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14 major drug companies including three of the largest in the world --
F. Hoffman-LaRoche Ltd. of Switzerland, BASF Aktiengesellschaft of Germany
and Daiichi Pharmaceutical Co. Ltd. of Japan were part of an international
conspiracy to allocate markets and set prices for 10 bulk vitamins, food
additives and pharmaceutical products in the United States and
Europe....
A group of 14 major international vitamin manufacturers have agreed to pay
$132.2-million -- the largest settlement of its kind ever in Canada -- to
end class-action lawsuits in connection with a price-fixing scheme.
If approved, the settlement would pay at least $22-million to dozens of
charities, trade associations and universities across the country. The
Victorian Order of Nurses, for example, would be eligible for more than
$2-million.
The distribution of settlement funds to charities and non-profit food groups
is highly unusual in Canada.
Lawyers involved in the case said that it would be impossible to determine
how many people purchased or ate products containing the artificially priced
vitamins.
As a result, they hired an expert to identify 48 Canadian organizations
involved in nutrition, food quality and education to receive a portion of
the settlement funds.
The commercial settlement proposal was filed yesterday in provincial courts
in Ontario, British Columbia and Quebec. The complex deal, which requires
approval in all three provinces, is an attempt by the giant vitamin
companies to settle a series of class-action lawsuits filed in 1999 on
behalf of 13 groups of consumers, vitamin retailers and livestock farmers.
The plaintiffs sought as much as $2-billion in damages resulting from a
conspiracy to set prices for 10 bulk vitamins and food additives sold in
Canada from 1990 to 1998.
Sales of the bulk vitamins during the time of the conspiracy are estimated
to have totalled about $950-million in Canada.
"This is a substantial amount of money and the way it is being allocated is
unprecedented," said Harvey Strosberg, one of the lead lawyers representing
the class-action lawsuit.
The largest compensation approved by a Canadian court occurred in 1999, when
the B.C. Supreme Court awarded $1.2-billion to hundreds of people who
contracted hepatitis C from tainted blood.
J.J. Camp, a Vancouver-based litigator who represents a group of B.C.
clients in the vitamin class-action, and who was also involved in the
tainted blood lawsuit, described the settlement proposal as "an example of
how a class-action can be effective in improving the conduct and behaviour
of companies because you can bet your bottom dollar that this $132.2-million
is going to sting."
According to the proposed settlement, the $132.2-million pool will be
allocated into five funds: $94.2-million will be available for direct
purchasers, or those who directly bought the vitamins from the
manufacturers; $11-million for intermediate purchasers, such as farmers who
purchased animal feed containing the vitamins; $11-million for a consumer
fund to cover those who purchased such products as bread, milk and orange
juice containing the vitamins; $10-million for an expense fund to pay for a
court-appointed administrator who will administer the payouts; and an
additional $6-million methionine fund to cover those who purchased that
vitamin exclusively.
Under the agreement, only direct buyers of the vitamins will be required to
apply to Deloitte & Touche LLP, which has been appointed trustee, for a
portion of the settlement money. The amount available for each applicant
will be capped at no more than 12% of the total amount purchased by each
claimant during the time of the pricing conspiracy.
Seventeen trade associations representing farmers, grocery distributors and
marketing agencies are entitled to receive specific amounts of money set out
in the proposal. For example, the Canadian Pork Council will receive
$2.4-million -- the biggest share -- from the $11-million intermediate fund,
while the Canadian Goat Society will receive $107,800, the smallest amount.
An additional 17 charities and research organizations are earmarked to
collect funds to provide nutrition services and public health advocacy. Of
these, the Victorian Order of Nurses is entitled to $2.05-million, Centraide
pour tout le Quebec would receive $1.815-million and the Food Safety Network
would get $957,000.
As well, the proposed settlement allows for 14 Canadian universities from
every province to receive funds left over from the $94.2-million direct
fund.
A court hearing for approval has been scheduled before an Ontario court
judge on March 8 and 9. Similar hearings are set for April 6 in British
Columbia and April 21 in Quebec.
If approved, the money is not expected to be distributed until next
September. However, groups that receive funds from the settlement will be
subjected to a rigorous review and approval process by Deloitte & Touche,
and must agree to an audit.
The 14 major drug companies involved in the settlement agreement include
three of the largest in the world -- F. Hoffman-LaRoche Ltd. of Switzerland,
BASF Aktiengesellschaft of Germany and Daiichi Pharmaceutical Co. Ltd. of
Japan.
Many have already pleaded guilty to an international conspiracy to allocate
markets and set prices for 10 bulk vitamins, food additives and
pharmaceutical products in the United States and Europe. In 2000, the
Canadian Competition Bureau fined them $88.4-million for rigging Canadian
markets.
The schemes were designed to split market share and artificially raise
vitamin prices, inflating prices on milk, bread, orange juice and other
foods as a result. These included vitamins A, E, C, B2 (riboflavin), B4
(choline chloride), B5 (calpan), B6, beta carotene and bulk premixes for
animal feed.
Last month, six of the companies involved in the Canadian class-action also
settled a similar price-fixing lawsuit in California for US$80-million.
© National Post 2004
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