Pfizer Inc. will pay $20 million in criminal fines and plead guilty to federal charges that its former Food Science Group unit took part in two international price-fixing conspiracies.
The Justice Department charged that the second-largest U.S. drugmaker had agreed to fix prices for sodium erythorbate, a food preservative, and divide up markets for maltol, a flavor enhancer. In each case, antitrust officials said Pfizer reached secret agreements with an unnamed company.
Pfizer said it doesn't expect the settlement to affect its business or financial results. Still, the guilty plea will open Pfizer to customer lawsuits that could be at least as expensive to resolve as the government probe.
"It's hard to imagine it would be less" than $20 million to settle the private suits, said Washington antitrust lawyer James Loftis. "It could be more."
Pfizer said it "deeply regrets these actions, which were contrary to the company's clear, long-standing values, policies and practices." Pfizer sold the Food Science Group in January 1996 and says it hasn't been involved in the sale of food additives for almost four years.
The two conspiracies affected more than $65 million in commerce, the Justice Department said. The sodium erythorbate conspiracy lasted from 1992 to 1994 and involved meetings at which Pfizer and the other producer agreed to forgo competition and increase prices, antitrust enforcers charged. With maltol, the companies agreed to allocate customers and territories from 1989 to 1995.
"The department will continue to seek out and prosecute all international conspiracies that defraud American consumers and unfairly impede free and open competition in our markets," said Joel I. Klein, the department's top antitrust enforcer.
The Justice Department filed the two-count case in federal court in San Francisco.
Pfizer said antitrust enforcers concluded that none of the company's current directors or employees had engaged in any wrongdoing. The Justice Department said that it doesn't plan to bring additional charges against Pfizer and that there are no more antitrust investigations of the drugmaker, according to the company.
The plea agreement is the latest in a federal government price-fixing crackdown that since 1996 has netted more than a dozen company fines, totaling in excess of $1 billion.
Sodium erythorbate, an antioxidant, is commonly used to preserve the color and flavor of meat, vegetables and processed foods. Maltol is a chemical food flavoring agent used primarily in fruit and caramel-flavored candies and beverages.
Pfizer sold its food-science unit to Finnish company Cultor Oy for $350 million in January 1996. Combined sales of sodium erythorbate and maltol accounted for less than 1 percent of the company's total sales, the company said.