October 4, 2023
By Tarso Veloso and Gerson Freitas Jr.
Archer-Daniels-Midland Co. must face a lawsuit claiming it undermined competitors by manipulating ethanol prices, after Midwest Renewable Energy LLC offered fresh allegations to support its case, according to a ruling seen by Bloomberg.
U.S. District Judge Colin S. Bruce on Sept. 26 denied ADM’s request to dismiss the case where competitors accuse the company of violating antitrust laws. The decision came after an analysis of an amended complaint by Midwest in which it names several ethanol producers allegedly affected by what the complaint characterizes as ADM’s anticompetitive practices.
For a period between 2017 and 2019, ADM allegedly sold ethanol below cost at Kinder Morgan Inc.’s terminal in Argo, Illinois, while using derivatives traded on the Chicago Mercantile Exchange to place an “outsized” bet on lower prices.
The plaintiff, which seeks to represent a larger group of producers that allegedly incurred losses, cited comments attributed to ADM’s head of financial planning and analysis for ethanol, Tony Schmoldt, that the company was positioned to drive prices down and that it wanted them to “go south so it buries our competition.” The plaintiff’s filing quoted Schmoldt as saying that “competition has to be bleeding” and that ADM should “flood the market with every gallon” it could make. The executive also allegedly said higher ethanol prices following a report of record inventories were “not good when we are trying to drive this thing into the toilet at the moment.”
In a statement Tuesday, ADM said Schmoldt never made an ethanol trade or had commercial decision-making authority regarding its ethanol trading business. “ADM believes in vigorous competition, which benefits consumer welfare, and the protection of its business,” it said. “We look forward to prevailing in Court on these issues.”
The ruling, which was downloaded from the court docket by Bloomberg News, was removed shortly afterward. A Sept. 26 entry on the docket notes that the order contains confidential information and is sealed, and that the parties have been directed to confer and file a redacted version of the order within seven days.
The lawsuit was initially dismissed in 2021 when the court ruled that Midwest, the ethanol producer leading the case, failed to show it had been knocked out of the market. In their amended complaint, the plaintiff identified 12 ethanol producers that were allegedly forced into halting or reducing production and canceling plans to build new plants.
“The lowering of prices may create an antitrust injury where it crosses the line from price cutting aimed simply at increasing market share to predatory pricing,” Bruce said in the ruling.
Ethanol delivered at Argo is used as a reference for the price benchmark created by S&P Global Platts, which sets the value of ethanol derivatives traded in Chicago. During the period at issue, ADM allegedly made about 67% of all ethanol sales at the terminal that were reported to Platts.
ADM is not a stranger to allegations of antitrust violations. Back in the 1990s, the company was implicated in a price-fixing conspiracy that later became the basis of the 2009 film “The Informant!”, starring Matt Damon. ADM pleaded guilty to the price-fixing charges in 1996.
ADM has also faced other ethanol price manipulation lawsuits, including by AOT Holding AG, Maize Capital Group LLC, Green Plains Inc. and United Wisconsin Grain Producers LLC. The company “denies liability, and is vigorously defending itself in these actions,” ADM said earlier this year in a filing.
ADM shares fell 0.5% as of 4 p.m. in New York.
The case is Midwest Renewable Energy LLC v. Archer Daniels Midland Co., 20-cv-02212, U.S. District Court, Central District of Illinois (Urbana).
©2023 Bloomberg L.P.
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