WILMINGTON, DEL. – The lawsuit in which the US Department of Justice challenges the purchase of Imperial Sugar Co. by US Sugar Corp. ended on April 21, with the court ordering both sides to complete their post-trial submissions by May 27.
The case, USA v. US Sugar Corp. et al., Case 21-01644, in the U.S. District Court for the District of Delaware, implies that the DOJ is challenging the agreement on the grounds that it would lessen competition and result in higher prices for bulk sugar in the Southeast. Is, thereby violating Section 7 of the Clayton Act. The DOJ took the somewhat unusual step of suing to block the transaction in federal court. The lawsuit was filed in November 2021, and the DOJ alleged that the $315 million deal would result in “an overwhelming majority of refined sugar sales in the Southeast in the hands of just two producers,” driving up sales. price of refined sugar paid by consumers. and many food and beverage producers.
The DOJ exhibits, including emails between United Sugars and another sugar company and other communications with a United Sugars customer that the DOJ described as “extremely disturbing.” The documents included pricing discussions and customer concessions. A DOJ attorney said there was “actual coordination that came to light because of this litigation.”
“The coordination effect in the context of a merger is not the type of conduct that lands you in jail for price-fixing,” said DOJ Antitrust Division attorney Ryan M. Sandrock. “It can be, but it doesn’t have to be.”
U.S. District Judge Maryellen Noreika pressed DOJ attorneys on the strength of some of their arguments in the acquisition’s antitrust challenge, noting that alleged industry coordination claimed by the DOJ did not appear uncommon, according to a Law360 report.
“The problem I have here is that I’ve been a litigator for 20 years and it just doesn’t seem that different from what everyone else does in every industry,” Mr Noreika said, adding that it’s “not price-fixing”, and that driving can be relatively common.
Lawrence E. Buterman of Latham & Watkins LLP, one of the attorneys representing US Sugar Corp., said it was up to the DOJ to accurately identify the geographic area and markets allegedly at risk due to the deal, and that the court should assess the pragmatic question rather than focus on a number of hypothetical tests of competitive effects, according to Law360.
“They have the burden of market definition,” Buterman said. “The overwhelming evidence of how the market works simply leads to the conclusion that this transaction will not harm competition. There is no coherent theory that can explain that the removal of an entity (Imperial Sugar Co.) which, frankly, is struggling to survive, which has input costs 30% higher than its competitors, acts as a competitive constraint in the market.”
Law360 noted that Mr. Noreika at one point referred to tensions between the government’s interest in protecting consumers from price increases and protecting producers in certain markets by preventing prices from falling.
“It just seems funny to me that the prices aren’t as low as they could be,” Judge said. “The US government is keeping them higher, and now the US government is coming in and saying, ‘Oh my God. This will increase prices. It seems a bit inconsistent.
Imperial Sugar Co. in Savannah, Georgia is owned by Louis Dreyfus Co. United Sugars Corp. is a sugar sales cooperative that markets sugar for US Sugar Corp. and others, including beet processors. The second major Southeast seller mentioned in the case besides US Sugar Corp. (sugar sold by United Sugars) is Domino Foods Inc., formerly Domino Sugar, which is not a party to the case.