Rafi Mohammed

Pricing is the Key Plot of a Hollywood Movie Starring an

Posted on October 1st, 2009 (1 Comments)

Pricing gone “off the cliff” is the plot of the recently released motion picture, “The Informant,” starring Matt Damon and directed by Steven Soderbergh. The movie focuses on the Archer Daniels price fixing case and details the efforts (as well as the downfall) of the key informant, Mark Whitacre.

Whitacre, at the time the youngest corporate vice president at Archer Daniels, was involved in a global conspiracy to fix the price of lysine, an animal feed additive. In other words, he and his colleagues at Archer Daniels were holding clandestine meetings with competitors and basically saying “set your prices high and we’ll do so also.”

After learning of his role in these illegal activities, Whitacre’s wife announced that if he did not report this to the FBI…she would. As a result, over the next three years Whitacre served as a FBI informant and secretly recorded price fixing conversations globally. A study by the U.S. Department of Justice found that within six months of the start of this pricing fixing scheme, Lysine prices increased by 70%. Two Archer Daniels executives, including its vice chairman, were each sentenced to two years in prison and fined $350,000. Archer Daniels ended up paying half a billion dollars in criminal fines and civil settlements.

In a bizarre twist to the case, while acting as an informant, Mark Whitacre was actually embezzling money from Archer Daniels, to the tune of 9 million dollars! Because of these actions, he lost his immunity and was sentenced to nine years in prison. He blames these actions on being a manic depressive. According to the best selling book on this case, “The Informant,” the pressure of being an informant caused Whitacre to become manic – not sleeping at nights, riding horses after midnight, and once using a gas leaf blower on his driveway in the middle of a thunderstorm at 3 AM (synopsis courtesy of Wikipedia). Today, after serving his time in prison and with the dutiful support of his wife (who, to visit him weekly, moved to each state that he was transferred to as an inmate), Whitacre is now the president of operations and c.o.o. of a biotechnology company. He is actively seeking a presidential pardon for his actions.

Just to be clear, the pricing initiatives that I advocate are both legal and ethical. Pricing for profits and growth emphasizes a competitive market where companies are encouraged to innovate (and profit) to produce products that yield new value to customers. The moral of this story: do not attempt any type of collusive behavior with your competitors and don’t use a leaf blower in the midst of a thunderstorm at 3 AM!

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Readers' Comments on This Blog Entry

From Steve on October 1st, 2009
Rafi, you have to learn to put the words "SPOILER ALERT" when you going to give away multiple plot points in one of your articles (being an industry insider now, I thought you would have known that). My wife and I don't need to go see the movie now. Thanks for saving us $20.