[Federal Register Volume 59, Number 250 (Friday, December 30, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-32146]
[[Page Unknown]]
[Federal Register: December 30, 1994]
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DEPARTMENT OF JUSTICE
U.S. v. Topa Equities (V.I.), Ltd.; Proposed Final Judgment and
Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. Section 16 (b) through (h), that a proposed
Final Judgment, a Stipulation and a Competitive Impact Statement have
been filed with the United States District Court for the District of
the Virgin Islands in United States of America v. Topa Equities (V.I.),
Ltd., Civil No. 1994-179.
The Complaint in the case alleges that Topa obtained the exclusive
Virgin Islands distribution rights to almost every brand of distilled
spirits in the world market, and that in obtaining and retaining these
rights, Topa restrained trade.
In the Proposed Final Judgment Topa agreed to allow its suppliers
of distilled spirits to deal with other wholesalers and not to
interfere with the business operations of its competitors.
Public comment on the proposed Final Judgment is invited within the
statutory 60-day comment period. Such comments and responses thereto
will be published in the Federal Register and filed with the Court.
Comments should be directed to John T. Orr, Chief, Atlanta Field
Office, Antitrust Division, Department of Justice, Suite 1176, Richard
B. Russell Federal Building, 75 Spring Street, Atlanta, Georgia 30303
(telephone: 404/331-7100).
Constance K. Robinson,
Director of Operations, Antitrust Division.
United States District Court, District of the Virgin Islands, St.
Thomas Division
Complaint
The United States of America, through its attorneys of the
Antitrust Division, acting under the direction of the Attorney General
of the United States, brings this civil action to obtain equitable and
other relief against the defendant named herein and alleges as follows:
I
Jurisdiction and Venue
1. This complaint is filed and this action is instituted under
Section 4 of the Sherman Act, 15 U.S.C. 4, to prevent and restrain the
continuing violation by the defendant, as hereinafter alleged, of
Section 3 of the Sherman Act, 15 U.S.C. 3. This Court has jurisdiction
over the subject matter and the person of the defendant pursuant to
Section 12 of the Clayton Act, 15 U.S.C. 22, and 28 U.S.C. 1331 and
1337.
2. The defendant is a Virgin Islands corporation and maintains
offices, transacts business and is found in the District of the Virgin
Islands. Venue is proper in the District of the Virgin Islands under 15
U.S.C. 22 and 28 U.S.C. 1391(c).
II
Defendant
3. Topa Equities (V.I.), Ltd. is made a defendant herein. Topa
Equities (V.I.), Ltd. is a holding company that wholly owns the Virgin
Islands wholesale distilled spirits companies West Indies Corporation
and Bellows International, Ltd. (Hereinafter in this Complaint, Topa
Equities (V.I.), Ltd. and its subsidiaries will be referred to
collectively as ``Topa.'') In 1991, Topa had total sales of distilled
spirits in the Virgin Islands of approximately $24.7 million.
4. The activities of Topa are within the flow of, and substantially
affect, commerce within the Virgin Islands and between the Virgin
Islands and the several states and foreign nations.
III
Definitions
5. ``Distilled spirits'' means liquor products of all types
intended for human consumption, including, but not limited to, whiskey,
gin, vodka, rum, tequila, brandy, liqueurs and cordials, but excluding
wine and malt beverages and non-alcoholic beverages.
6. ``Virgin Islands'' means the Territory of the Virgin Islands of
the United States.
7. ``Retailer'' means any person engaged in the business of
purchasing distilled spirits from wholesalers, as defined herein, and
reselling them to consumers in establishments located in the Virgin
Islands, including such Virgin Islands-located establishments as retail
liquor stores, grocery stores, convenience stores, restaurants and
hotels.
8. ``Supplier'' means any licensed manufacturer, distiller or
importer of distilled spirits from which defendant or any other
wholesaler, as defined herein, purchases or has purchased distilled
spirits.
9. ``Wholesaler'' means any person holding a wholesaler's license
for distilled spirits from the government of the Virgin Islands, and
who is engaged in the business of purchasing distilled spirits from
suppliers and reselling them to other wholesalers or to retailers
located in the Virgin Islands.
IV
Trade and Commerce
10. Most distilled spirits sold within the Virgin Islands are
imported from outside of the Virgin Islands. The imported distilled
spirits are transported to the Virgin Islands mainly in container
ships. A few brands of distilled spirits are produced within the Virgin
Islands. Wholesalers like Topa purchase distilled spirits from
suppliers, store them in warehouses and sell them to retailers who in
turn sell to consumers in retail outlets. Every wholesaler and retailer
must be licensed by the Virgin Islands government. Under Virgin Islands
law, a wholesaler must obtain a license for distilled spirits
wholesaling and is prohibited from retailing such products.
11. In the world distilled spirits market, production and
distribution of most distilled spirits are controlled by several large
international conglomerates. These conglomerates own the companies that
produce most of the distilled spirits available in the world market,
and each conglomerate offers a portfolio of products from the various
distilled spirits categories. The conglomerates produce or handle the
worldwide distribution of most of the distilled spirits sold in the
Virgin Islands, and in 1991 their products accounted for approximately
64% of all distilled spirits sold in the Virgin Islands.
12. In the world distilled spirits market, liquor suppliers often
grant exclusive distribution rights to wholesalers. In the Virgin
Islands, Topa and other wholesalers generally hold exclusive
distribution rights for the distilled spirits that they sell. The
distribution rights usually are limited to the Virgin Islands. Topa has
the exclusive Virgin Islands distribution rights to almost every
popular brand of distilled spirits available in the world market.
13. Exclusive distribution rights for the most popular brands of
distilled spirits, including those brands forming the portfolios of the
large international distilled spirits conglomerates, are important to
the success of a Virgin Islands distilled spirits wholesaler. A
significant entrant in the Virgin Islands wholesale distilled spirits
market would need the rights to distribute the products of one or more
major suppliers to have a successful business. It is difficult,
however, for a potential or existing wholesaler to obtain a brand or
portfolio that is already being distributed by another wholesaler in
the market, in part because a Virgin Islands law, Title 12A V.I.C.
sections 131 and 132, allows a dealer to sue a supplier for wrongful
termination.
14. The distribution of distilled spirits by wholesalers
constitutes a relevant product market. The relevant geographic market
for the relevant product is the Virgin Islands.
15. Most retail distilled spirits business in the Virgin Islands
takes place on the island of St. Thomas. On St. Thomas, warehouse space
suitable for the operation of a wholesale distilled spirits business is
scarce and expensive because of the restricted terrain. An entrant in
the Virgin Islands wholesale distilled spirits market would need
adequate and accessible storage space for its distilled spirits on St.
Thomas to have a successful business.
16. The potential for litigation under the Virgin Islands wrongful
termination statute helps to protect Topa's exclusive rights to
distribute the various brands of distilled spirits in the Virgin
Islands and makes it more difficult for a potential or existing
competitor to obtain the rights to distribute these brands. This
potential for litigation and the scarcity of warehouse space on St.
Thomas are among the most important barriers to entry which makes entry
for a competitor difficult and costly, and significant entry has not
occurred in at least ten years and is unlikely to occur without a Court
order.
Violation Alleged
17. Topa entered the Virgin Islands wholesale distilled spirits
market through a predecessor company in 1980. Through this entry and a
series of acquisitions of competitors, Topa acquired the exclusive
Virgin Islands distribution rights to almost every brand of distilled
spirits in the world market. Topa has retained these distribution
rights through continuing contractual relationships, both written and
oral, with its suppliers. As a result of its acquisitions, and its
retention of the exclusive distribution rights acquired, in 1991 Topa
had a market share of approximately 96% of wholesale distilled spirits
sold in the Virgin Islands market.
18. Topa obtained and has retained its monopoly position in the
Virgin Islands through the exclusive Virgin Islands distribution rights
to almost every brand of distilled spirits in the world market. Topa's
possession and retention of these distribution rights has made
significant entry extremely difficult in the Virgin Islands.
19. The contracts in restraint of trade by which Topa obtained and
has retained its monopoly position have had the following effects,
among others:
a. The wholesale distribution of distilled spirits in the Virgin
Islands is a monopoly;
b. Competition in the wholesale distribution of distilled spirits
in the Virgin Islands has been reduced;
c. Retailers of distilled spirits in the Virgin Islands have been
deprived of the benefits of free and open competition in that Topa is
their only source for almost all distilled spirits and there are no
alternative sources in the Virgin Islands for competing distilled
spirits; and
d. Suppliers of distilled spirits to the Virgin Islands have been
deprived of the benefits of free and open competition, in part because
Topa has inherent conflicts of interest in the representation of their
distilled spirits such that the representation of one product
necessarily results in diminished representation for competing
products.
20. The violation alleged in this complaint is continuing and will
continue unless the relief hereinafter prayed for is granted.
Prayer
Wherefore, plaintiff prays:
1. That the series of acquisitions of competitors through which
Topa acquired the exclusive Virgin Islands distribution rights to
almost every brand of distilled spirits available in the world market
and its retention of those exclusive distribution rights be adjudged
contracts in restraint of trade in violation of Section 3 of the
Sherman Act;
2. That plaintiff have such other and further relief as the Court
may deem just and proper; and
3. That plaintiff recover the costs of this action.
Dated: December 7, 1994.
Anne K. Bingaman,
Assistant Attorney General.
Robert E. Litan,
Deputy Assistant Attorney General.
Mark C. Schechter,
Deputy Director of Operations, U.S. Department of Justice, Antitrust
Division.
Clarence B. Taylor,
for the United States Attorney District of the Virgin Islands.
John T. Orr,
Justin M. Nicholson,
James L. Weis,
Attorneys, Antitrust Division, U.S. Department of Justice, Richard B.
Russell Building, Suite 1176, 75 Spring Street, SW., Atlanta, GA 30303,
(404) 331-7100.
Stipulation
It is stipulated by and between the undersigned parties, by their
respective attorneys, that:
1. This Court has jurisdiction over the subject matter of this
action and over the parties hereto, and venue of this action is proper
in the United States District Court for the District of the Virgin
Islands, St. Thomas Division;
2. The parties to this Stipulation consent that a Final Judgment in
the form attached may be filed and entered by the Court, upon any
party's or the Court's own motion, at any time after compliance with
the requirements of the Antitrust Procedures and Penalties Act (15
U.S.C. 16), without further notice to any party or other proceedings,
provided that plaintiff has not withdrawn its consent, which it may do
at any time before entry of the proposed Final Judgment by serving
notice on the defendant and by filing that notice with the Court;
3. Defendant agrees to be bound by the provisions of the proposed
Final Judgment pending its approval by the Court. If plaintiff
withdraws its consent or the proposed Final Judgment is not entered
pursuant to this Stipulation, this Stipulation shall be of no effect
whatever and its making shall be without prejudice to any party in this
or any other proceeding; and
4. This Stipulation and the Final Judgment to which it relates are
for settlement purposes only and do not constitute an admission by
defendant in this or any other proceeding that Section 3 of the Sherman
Act, 15 U.S.C. 3, or any other provision of law, has been violated.
Dated:
Anne K. Bingaman,
Assistant Attorney General.
Robert E. Litan,
Deputy Assistant Attorney General.
Mark C. Schechter,
Deputy Director of Operations.
John T. Orr,
Chief, Atlanta Field Office, U.S. Department of Justice, Antitrust
Division.
Ernest Gellhorn,
Counsel for Defendant, Jones, Day, Reavis & Pogue, Metropolitan Square
Building, 1450 G Street NW., Washington, DC 20005, (202) 879-3863.
Justin M. Nicholson,
James L. Weis,
Attorneys, Antitrust Division, U.S. Department of Justice, Richard B.
Russell Building, 75 Spring Street S.W., Suite 1176, Atlanta, Georgia
30303, (404) 331-7100.
Final Judgment
Plaintiff, United States of America, filed its Complaint on
December 7, 1994. Plaintiff and defendant, by their respective
attorneys, have consented to the entry of this Final Judgment without
trial or adjudication of any issue of fact or law. This Final Judgment
shall not constitute any evidence against, or any admission by, any
party with respect to any issue of fact or law. Defendant has agreed to
be bound by the provisions of this Final Judgment pending its approval
by the Court. Therefore, before the taking any testimony, and without
trial or adjudication of any issue of fact or law, and upon the consent
of the parties,
IT IS HEREBY ORDERED, ADJUDGED AND DECREED as follows:
I
This Court has jurisdiction over the subject matter of this action
and each of the parties consenting to this Final Judgment. The
Complaint states a claim upon which relief may be granted against
defendant under Section 3 of the Sherman Act (15 U.S.C. 3).
II
As used in this Final Judgment:
A. ``Distilled spirits'' means liquor products of all types
intended for human consumption, including, but not limited to, whiskey,
gin, vodka, rum, tequila, brandy, liqueurs and cordials, but excluding
wine and malt beverages and non-alcoholic beverages.
B. ``Person'' means any individual, association, cooperative,
partnership, corporation or other business or legal entity.
C. ``Virgin Islands'' means the Territory of the Virgin Islands of
the United States.
D. ``Retailer'' means any person engaged in the business of
purchasing distilled spirits from wholesalers, as defined herein, and
reselling them to consumers in establishments located in the Virgin
Islands, including such Virgin Islands-located establishments as retail
liquor stores, grocery stores, convenience stores, restaurants and
hotels.
E. ``Supplier'' means any licensed manufacturer, distiller or
importer of distilled spirits from which defendant or any other
wholesaler, as defined herein, purchases distilled spirits or has
purchased distilled spirits within one year prior to this Final
Judgment.
F. ``Wholesaler'' means any person holding a wholesaler's license
for distilled spirits from the government of the Virgin Islands and who
is engaged in the business of purchasing distilled spirits from
suppliers and reselling them to other wholesalers or to retailers
located in the Virgin Islands.
G. ``Topa Equities (V.I.), Ltd.'' (hereinafter referred to as
``Topa'') means defendant and its parent (but only to the extent of its
effective supervision of, or direct involvement in, defendant's
wholesale distribution of distilled spirits in the Virgin Islands),
wholesaler subsidiaries, wholesaler affiliates, successors and assigns
(excluding any independent purchasers), directors, officers, managers,
agents and employees and any other person acting for or on behalf of
them.
III
The provisions of this Final Judgment shall apply to Topa and to
all their persons in active concert or participation with Topa who
shall have received actual notice of this Final Judgment by personal
service or otherwise.
IV.
Topa is enjoined and restrained from:
A. Taking any action under any contract or under Title 12A,
Sections 131 and 132, of the Virgin Islands Code to prevent its
suppliers from canceling their distribution arrangements for distilled
spirits, whether written or not, with Topa upon thirty days' written
notice and appointing another wholesaler in its stead. In the event of
such cancellation of distribution arrangements for distilled spirits by
a supplier, Topa shall, at the supplier's request, sell back to the
supplier, at the prices Topa paid to the supplier to purchase the
products, plus storage, handling and transportation costs, as well as
all taxes and duties paid by Topa, all distilled spirits that Topa then
has in its possession that were purchased by Topa from the supplier and
that have not been sold or otherwise committed, and otherwise assist in
the orderly disposition of such existing inventory;
B. Entering into with, or enforcing or attempting to enforce
against, any officer of Topa, any written contract, agreement or
covenant not to compete in the distilled spirits industry in the Virgin
Islands; and countering an offer of employment to any officer of Topa
from any wholesaler with which a Topa supplier has entered into any
arrangement to distribute its distilled spirits in the Virgin Islands.
Otherwise, Topa may give its officers raises, bonuses and promotions in
the ordinary course of business, counter offers of employment from
distributors not engaged in the distribution of distilled spirits and
take action against its former officers for the unlawful disclosure of
trade secrets;
C. Making unsolicited offers of employment to any executive
employee of any wholesaler with which a supplier has entered into any
arrangement to distribute its distilled spirits in the Virgin Islands
for two years following the opening for business of such wholesaler,
unless such employee has previously resigned from or been terminated by
such wholesaler;
D. Refusing to deal with any retailer because that retailer deals
with another wholesaler;
E. Intentionally presenting, or attempting to prevent, any
wholesalers with which a supplier has entered into any arrangement to
distribute its distilled spirits in the Virgin Islands from obtaining
warehouse space for the distribution of distilled spirits. Topa may, in
the ordinary course of business, seek, retain and acquire warehouse
space to meet its ordinary and necessary business requirements;
F. Directly or indirectly merging or consolidating with, or
acquiring securities of, any other wholesaler without obtaining the
prior written consent of the Antitrust Division of the Department of
Justice; and
G. Acquiring, without obtaining the prior written consent of the
Antitrust Division of the Department of Justice, either any quantity in
excess of 5% of a wholesaler's assets, excluding inventory, applied to
the wholesale distribution of distilled spirits in the Virgin Islands,
or any quantity in excess of 30% of a wholesaler's inventory of
distilled spirits.
Within thirty days of the entry of this Final Judgment, Topa shall
cause to be delivered to all suppliers who have contracts then in
existence with Topa, written or otherwise, by certified letter or its
equivalent, a copy of this Final Judgment.
For the purpose of determining of securing compliance with this
Final Judgment and subject to any recognized privilege, from time to
time:
A. Duly authorized representatives of the Department of Justice
shall, upon written request by the Attorney General or by the Assistant
Attorney General in charge of the Antitrust Division, and on reasonable
written notice to defendant made to its principal office in Los
Angeles, California, be permitted:
1. Access during the office hours of defendant to inspect and copy
all books, ledgers, accounts, correspondence, memoranda, and other
records and documents in the possession or under the control of
defendant, which may have counsel present, relating to any of the
matters contained in the Final Judgment; and
2. Subject to the reasonable convenience of defendant and without
restraint or interference from it, to interview officers, employees and
agents of defendant, any of whom, together with defendant, may have
counsel present, regarding any such matters.
B. Upon written request by the Attorney General or the Assistant
Attorney General in charge of the Antitrust Division made to
defendant's principal office in Los Angeles, California, defendant
shall submit such written reports, under oath if requested, with
respect to any of the matters contained in this Final Judgment, as may
be requested.
C. No information obtained by the means provided in this Final
Judgment shall be divulged by any representative of the Department of
Justice to any person other than a duly authorized representative of
the Executive Branch of the United States, except in the course of
legal proceedings to which the United States is a party, or for the
purpose of securing compliance with the Final Judgment or as otherwise
required by law.
D. If at the time information or documents are furnished by
defendant to plaintiff, defendant represents and identifies in writing
the material in any such information or documents to be that to which a
claim of protection may be asserted under Rule 26(c)(7) of the Federal
Rules of Civil Procedure or as otherwise provided by statute, and the
defendant marks each pertinent page of such material, ``Subject to
Claim of Protection under Rule 26(c)(7) of the Federal Rules of Civil
Procedure,'' or as otherwise provided by statute, then ten days' notice
shall be given by the United States to defendant prior to divulging
such material in any legal proceeding (other than a grand jury
proceeding) to which defendant is not a party.
VI
Topa shall:
A. Establish and implement a plan for monitoring compliance by its
officers, directors, agents, managers and other employees with the
terms of the Final Judgment; and
B. File with this Court and serve upon plaintiff, within ninety
days after the date of entry of this Final Judgment, an affidavit as to
the fact and manner of its compliance with this Final Judgment.
VII
Jurisdiction is retained by this Court for the purpose of enabling
either of the parties to this Final Judgment to apply to this Court at
any time for such further orders and directions as may be necessary or
appropriate for the construction or modification of any of the
provisions hereof, for the enforcement of compliance herewith and for
the punishment of violations hereof.
VIII
This Final Judgment will expire on the fifth anniversary of its
date of entry.
IX
Entry of this Final Judgment is in the public interest.
Dated: ________.
____________________
United States District Judge, District of the Virgin Islands.
COMPETITIVE IMPACT STATEMENT
Pursuant to Section 2(b) of the Antitrust Procedures and Penalties
Act (``APPA''), 15 U.S.C. 16(b)-(h), the United States submits this
Competitive Impact Statement relating to the proposed Final Judgment
submitted for entry with the consent of Topa Equities (V.I.), Ltd. in
this civil antitrust proceeding.
I
Nature and Purpose of the Proceeding
On December 7, 1994, the United States filed a civil antitrust
complaint, under Section 4 of the Sherman Act, 15 U.S.C. 4, against
Topa Equities (V.I.), Ltd., alleging that Topa Equities (V.I.), Ltd.
restrained trade in violation of Section 3 of the Sherman Act, 15
U.S.C. 3, through its acquisition and retention of exclusive Virgin
Islands distribution rights to almost every brand of distilled spirits
in the world market. (Hereinafter, the United States Virgin Islands
will be referred to as ``the Virgin Islands.'')
Topa Equities (V.I.), Ltd., is a holding company that wholly owns
the Virgin Islands wholesale distilled spirits companies West Indies
Corporation and Bellows International, Ltd. (Hereinafter, Topa Equities
(V.I.), Ltd. and its subsidiaries will be collectively referred to as
``Topa.'') Topa has the distribution rights in the Virgin Islands for
almost every popular brand of distilled spirits available in the world
market. Distilled spirits means liquor products of all types intended
for human consumption, including, but not limited to, whiskey, gin,
vodka, rum, tequila, brandy, liqueurs and cordials, but excluding wine
and malt beverages and non-alcoholic beverages. Topa obtained these
distribution rights mainly through the acquisition of its competitors.
The complaint alleges that the effect of the contracts in restraint
of trade by which Topa obtained and has retained its monopoly position
has been to lessen competition substantially, in violation of Section 3
of the Sherman Act, 15 U.S.C. Sec. 3, by:
1. Decreasing actual and potential competition in the wholesale
distribution of distilled spirits in the Virgin Islands;
2. Depriving retailers in the Virgin Islands of the benefits of
free and open competition because Topa is the only source for almost
all distilled spirits products and there are no alternative sources for
competing distilled spirits products; and
3. Depriving suppliers of distilled spirits products to the Virgin
Islands of the benefits of free and open competition, in part because
Topa has inherent conflicts of interest in the representation of their
distilled spirits products, such that the representation of one product
necessarily results in diminished representation for competing
products.
On December 7, 1994, the United States and Topa filed a Stipulation
by which they consented to the entry of a proposed Final Judgment
designed to increase competition in the wholesale distilled spirits
market in the Virgin Islands. The proposed Final Judgment, as explained
more fully below, would order Topa to take no action to prevent its
distilled spirits suppliers from canceling their distribution
arrangements and appointing another wholesaler. The Final Judgment also
contains a number of provisions ordering Topa not to interfere with the
business operations of a competitor.
The United States and Topa have stipulated that the proposed Final
Judgment may be entered after compliance with the APPA. Entry of the
proposed Final Judgment will terminate this action, except that the
Court will retain jurisdiction to construe, modify and enforce the
Final Judgment and to punish violations of the Final Judgment.
II
Events Giving Rise to the Alleged Violation
Under Virgin Islands law, every distilled spirits wholesaler and
retailer must be licensed by the Virgin Islands government. In
addition, any wholesaler who obtains a license for distilled spirits
wholesaling is prohibited from retailing such products. Topa entered
the wholesale distilled spirits business in the Virgin Islands through
a predecessor company in 1980 and thereafter made a series of
acquisitions of competitors. Topa now imports most of the distilled
spirits products sold within the Virgin Islands. (Only a few brands of
distilled spirits are produced within the Virgin Islands.) Wholesalers
like Topa purchase distilled spirits products from suppliers, store
them in warehouses, and sell them to retailers who, in turn, sell to
consumers in retail outlets.
In the world distilled spirits market, liquor suppliers often grant
exclusive distribution rights to wholesalers. In the Virgin Islands,
wholesalers generally hold exclusive distribution rights for the
distilled spirits products that they sell. The distribution rights
usually are limited to the Virgin Islands. Exclusive distribution
rights for some of the most popular brands are important to the success
of a Virgin Islands distilled spirits wholesaler. It is difficult,
however, to obtain a brand that is already being distributed by another
wholesaler in the area, in part because a Virgin Islands law, Title 12A
V.I.C. Sections 131 and 132, allows a dealer to sue a supplier for
wrongful termination. Topa has the exclusive distribution rights in the
Virgin Islands for almost every popular brand of distilled spirits
available in the world market.
Most retail distilled spirits business in the Virgin Islands takes
place on the island of St. Thomas. On St. Thomas, warehouse space
suitable for the operation of a wholesale distilled spirits business is
scarce and expensive because of the restricted terrain. An entrant in
the Virgin Islands wholesale distilled spirits market would need
adequate and accessible storage space for its distilled spirits
products on St. Thomas to have a successful business.
The potential for litigation under the Virgin Islands wrongful
termination statute helps to protect Topa's exclusive rights to
distribute the various brands of distilled spirits in the Virgin
Islands and makes it difficult for a potential or existing competitor
to obtain the rights to distribute these brands. This potential for
litigation and the scarcity of warehouse space on St. Thomas are among
the most important barriers to entry which make entry for a competitor
difficult and costly, and significant entry into the Virgin Islands
wholesale distilled spirits market has not occurred in at least ten
years.
B. Effects on Competition
Through entry into the market and a series of acquisitions of
competitors. Topa acquired the exclusive Virgin Islands distribution
rights to almost every brand of distilled spirits in the world market.
Topa has retained these distribution rights through continuing
contractual relationships, both written and oral, with its suppliers.
As a result of its acquisitions, and its retention of the exclusive
distribution rights acquired, in 1991 Topa had a market share of
approximately 96% of wholesale distilled spirits sold in the Virgin
Islands market.
The United States filed its complaint because the effect of the
contracts in restraint of trade by which Topa obtained and has retained
its monopoly position has been to lessen competition substantially in
the wholesale distribution of distilled spirits in the Virgin Islands.
Retailers are deprived of alternative sources for competing products.
Suppliers are also deprived of the benefits of free and open
competition, in part because Topa has inherent conflicts of interest in
the representation of their distilled spirits products and cannot
represent all competing brands equally.
III
Explanation of the Proposed Final Judgment
The United States and Topa have stipulated that the Court may enter
the proposed Final Judgment after compliance with the APPA. The
stipulation provides that entry of the Final Judgment does not
constitute any evidence or admission by any party with respect to any
issue of fact or law. Under the provisions of the APPA, the proposed
Final Judgment may not be entered unless the Court finds that entry is
in the public interest. The Department believes that the proposed Final
Judgment provides an adequate remedy for the alleged violation and is
in the public interest. The term of the proposed Final Judgment is five
years.
The Final Judgment allows suppliers of distilled spirits to leave
Topa if they desire and also reduces substantial barriers to
competition in the wholesale distilled spirits market in the Virgin
Islands.
Paragraph IV.A orders Topa to take no action under any contract or
under Title 12A, Sections 131 and 132, of the Virgin Islands Code (the
local statute that protects dealers from wrongful termination by a
supplier) to prevent its suppliers from canceling their distribution
arrangements for distilled spirits, whether written or not, with Topa
upon thirty-days' written notice and appointing a new wholesaler
instead. If a supplier does cancel its distribution arrangements, Topa
must, at the supplier's request, sell back to the supplier all of the
distilled spirits Topa bought from the supplier and otherwise assist in
the orderly disposition of the existing inventory of the supplier's
product.
Under this provision of the Final Judgment, any dissatisfied
supplier will be free to find an alternative distributor if the
supplier chooses to do so, and, moreover, a potential new wholesaler
can freely solicit the business of any supplier. The Final Judgment
also provides that Topa must waive its rights under the Virgin Islands
statute which allows a dealer to sue a supplier for wrongful
termination. Topa's waiver of its rights under this statute removes a
significant potential impediment to a supplier changing wholesalers,
and also removes a major potential problem for any wholesaler trying to
take brands away from Topa.
Qualified personnel, with the necessary connections with the retail
trade, are difficult to find in the Virgin islands. Paragraphs IV.B and
IV.C may help an entrant to hire and retain qualified personnel to run
a distilled spirits business in the Virgin Islands without undue
interference from Topa.
Paragraph IV.B orders Topa not to enter into with, or enforce or
attempt to enforce against, any officer of Topa, any written contract,
agreement or covenant not to compete in the distilled spirits industry
in the Virgin Islands; and not to counter an offer of employment to any
officer of Topa from any wholesaler with which a Topa supplier has
entered into any arrangement to distribute its distilled spirits in the
Virgin Islands. Otherwise, Topa may give its officers raises, bonuses
and promotions in the ordinary course of business, counter offers of
employment from distributors not engaged in the distribution of
distilled spirits and take action against its former officers for the
unlawful disclosure of trade secrets.
Paragraph IV.C orders Topa not to make unsolicited offers to hire
any executive employee of any wholesaler with which a supplier has
entered into any arrangement to distribute its distilled spirits in the
Virgin Islands for two years following the opening for business of the
new wholesaler, unless the employee has previously resigned from or
been terminated by such wholesaler.
Paragraph IV.D. orders Topa not to refuse to deal with any retailer
because the retailer deals with another wholesaler. Topa has the Virgin
Islands distribution rights for almost every major brand of distilled
spirits available in the world market. Consequently, even if Topa loses
some brands to a new or existing wholesaler, Topa will retain enormous
influence over retailers. This provision will prevent Topa from abusing
that position in the retail trade and will help ensure that a new or
existing wholesaler will be able to compete fairly in the marketplace.
Paragraph IV.E orders Topa not to prevent, or attempt to prevent,
any wholesaler with which a supplier has entered into any arrangement
to distribute its distilled spirits in the Virgin Islands from
obtaining warehouse space for the distribution of distilled spirits.
This provision helps ensure that a Topa competitor will be able to
obtain warehouse space for its products. Under the wording of this
provision, the United States can seek Court-ordered relief should Topa
do anything to prevent a competitor from obtaining warehouse space. The
provision allows Topa to obtain warehouse space for its own use, if it
is acquired in ``the ordinary course of business'' and is an ``ordinary
and necessary'' business requirement.
Paragraph IV.F orders Topa not to, directly or indirectly, merge or
consolidate with, or acquire securities of, any other wholesaler
without obtaining the prior written consent of the Antitrust Division
of the Department of Justice. Paragraph IV.G also orders Topa not to
acquire, without obtaining the prior written consent of the Antitrust
Division of the Department of Justice, either any quantity in excess of
5% of a wholesaler's assets, excluding inventory, applied to the
wholesale distribution of distilled spirits in the Virgin Islands, or
any quantity in excess of 30% of a wholesaler's inventory of distilled
spirits.
Topa is also ordered, within thirty days of the entry of this Final
Judgment, to deliver to all suppliers who have contracts then in
existence with Topa, written or otherwise, by certified letter or its
equivalent (necessary because so many of the suppliers are not in the
United States), a copy of the Final Judgment.
IV
Remedies Available to Potential Litigants
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
attorney's fees. Entry of the proposed Final Judgment will neither
impair nor assists the bringing of any private antitrust actions under
the Clayton Act. Under the provisions of Section 5(a) of the Clayton
Act, 15 U.S.C. 16(a), the proposed Final Judgment has no prima facie
effect in any private lawsuit that may be brought against the
defendants.
V
Procedures Available for Modification of the Proposed Final
Judgment
As provided by the APPA, any person believing that the proposed
Final Judgment should be modified may submit written comments within
the sixty day period from the date of publication in the Federal
Register to John T. Orr, Chief, Atlanta Field Office, Antitrust
Division, U.S. Department of Justice, Suite 1176, 75 Spring Street,
S.W., Atlanta, GA 30303, (404) 331-7100. These comments, and the
Department's responses, will be filed with the Court and published in
the Federal Register. All comments will be given due consideration by
the Department of Justice, which remains free to withdraw its consent
at any time prior to entry. The proposed Final Judgment provides that
the Court retains jurisdiction over these actions, and any party may
apply to the Court for any order necessary or appropriate for their
modification, interpretation or enforcement.
VI
Alternatives to the Proposed Final Judgment
The United States considered, as an alternative to the proposed
Final Judgment, litigation seeking structural relief, including forcing
Topa to unilaterally terminate its distribution arrangements with some
of its suppliers. The United States rejected that alternative because
such structural relief would place an unacceptably large burden on the
third-party suppliers. Moreover, the relief in the proposed Final
Judgment presents an effective means to improve the level of
competition in the Virgin Islands wholesale distilled spirits market
without creating a regulatory environment that might interfere with
free market forces.
VII
Determinative Documents
No documents were determinative in the formulation of the proposed
Final Judgment. Consequently, the United States has not attached any
such documents to the proposal Final Judgment.
Dated: December 7, 1994.
Justin M. Nicholson,
James L. Weis,
Attorneys, Antitrust Division, U.S. Department of Justice, Richard B.
Russell Building, Suite 1176, 75 Spring Street, S.W., Atlanta, Georgia
30303, (404) 331-7100.
[FR Doc. 94-32146 Filed 12-29-94; 8:45 am]
BILLING CODE 4410-01-M
