ADM Motions to Dismiss Ethanol Case

LINCOLN, Neb. (DTN) -- Archer Daniels Midland asked a federal court to dismiss one of a handful of lawsuits claiming the company profited by manipulating the price of ethanol at the Argo terminal in Illinois, arguing that Midwest Renewable Energy's claims in an ongoing legal action don't match up with what is required to prove antitrust law violations through predatory pricing.

ADM has found itself facing a peculiar accusation: That it harmed competitors by making ethanol too cheap.

Across multiple lawsuits filed in the U.S. District Court for the Central District of Illinois, plaintiffs advanced virtually identical theories. They alleged that from late 2017 through late 2019, ADM deliberately sold its ethanol at artificially low prices at the Argo terminal, driving down ethanol prices nationwide.

The twist in their theory was how ADM allegedly profited; not by later raising prices to monopoly levels, as traditional predatory pricing schemes work, but by simultaneously trading ethanol futures contracts that gained value as spot prices fell.

ADM attorneys recently filed a motion to dismiss the lawsuit filed by Midwest Renewable Energy, telling the court the company's now-amended complaint fails on several levels.

"ADM moved to dismiss their original antitrust complaints on the ground that cutting prices is an essential act when competing to sell a commodity like ethanol, and the antitrust laws exist to protect low prices for consumers," ADM said in its recent motion.

"Plaintiffs then relabeled their claims as seeking recovery for predatory pricing. But they continued to insist that ADM used low ethanol prices to produce gains on futures to recoup."

The U.S. Court of Appeals for the Seventh Circuit recently ruled in a similar case, United Wisconsin v ADM, that unless a plaintiff shows ADM eventually caused consumers to pay sustained monopoly prices, claims of predatory pricing must be dismissed.

"That decision is based on a fundamental principle: the 'antitrust laws are designed to benefit consumers,'" attorneys for ADM said.

"United Wisconsin Grain Producers v. Archer Daniels Midland, consumers benefit from low prices. Thus, even if plaintiffs are correct that 'ADM manages to profit from below-cost (ethanol) prices' by trading futures, ADM's conduct in causing low prices is 'a benefit, not a burden, for consumers.'"

ADM attorneys told the court that the United Wisconsin decision required the plaintiff to plead facts showing that ADM charged consumers "monopoly prices" and did so for "long enough to recoup losses" on around two years' worth of predatory prices.

"When ADM first moved to dismiss the original complaints, the company's argument rested on a bedrock principle of antitrust law: price competition is precisely what the antitrust statutes are designed to encourage," ADM said in its motion.

"Cutting prices represents the very essence of competing to sell a commodity product like ethanol. The antitrust laws exist to protect consumers through lower prices, not to shield competitors from aggressive price competition."

The Midwest amended complaint, like the original, focused extensively on the alleged price suppression from 2017 to 2019 and the supposed gains ADM made trading futures.

But when it came to alleging the recoupment period -- when ADM supposedly charged monopoly prices to make back its losses -- the complaint claimed that ADM caused prices "to be higher than they otherwise would have been beginning by early 2020."

In its new motion to dismiss, ADM provided data from the Federal Trade Commission and U.S. Energy Information Administration that told an ethanol-pricing story that is inconsistent with Midwest's theory.

Ethanol prices fell to their lowest point in at least six years, according to the ADM motion. Average profit margins for ethanol producers in 2020 were lower than in 2018, ADM said, when ADM was supposedly suppressing prices.

"To sum up: plaintiff's conclusory allegation of 2020 initiating an era of 'higher' prices from ADM is a fantasy," ADM said in its motion.

"It cannot be made plausible given the facts in the real world. ADM did not have the ability in early 2020 to charge monopoly prices; ADM did not charge monopoly prices then; and ADM did not earn monopoly profits as a result -- much less sufficient monopoly profits to recoup around two years of supposedly predatory pricing. This court should dismiss this case."

Read more on DTN:

"ADM Claims Economic Model Faulty in Case," https://www.dtnpf.com/…

Todd Neeley can be reached at todd.neeley@dtn.com

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