When commodity traders get caught

Close

Brazil and the orange cartel

Companies and/or individuals involved: Louis Dreyfus Company (Switzerland), Cutrale (Brazil and Switzerland), Citrosuco (Brazil, Cargill, Fischer (Brazil), Bascitrus (Brazil), Abecitrus (umbrella organization, Brazil)

Charges: Abuse of dominant position, price cartel

Swiss lawyers used: N/A 

Countries affected: Brazil, United Kingdom, Switzerland 

Proceedings: Brazil, United Kingdom

Outcome:

  • Brazil: R$301 million (CHF 54 million). Other compensation claims: Pending
  • UK: Pending

Asset recovery: Pending

The case

This case concerns the agricultural region of São Paulo and its powerful orange cartel. Three giants dominate the world orange juice market, accounting for three quarters of production: the Swiss trader Louis Dreyfus Company (LDC) and the Brazilian companies Cutrale and Citrosuco. Only dealing with small farms and pickers, mostly from the poor regions of northeastern Brazil, the cartel exerts strong pressure on basic conditions, wages and prices, which it sometimes sets below production costs. 

In 1999, the Brazilian antitrust authority had already launched an investigation into the orange juice industry. Appearing in the dock were Cutrale, Citrovita (now Citrosuco), Coinbra Frutesp (since acquired by LDC), Cargill (which sold its orange operations to Cutrale and Citrosuco in 2004), Fischer (which merged with Citrosuco), Bascitrus, Abecitrus (the industry association at the time), and nine others – all accused of signing secret deals to keep purchase prices as low as possible. The case was settled in 2016, after the companies admitted their wrongdoing and paid R$301 million (CHF 54 million) into a compensation fund for the victims.

Despite this conviction, the orange juice giants continue to impose their rules. For many independent producers, “the cartel continues to operate”: most of these company names have disappeared and the market has become reorganized around Cutrale, Citrosuco and LDC. The three giants joined forces in 2009 to form the export association CitrusBR, indicating on its website that its main goal is to “defend the common objectives of citrus exporting companies on a national and international scale”, in particular by “monitoring trade issues”, “fighting against trade barriers” or “promoting the sector’s image”.

The Brazilian association Associtrus, which protects independent producers, estimates that since the early 1990s, more than 20,000 farms have had to give up growing oranges to make juice because it was no longer profitable. Their number has dropped from 30,000 to only about 7,000 nowadays. In September 2019, Associtrus launched a civil action in a London court against the citrus multinationals in order to assert the rights of the 500 or so independent producers it represents. The umbrella organization is claiming more than R$3 billion (CHF 540 million) in compensation for the losses suffered by its members as a result of price manipulation. Proceedings are still pending.

In Brazil, the orange giants have also had to defend themselves, since March 2023, against a collective legal action denouncing a price-fixing scheme operating between 1999 and 2006. The prosecutors state in this lawsuit that the cartel’s goal was to cause a sharp drop in fruit prices. This has inflicted losses on farmers and consumers, excluding about 75% of small and medium-sized businesses in the sector in the state of Sao Paulo alone. The prosecutors are seeking about R$14 billion in damages.

Documents related to this affair

Timeline

Date

Event

Source

1980-1990Brazil becomes the world’s leading producer of oranges used to make juice. Large companies acquire processing sites and increasingly exclude small producers from the market. In the state of São Paulo, which accounts for 80% of Brazil’s production, more than 20,000 farms disappear due to lack of profitability. Currently, there are only 7,000 farms left.Public Eye
1999An investigation is opened against Cutrale, Citrovita (now Citrosuco), Coinbra Frutesp (since acquired by LDC), Cargill, Fischer (which merged with Citrosuco), Bascitrus, the industrial association at the time, Abecitrus, and nine other individuals. Brazil’s antitrust authority accuses them of making secret deals to keep purchase prices as low as possible. Public Eye
23rd November 2016In Brazil, the authorities’ criminal proceedings end after 17 years with a fine of R$301 million, to be paid into a fund. The orange giants admit their guilt by means of a simplified procedure. But the farmers concerned are not compensated. Reuters
September 2019 Associtrus, which protects independent orange producers, launches a civil action in a London court against Cutrale (which has its administrative headquarters in the UK capital), Louis Dreyfus and Citrosuco for running a cartel. The umbrella organization claims more than R$3 billion (CHF 540 million) in compensation for the losses suffered by its members as a result of price manipulation. Proceedings are still pending, despite appeals from the Cutrale family, who wanted a judgment issued in Brazil. 

The founder of Cutrale, José Luis Cutrale (now deceased), and his son José Luis Junior had chosen Geneva as their residence. 

England and Wales High Court

 

April 2023In Brazil, Citrosuco, Cutrale and Louis Dreyfus face a class action lawsuit seeking R$13.75 billion in damages (CHF 2.18 billions) due to an alleged illegal price fixing scheme operating between 1999 and 2006. Brazilian Federal Prosecutor Karen Kahn says the São Paulo Court of Justice will hear the lawsuits filed in March, more than 20 years after the first accusations were made.Ministério Público Federal

Legislative loopholes

  • Adverse consequences of market concentration and abuse of competitive dominance
  • Lack of transparency across the entire supply chain, no list of suppliers to ensure traceability of raw materials and contracts to guarantee maintenance of competitive practices, etc.
  • Long procedure to have the company’s responsibility recognized
  • Up until now, and in view of the complexity of the legal proceedings, no compensation has been paid to the victims
  • No specific supervisory authority in the commodities sector and no appropriate due diligence obligations for traders