WILMINGTON, DEL. — The trial in which the US Department of Justice is challenging the US Sugar Corp.’s purchase of Imperial Sugar Co. ended April 21 with the court ordering both parties to complete post-trial submissions by May 27.
The case, USA v. US Sugar Corp. et al., number 21-01644, in the US District Court for the District of Delaware, involves the DOJ challenging the deal on grounds it would reduce competition and result in higher bulk sugar prices in the Southeast, thus violating Section 7 of the Clayton Act. The DOJ took the somewhat unusual step of suing to block the transaction in federal court. The suit was filed in November 2021, and the DOJ alleged that the $315 million deal would result in “an overwhelming majority of refined sugar sales across the Southeast in the hands of only two producers,” resulting in higher prices for 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 troubling.” The documents included price discussions and customer concessions. An attorney for the DOJ said there was “actual coordination that was revealed because of this litigation.”
“The coordination effect in the merger context is not the type of conduct that sends you to jail for price-fixing,” DOJ antitrust division attorney Ryan M. Sandrock said. “It can be, but it doesn’t have to.”
US district judge Maryellen Noreika pressed DOJ attorneys on the strength of some of their arguments in the antitrust challenge to the acquisition, noting that alleged industry coordination claimed by the DOJ appeared not to be uncommon, according to a report from Law360.
“The problem I’m having here is, I was a litigator for 20 years and this just doesn’t seem like that much of a difference from what everyone in every industry does,” Mr. Noreika said, adding that it’s “not price-fixing,” and that the conduct may be relatively common.
Lawrence E. Buterman of Latham & Watkins LLP, one of the attorneys representing US Sugar Corp., said it was the DOJ’s burden to accurately identify the geographic area and markets allegedly at risk because of the deal, and that the court needed to assess the issue pragmatically rather than focusing on a number of hypothetical tests of competitive effects, according to Law360.
“They have the burden of market definition,” Mr. Buterman said. “The overwhelming evidence of the way the market operates simply leads to the conclusion that this transaction will not harm competition. There is no coherent theory that can explain that taking out an entity (Imperial Sugar Co.) that, frankly, is struggling to survive, that has input costs that are 30% higher than its competition, is acting as a competitive constraint on the market.”
Law360 noted that Mr. Noreika mused at one point about tensions between the government’s interest in protecting consumers against price increases and protecting producers in some markets by keeping prices from going to low.
“It just seems funny to me that prices are not as low as they could be,” the judge said. “The US government keeps them higher, and now the US government is coming in and say, ‘Oh my God. This is going to raise prices.’ It seems a little inconsistent.”Imperial Sugar Co. in Savannah, Ga., is owned by Louis Dreyfus Co. United Sugars Corp. is a sugar-selling cooperative that markets sugar for US Sugar Corp. and others, including beet processors. The second major seller in the Southeast noted in the case in addition to US Sugar Corp. (sugar sold by United Sugars) is Domino Foods Inc., formerly Domino Sugar, which is not a party in the case.