not want price decreases and wanted to maintain the agreed prices, but that such agreed prices had been rendered meaningless due to the fact that Eurolysine was selling quantities in advance at a price lower than the agreed price. If this situation continued, Sewon would sell at whatever prices it could. It would keep the agreed price levels only if they were in line with market conditions. As a model case, Sewon Europe suggested that producers should stop selling for two weeks in Spain, and resume selling when the agreed price was reached in the market. Eurolysine and ADM Ingredients informed Sewon Europe that they had announced the agreed new price that day.

(152) On 12 December 1994, Ajinomoto and Sewon met again in order to continue their discussions started on 23 November 1994 in Seoul. Ajinomoto stated that that year, all lysine producers maintained communications and were happy with the achieved prices. It warned Sewon that, if companies started a price war, it was certain that everyone would suffer losses. Therefore, they urged Sewon to find points that all could agree on. Sewon stated that, in 1995, its policy was to achieve 20 % market share and to sell 50000 t. However, Sewon was willing to reduce its sales to 46000 t. Ajinomoto proposed a sales volume for Sewon of 40000 t and to purchase the extra quantity of 6000 t from Sewon in order to sell it under Ajinomoto's brand. Sewon rejected that proposal and insisted on 46000 t own sales. It, nevertheless, promised to keep the price at Ajinomoto's level.

(k) Meeting of 18 January 1995 in Atlanta

(153) On 18 January 1995, representatives of Ajinomoto/Eurolysine, ADM, Kyowa, Sewon and Cheil met in Atlanta.

(154) The participants compared the allocated production quotas for 1994 with the actual sales figures realised during the same year. They concluded that the difference between allocated quota and actual sales of each company was not excessive and that therefore the price level could be maintained. Furthermore the participants resolved to allocate sales quotas on the basis of the estimated market size for 1995. All participants, except Sewon, which requested a higher market share, agreed to maintain the market share, allocated for 1994, i.e. Ajinomoto 33 %, ADM 27 %, Kyowa 19 %, Sewon 14 %, Cheil 7 %.

(155) All participants, including Sewon, agreed to continue to report monthly sales results to Ajinomoto.

(156) With regard to prices, the participants agreed, inter alia, to increase the European price from DEM 4,50/kg to DEM 4,90/kg, with an exceptional minimum price of DEM 4,80/kg.

- Follow-up

(157) On 30 January 1995 European representatives of amino acid producers met, apparently in order to review prices for the first quarter of 1995. Kyowa was informed of the results by phone.

(158) On 9 March 1995, at the occasion of an official Fefana meeting in Basle ADM Ingredients, Eurolysine, Sewon Europe, and Cheil met unofficially in the Hilton Hotel. The purpose of the meeting was a price adjustment for the second quarter of 1995 with the weakening US dollar and stronger German mark. The participants expected continuous price weakening due to the traders' activities of importing the product from the USA where the price was at USD 2,64/kg. Taking this into account, the participants agreed on the following prices/kg: the United Kingdom GBP 1,95 to 2,00; Spain DEM 4,10; Italy ITL 5200 to 5300; France FRF 15,70 to 16,00; other European markets DEM 4,40 to 4,50. There was a discussion between Sewon and ADM concerning the supply to each other's customers in the United Kingdom.

(l) Meeting of 21 April 1995 in Hong Kong

(159) The meeting was held in the Regent Hotel in Hong Kong. The participants included representatives of Ajinomoto/Eurolysine, ADM, Kyowa, Sewon and Cheil.

(160) The participants compared the allocated production quotas for 1994 and January to March 1995 with the actual sales figures realised during the same period. Because Sewon had increased sales volume beyond its 1995 share, there were strong protests from the other companies. Sewon reconfirmed that its target volume was unalterable. Ajinomoto and Kyowa urged Sewon to reduce sales volume because the market price would suffer. Sewon pointed out that the market price had fallen despite their increased sales volumes.

(161) Furthermore, the participants discussed sales prices region by region. Concerning Europe, the participants agreed to decrease the previously agreed price of DEM 4,80/kg (meeting of 18 January 1995) to DEM 4,50/kg. The plan was to discuss the price again at a meeting between the people in charge of sales in Europe.

(162) The participants noted that in Europe the premix companies resold lysine causing a price drop. Ajinomoto requested that traders' activities of re-exporting the product originally imported from other regions should be blocked. He also requested Sewon to stop Sewon's distributor in Canada from selling to regions other than Canada.

(163) It was finally agreed that Kyowa would be the host for the next meeting in the Cayman Islands, which was scheduled for 7 July 1995.

- Follow-up

(164) On 27 April 1995 ADM Ingredients, Eurolysine, Kyowa Europe, Sewon Europe and Cheil met in the Sofitel Hotel in Brussels. The participants compared their sales volumes in Europe (including Africa and the Middle East) during the first quarter of 1995. Sewon's sales volume was estimated, and this company was asked to submit actual data. The other participants complained about Sewon's sales volume increase. The participants then reviewed the price discussion that had taken place at the Hong Kong meeting (21 April 1995). After this, they entered into a detailed price discussion concerning Europe. They decided a minimum of DEM 4,25/kg as the European price, and set the prices by each currency. These prices were to be applied for deliveries from 27 April to late June. Afterwards, a price of DEM 4,50 was to be announced. The participants agreed on the explanation to be given to buyers. It was also agreed not to include in the contract a clause on most favourable treatment. The next meeting of the European representatives was scheduled for 19 May 1995, in Utrecht.

(165) On 23 May 1995, apparently at the occasion of the official Fefana task force meeting on environmental pollution, ADM Ingredients, Eurolysine, Kyowa Europe, Sewon Europe and Cheil met. The participants exchanged detailed information on prices and quantities applied by each producer in different European countries. The new European price valid from the Monday following the meeting was set at DEM 4,25/kg. The participants then set the price by each European currency. All participants agreed to firmly respect that level. The idea of dividing customers amongst producers was put forward.

(166) On 27 June 1995 the FBI searches of the offices of ADM, Ajinomoto's Heartland Lysine and Sewon America took place.

F. THE COMMISSION'S PROCEDURE

(167) In July 1996, immediately after the publication of the Commission notice on the non-imposition or reduction of fines in cartel cases(5) (leniency notice), Ajinomoto offered to the Commission, on the basis of that notice, its full cooperation in establishing the existence of a cartel in the lysine market and its effect in the EEA. It later submitted evidence in this respect and continued to supplement this information.

(168) On 11 and 12 June 1997 the Commission carried out investigations ordered by decision at two European subsidiaries of ADM and the offices of Kyowa Europe. ADM issued a press release on the investigations which took place at its subsidiaries.

(169) Immediately after the investigations at ADM and Kyowa, Sewon Europe and the European sales office of Cheil were informed by the Commission, by telephone, that the Commission had opened a proceeding under Article 81 of the EC Treaty and Article 53 of the EEA Agreement.

(170) A few days after the investigation at their premises, Kyowa indicated its possible willingness to cooperate with the Commission. After discussion with the Commission on the terms of reference concerning its possible cooperation, Kyowa submitted business records and subsequently its representatives gave an oral chronology of meetings and other contacts between lysine producers. Thereafter, it continued to supplement this information.

(171) On 28 July 1997 the Commission addressed requests for information in accordance with Article 11 of Regulation No 17 to ADM, ADM Ingredients, Sewon, Sewon Europe and Cheil concerning their behaviour in certain amino acid markets, and in particular business records of the cartel meetings which were identified in the request.

(172) After having received the request for information, Sewon indicated its willingness to cooperate with the Commission. It provided minutes of meetings between lysine producers. Sewon also provided details of meetings for which the Commission had made no request. It continued to supplement this information.

(173) Cheil replied that there were no complete or accurate records of the meetings identified in the Commission's request. It had, however, interviewed each and every member of staff who participated in the meetings in order to obtain a detailed account of what was actually discussed. Cheil also provided details of meetings for which the Commission had made no request.

(174) As ADM and ADM Ingredients did not respond to the Commission's request within the time limit fixed by it for providing the requested information, the Commission, by registered letter of 14 October 1997, reminded both companies that it had not received any, or part, of the information requested. In this letter the Commission expressly stated that the delay in replying to the request for information hindered the conduct of this case.

(175) Eventually, on 24 October 1997 ADM Ingredients answered the Commission's request in relation to lysine, but submitted no information concerning other amino acids. ADM did not answer at all.

(176) On 29 October 1998 the Commission initiated proceedings in the present case and adopted a statement of objections against companies to which this Decision is addressed. All parties submitted written observations in response to the Commission's objections. An oral hearing took place on 1 March 1999. On 16 August 1999 the Commission issued a supplementary statement of objections.

G. THE LYSINE INVESTIGATION IN THE USA

(177) On 27 June 1995, after more than two years of secret investigation, the FBI searched the offices of ADM, Ajinomoto's Heartland Lysine and Sewon America.

(178) In August and October 1996 the parties were charged by the US authorities with engaging in a conspiracy to suppress and eliminate competition by fixing the price and allocating the sales volumes of lysine. The defendants signed plea agreements to pay fines. ADM paid a then record fine of USD 70 million (out of USD 100 million including a citric acid conspiracy). Ajinomoto and Kyowa agreed in their plea agreements to pay fines of USD 10 million each and Cheil agreed to pay USD 1,25 million. As to Sewon, the US Government prosecuted only Sewon's US subsidiary, Sewon America.

(179) On 4 November 1992 the former President of ADM's Bioproducts Division, who served this undertaking during the relevant period, began working with the FBI. He agreed to follow all directions given by FBI agents. Currently, the former President of ADM's Bioproducts Division is serving a nine-year prison term for the theft of nearly USD 10 million from ADM.

(180) On 9 July 1999 a US judge sentenced the former vice chairman of ADM and two former executives to prison and to pay fines for their roles in the conspiracy which is the subject of the present proceeding.

H. THE LYSINE INVESTIGATION IN CANADA

(181) On 27 May 1998 the Canadian authorities announced that ADM pleaded guilty to having participated in price-fixing and market-sharing conspiracies and were fined CAD 16 million. The fine imposed on Ajinomoto was CAD 3,5 million, while the fine imposed on Sewon was CAD 70000. Cheil was not prosecuted in Canada because during the conspiracy period Cheil did not sell any lysine in Canada. Kyowa was granted immunity.

II. ASSESSMENT

A. JURISDICTION

(182) These proceedings concern agreements concluded inside and outside the EEA by companies established inside and outside this region. According to established case-law of the Court of Justice and the Court of First Instance of the European Communities, where producers established outside the EEA region sell directly to purchasers established in the EEA region and engage in price competition in order to win orders from those customers, that constitutes competition within the common market. It follows that where those producers agree on the prices and on the allocation of sales volumes, and put that coordination into effect in the EEA region, they are taking part in agreements which have the object and effect of restricting competition within the common market, within the meaning of Article 81(1) of the EC Treaty and Article 53 of the EEA Agreement. (Judgment in Joined Cases 89, 104, 114, 116, 117 and 125 to 129/85 Ahlström)(6).

B. ARTICLE 81 OF THE EC TREATY AND ARTICLE 53 OF THE EEA AGREEMENT

(183) The Commission considers that the companies concerned by this Decision infringed Article 81 of the EC Treaty and Article 53 of the EEA Agreement in that they, in the EEA and by agreement, fixed lysine prices, controlled the supply and allocated sales volumes to each other, and exchanged information on their sales volumes in order to monitor the sales volume allocations they agreed upon.

1. Article 81(1) of the EC Treaty and Article 53(1) of the EEA Agreement

(a) Undertakings

(184) The companies concerned by this Decision are undertakings within the meaning of Article 81(1) of the EC Treaty and Article 53(1) of the EEA Agreement.

(b) Agreements

(185) According to the case-law of the Court of Justice, in order for there to be an agreement within the meaning of Article 81(1) of the EC Treaty and Article 53 of the EEA Agreement, it is sufficient that the undertakings in question should have expressed their joint intention to conduct themselves on the market in a specific way (judgments in Case 41/69 ACF Chemiefarma(7), and in Joined Cases 209/78 to 215/78 and 218/78 Heintz van Landewyck(8). Attendance by an undertaking at meetings involving anti-competitive activities suffices to establish its participation in those activities, in the absence of proof capable of establishing the contrary (Judgments in Cases T-14/89 Montedipe(9) and in T-141/94 Thyssen(10)).

- Price agreements

(186) In July 1990 Ajinomoto, Kyowa and Sewon agreed to raise the worldwide lysine price (see paragraph 52). In September 1990, Ajinomoto, Kyowa and Sewon fixed, inter alia, the European price at DEM 4,60/kg (see paragraph 53).

(187) In the first half of December 1990 Ajinomoto, Kyowa and Sewon set the European price at DEM 4,80/kg (see paragraph 54).

(188) On 18 February 1991 Ajinomoto, Kyowa and Sewon fixed the price in Europe at DEM 4,70/kg (see paragraph 56).

(189) On 12 March 1991 Ajinomoto, Kyowa and Sewon agreed to maintain the lysine price in Europe at DEM 4,70/kg (see paragraph 61).

(190) On 4 July 1991 Ajinomoto, Kyowa and Sewon fixed the price in Europe at DEM 4,30/kg (see paragraph 64).

(191) Thereafter, Ajinomoto, Kyowa and Sewon continued to discuss lysine prices.

(192) Ajinomoto and Kyowa agreed, on 10 March 1992, to follow ADM's prices, so as to maintain market shares (see paragraph 65).

(193) During a meeting apparently at the end of March 1992, on which Sewon Europe reported on 30 March 1992 to its headquarters in Korea, Ajinomoto, Kyowa and Sewon agreed to maintain the European price at DEM 3,76/kg (see paragraph 66).

(194) At the end of April/beginning of May 1992 Ajinomoto, Kyowa and Sewon confirmed their price agreement reached at the end of March 1992 (see paragraph 67).

(195) On 23 June 1992, ADM, Ajinomoto and Kyowa fixed the worldwide lysine price at a level they intended to maintain until the end of that year. The participants agreed that the European lysine price could be a little higher than the North American price, i.e. USD 1,05/lb until October and USD 1,20/lb for the end of the year (apparently fixed at DEM 3,50/kg and DEM 3,75/kg mentioned during the meeting of 1 October 1992). This agreement was conditional on an agreement on ADM's sales quantities. ADM's request was 48000 t to for 1992 (see paragraph 73). Ajinomoto, Kyowa and Sewon accepted ADM's sales quantities request (meetings of 10 July and 7 August 1992), with which ADM was satisfied (as mentioned during the meetings of 2 November 1992 between Ajinomoto and Sewon). Cheil and Sewon adhered to this price agreement on 27 August 1992 (see paragraph 79).

(196) On 1 October 1992, the five lysine producers fixed the price at DEM 4,00/kg (see paragraph 82).

(197) On 2, 4 and 5 November 1992 ADM, Ajinomoto, Sewon and Cheil agreed to set the lysine price in Europe at DEM 4,25/kg (see paragraphs 87, 89 and 90). The price fixing was prepared by Ajinomoto's and Kyowa's discussion of 29 October 1992; Kyowa was therefore also involved in this agreement (see paragraph 86).

(198) On 1 June 1993 ADM informed Kyowa that it had stopped decreasing the lysine price. The new standard price was USD 0,81/lb. On the basis of that price, the Asian producers, on 18 June 1993, set the European price at DEM 3,20/kg (see paragraph 104). On 24 June 1993, all five lysine producers confirmed this price agreement, and a new step increase in prices was envisaged (see paragraph 107).

(199) On 5 October 1993, apparently due to flooding of the Mississippi river, which destroyed the US soybean crop, the five producers set the European price at DEM 5,30/kg (see paragraph 114). At their meeting of 8 December 1993, this price was confirmed (see paragraph 120).

(200) On 10 March 1994 all five producers fixed the European lysine price at DEM 5,20/kg (paragraph 130).

(201) On 19 May 1994 the five lysine producers fixed the baseline lysine price for Europe at DEM 5,10/kg (see paragraph 135). ADM, Ajinomoto, Kyowa and Cheil confirmed this agreement on 16 June 1994 (see paragraph 137). On 30 June 1994 Ajinomoto informed Sewon that the agreement had been confirmed. On 19 July 1994 ADM, Ajinomoto, Sewon and Cheil agreed to keep the price of DEM 5,10/kg until the end of 1994 (see paragraph 139). All five lysine producers again confirmed this agreement on 23 August 1994 (see paragraph 144).

(202) On 7 September 1994 ADM, Ajinomoto, Sewon and Cheil fixed the lysine price to be between DEM 5,00 and DEM 5,20/kg in Europe (see paragraph 145). On 23 November 1994, Sewon confirmed that it would keep this price, too (see paragraph 149).

(203) On 1 December 1994 ADM, Ajinomoto, Kyowa and Cheil set the minimum offer price at DEM 4,80/kg for Europe (see paragraph 150). On 12 December 1994 Sewon agreed to set the price at this level (see paragraph 152).

(204) On 18 January 1995 all five producers agreed the European target price to be DEM 4,90/kg, with an exceptional minimum price of DEM 4,80/kg (see paragraph 156).

(205) On 9 March 1995 ADM, Ajinomoto, Sewon and Cheil set the European price at DEM 4,40 to 4,50/kg (see paragraph 158). All five producers confirmed this price on 21 April 1995 (see paragraph 161).

(206) On 27 April 1995 the five lysine producers set the European minimum price at DEM 4,25/kg and the target price at DEM 4,50/kg (see paragraph 164). All five lysine producers confirmed the minimum price on 23 May 1995 (see paragraph 165).

(207) It therefore has to be concluded that, from at least July 1990, Ajinomoto, Kyowa and Sewon repeatedly expressed their joint intention to apply certain sales prices in the EEA, and hence concluded agreements within the meaning of Article 81(1) of the EC Treaty and Article 53(1) of the EEA Agreement. ADM became a party to price agreements with the then incumbent lysine producers as of 23 June 1992, and Cheil as of 27 August 1992.

(208) The Commission has no reason to believe that after 27 June 1995, when the FBI searches took place, the undertakings concerned by this Decision concluded more price agreements.

(209) ADM suggests that a review of the documents which the Commission used to demonstrate that the commencement date of ADM's involvement in the infringement corresponds with the meeting attended by ADM, Ajinomoto/Eurolysine and Kyowa representatives in Mexico City on 23 June 1992 does not support the Commission's conclusion. It is of the opinion that no agreement was reached involving ADM in the cartel at that time. With regard to agreements on price, ADM observes that any such agreement at the Mexico City meeting was conditional on agreement as to volume allocations. In its view, final agreement could not have been reached before 8 December 1993 (i.e. the meeting in Tokyo).

(210) As to this argument it has to be noted that agreements which are concluded under a condition are nevertheless "agreements" within the meaning of Article 81(1) of the EC Treaty and Article 53(1) of the EEA Agreement. Therefore, ADM's agreement to the prices discussed during the Mexico meeting, which was conditional on the other producers' agreement to a volume allocation of 48000 t, falls into this category. Moreover, this agreement became unconditional. On 23 June 1992 in Mexico Ajinomoto/Eurolysine and Kyowa agreed to the volume allocation requested by ADM. ADM then confirmed its agreement to this allocation on 2 July 1992. Sewon agreed on 7 August 1992. At about the same time, Cheil agreed to self-restrain its sales as well (mentioned during the meeting of 2 November 1992, between Ajinomoto and Sewon). The condition for the price agreement of 23 June 1992 to become unconditional was therefore met.

- Agreements on quantities

(211) From the minutes of the meeting of 18 February and 12 March 1991 it can be seen that Ajinomoto, Kyowa, and Sewon agreed to sell, in 1991, worldwide the same quantities as in 1990 (see paragraphs 58 and 61). There was at least agreement between the participants that in 1991 in Europe Sewon's quantities should be the same as in 1990. Furthermore, at least in 1991, Ajinomoto, Kyowa and Sewon agreed to the home-market principle, i.e. that the local producer should sell as much as possible in its own region. The local producer in Europe was Ajinomoto/Eurolysine.

(212) The Commission reaches this conclusion on the basis of the fact that Kyowa and Ajinomoto insisted on this principle (meetings of 18 February 1991 and 19 June 1992) and that Sewon had submitted to the same principle (see paragraphs 56 and 68).

(213) On 23 June 1992 ADM, Ajinomoto and Kyowa agreed to the proposal that worldwide lysine sales quantities had to be coordinated (see paragraphs 73 and 74). On 10 July 1992, the two Korean lysine producers adhered to the idea to coordinate their sales with ADM (see paragraph 76).

(214) On 10 July 1992 Ajinomoto and Kyowa proposed to the Korean producers a sales allocation plan for 1992 which provided for a quota of 48000 t in favour of ADM (see paragraph 77). On 2 July 1992 ADM had already agreed to its 1992 quota (see paragraph 76) (confirmed in the meeting of 8 September 1992, see paragraph 80). During the meeting of 7 August 1992, it became clear that Sewon adhered to the agreement on ADM's quota (see paragraph 78). Sewon confirmed its agreement during the meeting of 2 November 1992 (see paragraph 87). Furthermore, at this meeting, Sewon agreed to limit its sales in Europe to 6000 t. Although Cheil did not agree to any individual sales quantity allocation, it agreed, within the plan, to coordinate sales quantities to self-restrain its sales (mentioned during the meeting of 2 November 1992 between Ajinomoto and Sewon, see paragraph 87).

(215) The negotiations for an agreement on individual sales volume allocations for 1993 started on 21 January 1993. Although the parties continued their efforts during the summer of that year, they reached no agreement on a comprehensive individual sales allocation for 1993. On 5 October 1993 however, all five lysine producers agreed to reduce supply in order to prevent a price decline. As regards Europe, a 40 % to 50 % reduction was envisaged (see paragraph 114).

(216) At their meeting of 25 October 1993 Ajinomoto and ADM reached agreement on a comprehensive individual sales volume allocation for all five lysine producers for 1994: all five producers were allocated a basic quota equal to their 1993 sales. Out of the expected sales increase, Kyowa, Sewon and Cheil would each get a supplementary quota of 2000 t while ADM and Ajinomoto would share equally the remaining worldwide lysine sales increase (see paragraph 117). Kyowa and Sewon adhered to this agreement on 8 December 1993 (see paragraph 121). On 10 March 1994 ADM, Ajinomoto, Kyowa, and Sewon confirmed their agreement on the sales allocation volumes for 1994, and Cheil adhered to this agreement (see paragraphs 127 and 128). Sewon confirmed its agreement once again on 23 and 24 November 1994 (see paragraph 149).

(217) On 18 January 1995 ADM, Ajinomoto, Kyowa and Cheil agreed to maintain, for 1995, the market share allocated for 1994 (see paragraph 153). Sewon did not participate in the 1995 sales volume allocation.

(218) It therefore has to be concluded that, as from at least 18 February 1991, Ajinomoto, Kyowa and Sewon repeatedly expressed their joint intention to control the supply of lysine and to allocate certain sales volumes to each other in the EEA and hence concluded agreements within the meaning of Article 81(1) of the EC Treaty and Article 53(1) of the EEA Agreement. ADM became a party to agreements on quantities as from 2 July 1992. Also at some moment during the second half of 1992, and in any event before 2 November 1992, Cheil agreed, within the plan to coordinate sales quantities (meeting of 10 July 1991), to self-restrain its sales (mentioned during the meeting of 2 November 1992, between Ajinomoto and Sewon). From this moment, Cheil definitely consented to the adoption of an overall plan comprising the constituent elements of an agreement on sales quantities, and it became a party to such agreements with the other lysine producers(11).

(219) Cheil does not agree with the Commission's conclusion concerning the duration of its involvement in sales volume agreements. It suggests that it was always in disagreement with the other companies as to how much volume it should produce. Cheil states that the only occasion on which it might have been possible to suggest that it could have agreed to a volume allocation was at the Honolulu meeting (10 March 1994) where, on the face of the minutes, it might appear that it had settled on an agreed volume of 17000 t. Cheil emphasises however that it only gave this token indication after being put under considerable pressure by ADM and Ajinomoto. Cheil stresses that at the time it indicated it might accept 17000 t, it had already taken the internal decision to expand to 40000 t. Cheil states that while it indicated that it might agree to a volume allocation on 10 March 1994, it already knew that in practice it would not comply.

(220) Furthermore, Cheil claims that statements on sales volumes, made by its representatives before 10 March 1994, were merely acknowledgments of the generally known economic principle that over-capacity will lead to a reduction in prices. It argues that such acknowledgments of a general economic nature do not amount to an agreement to limit sales volumes within the meaning of Article 81(1) of the EC Treaty.

(221) The Commission's finding that Cheil's behaviour constitutes restrictive agreements within the meaning of Article 81(1) of the EC Treaty and Article 53(1) of the EEA Agreement, is not altered if it could be established that this undertaking had no genuine intention to implement the intentions actually expressed by it. Having regard to the manifestly anti-competitive object of the events at the occasions where the intentions were expressed Cheil, by participating without taking any action to publicly distance themselves from what occurred at them, gave the impression to the other participants that it had the same intentions as the other parties and would act in conformity with them (judgment in Case T-7/89 Hercules(12)). The notion of "agreement" is objective in nature. The actual motives (and hidden intentions) which underlay the behaviour adopted towards the other participants are irrelevant (judgment in Case T-142/89 Usines Gustave Boël(13).

(222) As to Cheil's argument that it did not express any intention as to its sales volumes, but that it merely acknowledged a general economic principle, the Commission notes that it is clear that the objective of the meetings in question was clearly to control sales volumes and that it is the Commission's understanding and that of the other lysine producers that Cheil made statements concerning its conduct on the lysine market.

(223) The Commission has no reason to believe that after 27 June 1995, when the FBI searches took place, the undertakings concerned by this Decision concluded more agreements on sales quantities.

- Agreement on the exchange of information on sales quantity

(224) On 8 December 1993, ADM, Ajinomoto, Kyowa and Sewon agreed that from January 1994, all companies were to make monthly reports of sales/shipments by region to Ajinomoto, at the latest 15 days after the end of the month, allowing for feedback each month (see paragraph 122). Cheil adhered to this agreement on 10 March 1994 (see paragraph 128).

(225) ADM, Ajinomoto, Kyowa and Cheil implemented the agreement on the quantity information system until 27 June 1995. Sewon stopped producing sales figures as from beginning 1995 (meeting of 27 April 1995). However it continued to participate in meetings where it was informed of the figures reported by the other producers, until 27 June 1995. In those circumstances, Sewon remained a participant in the agreement on the exchange of information(14).

(226) It therefore has to be concluded that, from the beginning of 1994, the undertakings concerned by this Decision had a joint intention to exchange information on their sales quantities in the EEA in order to monitor the agreements on sales quantity allocation, and hence were parties in an agreement within the meaning of Article 81(1) of the EC Treaty and Article 53(1) of the EEA Agreement.

(227) The Commission has no reason to believe that after 27 June 1995, when the FBI searches took place, the undertakings concerned by this Decision continued their agreement on the exchange of information on sales quantity.

(c) Object of the agreements

(228) Article 81(1) of the EC Treaty and Article 53(1) of the EEA Agreement expressly mention, as restrictive of competition, agreements that fix selling prices, limit or control production, or share markets within the EEA. In the present case, the objective of the companies concerned was to regulate the lysine market and to coordinate their behaviour in such a way as to ensure that their agreed price and sales quota initiatives would be successful. Therefore, the agreements on prices and sales quantities in question have as their object the restriction of competition within the meaning of Articles 81(1) of the EC Treaty and Article 53(1) of the EEA Agreement.

(229) As to the information exchange system, it has to be noted that the information which the undertakings, according to the agreement, were to receive and subsequently actually did receive was capable of appreciably influencing their conduct. Given the availability of this information, each undertaking knew that it was being kept under close surveillance by its competitors and that it could, if necessary, react to the conduct of its competitors, on the basis of considerable more recent and accurate data than those available by other means. It follows that the information exchange system appreciably reduced the decision-making independence of the participating producers by substituting practical cooperation between them for the normal risks of competition. In any event, where an exchange of firm specific information is the adjunct of an anti-competitive practice, such as in the present case, it is also caught by the prohibition in Article 81(1) of the EC Treaty and Article 53(1) of the EEA Agreement as an integral part of that practice.

(230) It is established case-law that there is no need to take account of the concrete effects of agreements in order to conclude that they are prohibited by Article 81(1) of the EC Treaty (and by implication Article 53(1) of the EEA Agreement), when it is apparent, as in this case, that they have as their object the restriction of competition (judgment in Case C-277/87 Sandoz(15)).

(d) Effect on trade between Member States of the Community and EEA countries

(231) The agreements in question had an appreciable effect upon trade between Member States of the Community and EEA countries.

(232) The lysine market is one which is particularly characterised by trade between Member States. In the EEA there is only one producer of lysine, i.e. Eurolys