[Federal Register Volume 64, Number 94 (Monday, May 17, 1999)]
[Notices]
[Pages 26782-26790]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-12340]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Suiza Foods Corporation and Broughton Foods
Company; 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, Stipulation and Competitive Impact Statement have been
filed with the United States District Court for the Eastern District of
Kentucky, London Division in United States of America v. Suiza Foods
Corporation and Broughton Foods Company, Civil Action No. 99-CV-130. On
March 18, 1999, the United States filed a Complaint alleging that the
proposed acquisition by Suiza Foods Corporation (``Suiza'') of the
stock of Broughton Foods Company (``Broughton''), would violate Section
7 of the Clayton Act, 15 U.S.C. 18. The proposed Final Judgment, filed
on April 22, 1999, requires Suiza to divest the Southern Belle plant
and related assets in Somerset, Kentucky, pursuant to the Final
Judgment. Copies of the Complaint, proposed Final Judgment and
Competitive Impact Statement are available for inspection at the
Department of Justice in Washington, D.C. in Room 200, 325 Seventh
Street, N.W., and at the Office of the Clerk of the United States
District Court for the District of the District of Columbia.
Public comment is invited within 60 days of the date of this
notice. Such comments, and responses thereto, will be published in the
Federal Register and filed with the Court. Comments should be directed
to Craig W. Conrath, Chief, Merger Task Force, Antitrust Division,
Department of Justice, 1401 H St. N.W., Suite 4000, Washington, D.C.
20530 (telephone: (202) 307-0001).
Constance K. Robinson,
Director of Operations & Merger Enforcement.
United States of America, Plaintiff, vs. Suiza Foods
Corporation, d/b/a Louis Trauth Dairy, Land O'Sun Dairy, and Flav-O-
Rich Dairy, and Broughton Foods Company, d/b/a Southern Belle Dairy,
Defendants. Civil Action No. 99-CV-130.
Stipulation and Order
It is stipulated by and between the undersigned parties, by their
respective attorneys, as follows:
(1) The Court has jurisdiction over the subject matter of this
action and over each of the parties hereto, and venue of this action is
proper in the Eastern District of Kentucky, London Division.
(2) The parties stipulate that a Final Judgment in the form hereto
attached
[[Page 26783]]
may be filed and entered by the Court, upon the motion of any party or
upon the Court's own motion, at any time after compliance with the
requirements of the Antitrust Procedures Penalties Act (15 U.S.C. 16),
and without further notice to any party or other proceedings, provided
that the plaintiff has not withdrawn its consent, which it may do at
any time before the entry of the proposed Final Judgment by serving
notice thereof on defendant and by filing that notice with the Court.
(3) Defendants shall abide by and comply with the provisions of the
proposed Final Judgment pending entry of the Final Judgment, or until
expiration of the time for all appeals of any Court ruling declining
entry of the proposed Final Judgment, and shall, from the date of the
filing of this Stipulation, comply with all the terms and provisions of
the proposed Final judgment as though the same were in full force and
effect as an order of the Court.
(4) This Stipulation shall apply with equal force and effect to any
amended proposed Final Judgment agreed upon in writing by the parties
and submitted to the Court.
(5) Defendants shall prepare and deliver reports in the form
required by the provisions of paragraph B of Section VI of the proposed
Final Judgment commencing no later than twenty (20) calendar days after
the filing of this Stipulation, and every thirty (30) calendar days
thereafter pending entry of the Final Judgment.
(6) In the event the plaintiff withdraws its consent, as provided
in paragraph 2 above, or if the proposed Final Judgment is not entered
pursuant to this Stipulation, or the time has expired for all appeals
of any Court ruling declining entry of the proposed Final Judgment, and
the Court has not otherwise ordered continuing compliance with the
terms and provisions of the proposed Final Judgment, this Stipulation
shall be of no effect whatsoever, and the making of this Stipulation
shall be without prejudice to any party in this or any other
proceeding.
(7) Defendants represent that the divestiture ordered in the
proposed Final Judgment can and will be made, and that defendants will
raise no claim of hardship or difficulty as grounds for asking the
Court to modify any of the divestiture provisions contained therein.
(8) Upon entry of this Stipulation as an Order of the Court, and
consistent with this Stipulation, insofar as the defendants were
enjoined by Orders of the Court on March 18, 1999, and April 14, 1999,
from consummating their proposed transaction and from bringing their
operations under common ownership and control, such previous Orders
shall be vacated.
Respectfully submitted,
James K. Foster,
Attorney, U.S. Department of Justice, Antitrust division, 1401 H
Street, N.W., Room 4000, Washington, D.C. 20530, Telephone: (202) 514-
8362, Facsimile: (202) 307-5802.
Paul T. Denis,
Arnold & Porter, 555 Twelfth Street, N.W., Washington, DC 20004,
Telephone: (202) 942-5000, Facsimile: (202) 942-5999.
Attorney for Defendant Suiza Foods Corporation
Joseph L. Famularo,
United States Attorney, 110 W. Vine Street, Suite 4000, Lexington,
Kentucky 50407, Telephone: (606) 233-2666.
William J. Kolasky,
Wilmer, Cutler & Pickering, 2445 M Street, NW., Washington, DC 20037,
Telephone: (202) 663-6357, Facsimile: (202) 663-6363.
Attorney for Defendant Broughton Foods Company
So Ordered, this ____ day of ________. 1999.
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United States District Judge
Final Judgment
Whereas plaintiff the United States of America (hereinafter
``United States''), having filed its Complaint herein, and defendants,
by their attorneys, having consented to the entry of this Final
Judgment without trial or adjudication of any issue of fact or law
herein, and without this Final Judgment constituting any evidence
against or an admission by any part with respect to any issue of law or
fact herein;
And whereas, the defendants have agreed to be bound by the
provisions of this Final Judgment pending its approval by the Court;
And whereas, prompt and certain divestiture of certain assets to a
third party is the essence of this agreement;
And whereas, plaintiff requires defendants to divest, as a viable
business, the Southern Belle Dairy so as to ensure, to the sole
satisfaction of the plaintiff, that the Acquirer will be to continue to
operate the Southern Belle Dairy as a viable, ongoing business;
And whereas, defendants have represented to plaintiff that the
divestiture required below can and will be made as provided in this
Final Judgment and that defendants will later raise no claims of
hardship or difficulty as grounds for asking the Court to modify any of
the divestiture provisions contained below;
Now, therefore, before the taking of any testimony, and without
trial or adjudication of any issue of fact or law herein, and upon
consent of the parties hereto, it is hereby ordered, adjudged, and
decreed as follows:
I. Jurisdiction
This Court has jurisdiction over the subject matter of this action
and over each of the parties hereto. The Complaint states a claim upon
which relief may be granted against the defendant under Section 7 of
the Clayton Act, as amended (15 U.S.C. 18).
II. Definitions
As used in this Final Judgment:
A. ``Acquirer'' means the person(s) to whom defendants shall sell
the Southern Belle Dairy (as defined below).
B. ``Southern Belle Dairy'' means the entire milk processing plant
owned by Broughton Foods Company located in Pulaski County, Kentucky,
and all related assets, including all rights and interests in it,
including all property and contract rights, all existing inventory,
accounts receivable, pertinent correspondence and files, customer
lists, all related customer information, advertising materials,
contracts or other relationships with suppliers, customers and
distributors, any rights, contracts and licenses involving intellectual
property, trademarks, tradenames or brands, computers and other
physical assets and equipment used for production at, distribution
from, or associated with, Southern Belle Dairy or any of its
distribution branches and locations.
C. ``Suiza Foods Corporation'' means defendant Suiza Foods
Corporation and includes its successors and assigns, their
subsidiaries, divisions, groups, partnerships and joint ventures,
affiliates, directors, officers, managers, agents and employees.
D. ``Broughton Foods Company'' means defendant Broughton Foods
Company and includes its successors and assigns, their subsidiaries,
divisions, groups, partnerships and joint ventures, affiliates,
directors, officers, managers, agents and employees.
II. Applicability
A. The provisions of this Final Judgment apply to the defendants,
their successors and assigns, their subsidiaries, affiliates,
directors, officers, managers, agents, and employees, and all other
persons in active concert or participation with any of them who shall
have received actual notice of this Final Judgment by personal service
or otherwise.
[[Page 26784]]
B. Southern Belle Diary may not be sold to an Acquirer that has not
agreed to be bound by the provisions of this Final Judgment
IV. Divestitute of Assets
A. Suiza Foods Corporation is hereby ordered and directed, within
six (6) months from the date this Final Judgment is filed with the
Court, or five (5) calendar days after notice of the entry of this
Final Judgment by the Court, whichever is later, to divest the Southern
Belle Dairy to an Acquirer acceptable to the United States in its sole
discretion. The United States, in its sole discretion, may agree to an
extension of this time period of up to one (1) month, and shall notify
the Court in such circumstances.
B. Unless the United States consents in writing, the divestiture
pursuant to Section IV, or by trustee appointed pursuant to Section V
of this Final Judgment, shall include the entire Southern Belle Dairy
defined above. Divestiture shall be accomplished in such a way as to
satisfy the United States, in its sole discretion that the Southern
Belle Dairy can and will be operated by the Acquirer as a viable,
ongoing business. Divestiture of the Southern Belle Dairy, whether
pursuant to Section IV or Section V of this Final Judgment, shall be
made to a purchaser for whom it is demonstrated to the sole
satisfaction of the United States that (1) the purchase is for the
purpose of competing effectively in the dairy business, (2) the
Acquirer has the managerial, operational, and financial capability to
compete effectively in the dairy business; and (3) that none of the
terms of any agreement between the Acquirer and defendant give
defendant the ability unreasonably to raise the Acquirer's costs, to
lower the Acquirer's efficiency, or otherwise to interfere in the
ability of the Acquirer to compete effectively.
C. In accomplishing the divestiture ordered by this Final Judgment,
Suiza Foods Corporation shall make known, by usual and customary means,
the availability of the Southern Belle Dairy. Suiza Foods Corporation
shall provide any person making inquiry regarding a possible purchase a
copy of the Final Judgment. The defendants shall also offer to furnish
to any bona fide prospective purchaser, subject to customary
confidentiality assurance, all information regarding the Southern Belle
Dairy customarily provided in a due diligence process, except such
information subject to attorney-client privilege or attorney work
product privilege. Defendants shall make available such information to
the plaintiff at the same time that such information is made available
to any other person. Defendants shall permit bona fide prospective
purchasers of the Southern Belle Dairy to have access to personnel and
to make such inspection of physical facilities and any and all
financial, operational, or other documents and information customarily
provided as part of a due diligence process.
D. Defendants shall not interfere with any negotiations by the
Acquirer to employ any employee whose primary responsibility is the
production, sale, marketing, or distribution of products from the
Southern Belle Dairy.
E. Suiza Foods Corporation shall take all reasonable steps to
accomplish quickly the divestiture contemplated by this Final Judgment.
Defendants shall not take any action that will impede in any way the
operation of the Southern Belle Dairy other than in the ordinary course
of their other business.
V. Appointment of Trustee
A. In the event that Suiza Foods Corporation has not divested the
Southern Belle Dairy within the time period specified in Section IV.A.,
it shall notify the plaintiff of that fact in writing. In the event
that Suiza Foods Corporation has not divested the Southern Belle Dairy
within the time period specified in Section IV.A., and upon application
of the United States, the Court shall appoint a trustee selected by the
United States to effect the divestiture of the Southern Belle Dairy.
Unless the plaintiff otherwise consents in writing, the divestiture
shall be accomplished in such a way as to satisfy the United States, in
its sole discretion, that the Southern Belle Dairy can and will be
operated by the Acquirer as a viable on-going business.
B. After the appointment of a trustee becomes effectively, only the
trustee shall have the right to sell the Southern Belle Dairy. The
trustee shall have the power and authority to accomplish the
divestiture at the best price then obtainable upon a reasonable effort
by the trustee, subject to the provisions of Sections IV, V and VIII of
this Final Judgment, and shall have such other powers as the Court
shall deem appropriate. Subject to Section V.C. of this Final Judgment,
the trustee shall have the power and authority to hire at the cost and
expense of defendants any investment bankers, attorneys, or other
agents reasonably necessary in the judgment of the trustee to assist in
the divestiture, and such professionals and agents shall be solely
accountable to the trustee. The trustee shall have the power and
authority to accomplish the divestiture at the earliest possible time
to a purchaser acceptable to the United States, and shall have such
other powers as this Court shall deem appropriate. Defendants shall not
object to a sale by the trustee on any grounds other than the trustee's
malfeasance. Any such objections by defendants must be conveyed in
writing to the plaintiffs and the trustee within ten (10) calendar days
after the trustee has provided the notice required under Section VI.
C. The trustee shall serve at the cost and expense of Suiza Foods
Corporation, on such terms and conditions as the Court may prescribe,
and shall account for all monies derived from the sale of the assets
sold by the trustee and all costs and expenses so incurred. After
approval by the Court of the trustee's accounting, including fees for
its services and those of any professionals and agents retained by the
trustee, all remaining money shall be paid to Suiza Foods Corporation
and the trust shall then be terminated. The compensation of such
trustee and that of any professionals and agents retained by the
trustee shall be reasonable in light of the value of the Southern Belle
Dairy and based on a fee arrangement providing the trustee with an
incentive based on the price and terms of the divestiture and the speed
with which it is accomplished.
D. Suiza Foods Corporation shall use its best efforts to assist the
trustee in accomplishing the required divestiture. The trustee and any
consultants, accountants, attorneys, and other persons retained by the
trustee shall have full and complete access to the personnel, books,
records, and facilities of, and relating to, the Southern Belle Dairy,
and defendants shall develop financial or other information relevant to
such assets customarily provided in a due diligence process as the
trustee may reasonably request, subject to reasonable protection for
trade secret or other confidential research, development, or commercial
information. Defendants shall take no action to interfere with or to
impede the trustee's accomplishment of the divestiture. Defendants
shall permit prospective acquires of the assets to have reasonable
access to personnel and to make such inspection of physical facilities
and any and all financial, operational, or other documents and other
information as may be relevant to the divestiture required by this
Final Judgment.
E. After its appointment, the trustee shall file monthly reports
with the parties and the Court setting forth the trustee's efforts to
accomplish the divestiture ordered under this Final
[[Page 26785]]
Judgment; provided, however, that to the extent such reports contain
information that the trustee deems confidential, such reports shall not
be filed in the public docket of the Court. Such reports shall include
the name, address and telephone number of each person who, during the
preceding month, made an offer to acquire, expressed an interest in
acquiring, entered into negotiations to acquire, or was contacted or
made an inquiry about acquiring, any interest in the Southern Belle
Dairy, and shall describe in detail each contact with any such person
during that period. The trustee shall maintain full records of all
efforts made to divest the Southern Belle Dairy. If the trustee has not
accomplished such divestiture within six (6) months after its
appointment, the trustee shall thereupon promptly file with the Court a
report setting forth (1) the trustee's efforts to accomplish the
required divestiture, (2) the reasons, in the trustee's judgment, why
the required divestiture has not been accomplished, and (3) the
trustee's recommendations; provided, however, that to the extent such
reports contain information that the trustee deems confidential, such
reports shall not be filed in the public docket of the Court. The
trustee shall at the same time furnish such report to the parties, who
shall each have the right to be heard and to make additional
recommendations consistent with the purpose of the trust. The Court
shall thereafter enter such orders as it shall deem appropriate in
order to carry out the purpose of the Final Judgment, which may, if
necessary, include extending the trust and the term of the trustee's
appointment by a period requested by the United States.
VI. Notification
A. Within two (2) business days following execution of a definitive
agreement, Suiza Foods Corporation or the trustee, whichever is then
responsible for effecting the divestiture required herein, shall notify
the plaintiff of any proposed divestiture required by Section IV or V
of this Final Judgment. If the trustee is responsible, it shall
similarly notify Suiza Foods Corporation. The notice shall set forth
the details of the proposed transaction and list the name, address, and
telephone number of each person not previously identified who offered
to, or expressed an interest in or desire to, acquire any ownership
interest in the Southern Belle Dairy, together with full details of the
same. Within fifteen (15) calendar days after receipt of the notice,
the plaintiff may request from Suiza Foods Corporation, the proposed
purchaser, or any third party additional information concerning the
proposed divestiture, the proposed purchaser, and any other potential
purchaser. Suiza Foods Corporation or the trustee shall furnish the
additional information within fifteen (15) calendar days of the receipt
of the request. Within thirty (30) calendar days after receipt of the
notice or within twenty (20) calendar days after receipt of the
additional information by the United States, whichever is later, the
United States shall notify in writing Suiza Foods Corporation and the
trustee, if there is one, whether or not it objects to the proposed
divestiture. If the United States notifies in writing Suiza Foods
Corporation and the trustee, if there is one that it does not object,
then the divestiture may be consummated, subject only to Suiza Foods
Corporation's limited right to object to the sale under Section V.B.
Absent written notice that the United States does not object to the
proposed purchaser or upon objection by the United States, a
divestiture proposed under Section IV or V may not be consummated. Upon
objection by Suiza Foods Corporation under Section V.B., the proposed
divestiture under Section V shall not be accomplished unless approved
by the Court.
B. Twenty (20) calendar days from the date of the filing of this
Final Judgment, and every thirty (30) calendar days thereafter until
the divestiture has been completed under Section IV or V, Suiza Foods
Corporation shall deliver to the plaintiff a written affidavit as to
the fact and manner of compliance with Section IV or V of this Final
Judgment. Each such affidavit shall include, for each person who during
the preceding thirty (30) calendar days made an offer, expressed an
interest or desire to acquire, entered into negotiations to acquire, or
made an inquiry about acquiring any ownership interest in all or any
portion of the Southern Belle Dairy, the name, address, and telephone
number of that person and a detailed description of each contact with
that person during that period. Each such affidavit shall also include
a description of the efforts that Suiza Foods Corporation has taken to
solicit a buyer for the relevant assets and to provide required
information to prospective purchasers including the limitations, if
any, on such information. Assuming the information set forth in the
affidavit is true and complete, any objection by the United States to
the information provided by the defendant, including limitations on
information, shall be made within fourteen (14) calendar days of
receipt of such affidavit. Suiza Foods Corporation shall maintain full
records of all efforts made to divest all or any portion of the
Southern Belle Dairy.
VII. Financing
Suiza Foods Corporation shall not finance all or any part of any
purchase of the Southern Belle Dairy made pursuant to Sections IV or V
of this Final Judgment
VIII. Hold Separate Requirements
Unless otherwise indicated, from the date of filing of this
proposed Final Judgment with the Court and until the divestiture
required by Section IV.A. or V of the Final Judgment has been
accomplished:
A. Following consummation of Suiza Foods Corporation's acquisition
of Broughton Foods Company and until the divestiture required by
Section IV.A. or V of the Final Judgment has been accomplished, Suiza
Foods Corporation shall preserve, maintain, and operate the Southern
Belle Dairy as an independent competitor with management, production,
sales and operations held entirely separate, distinct and apart from
those of Suiza Foods Corporation. Suiza Foods Corporation shall not
coordinate the production, marketing or sale of products from Southern
Belle Dairy's business with the business that it will own as a result
of the acquisition of Broughton Foods Company.
B. Following consummation of Suiza Foods Corporation's acquisition
of Broughton Foods Company and until the divestiture required by
Section IV.A. or V of the Final Judgment has been accomplished, Suiza
Foods Corporation shall take all steps reasonably necessary to ensure
that the Southern Belle Dairy will be maintained and operated as an
independent, ongoing, economically viable and active competitor in the
production and sale of products; that the management of the Southern
Belle Dairy will not be influenced by Suiza Foods Corporation, and that
the books, records, competitively sensitive sales, marketing and
pricing information, and decision-making associated with the Southern
Belle Dairy will be kept separate and apart from the operations of
Suiza Foods Corporation. Suiza Foods Corporation's influence over the
Southern Belle Dairy shall be limited to that necessary to carry out
its obligations under the Final Judgment. Suiza Foods Corporation may
receive historical aggregate financial information (excluding capacity
or pricing information) relating to the Southern Belle Dairy to the
extent necessary to allow Suiza Foods
[[Page 26786]]
Corporation to prepare financial reports, tax returns, personnel
reports, and other necessary or legally required reports including
provision of due diligence information required to be made available
pursuant to this Final Judgment.
C. Following consummation of Suiza Foods Corporation's acquisition
of Broughton Foods Company and until the divestiture required by
Section IV.A. or V of the Final Judgment has been accomplished, Suiza
Foods Corporation shall use all reasonable efforts to maintain the
operations of the Southern Belle Dairy, and shall maintain at current
or previously approved levels, whichever are higher, internal funding,
promotional, advertising, sales, technical assistance, marketing and
merchandising support for the Southern Belle Dairy.
D. Following consummation of Suiza Foods Corporation's acquisition
of Broughton Foods Company and until the divestiture required by
Section IV.A. or V of the Final Judgment has been accomplished, Suiza
Foods Corporation shall provide and maintain sufficient working capital
to maintain the Southern Belle Dairy as an economically viable, ongoing
business.
E. Following consummation of Suiza Foods Corporation's acquisition
of Broughton Foods Company and until the divestiture required by
Section IV.A. or V of the Final Judgment has been accomplished, Suiza
Foods Corporation shall provide and maintain sufficient lines and
sources of credit to maintain the Southern Belle Dairy as an
economically viable, ongoing business.
F. Following consummation of Suiza Foods Corporation's acquisition
of Broughton Foods Company and until the divestiture required by
Section IV.A. or V of the Final Judgment has been accomplished, Suiza
Foods Corporation shall take all steps reasonably necessary to ensure
that the Southern Belle Dairy is fully maintained in operable condition
at no lower than its current rated capacity levels, and shall maintain
and adhere to normal repair and maintenance schedules for the Southern
Belle Dairy.
G. Suiza Foods Corporation shall not, except as part of a
divestiture approved by plaintiff, remove, sell, lease, assign,
transfer, pledge or otherwise dispose of or pledge as collateral for
loans, any assets of the Southern Belle Dairy.
H. The management of Southern Belle Dairy shall maintain, in
accordance with sound accounting principles, separate, true, accurate
and complete financial ledgers, books and records that report, on a
periodic basis, such as the last business day of every month,
consistent with past practices, the assets, liabilities, expenses,
revenues, income, profit and loss of the Southern Belle Dairy.
I. Except in the ordinary course of business or as is otherwise
consistent with this Final Judgment, Suiza Foods Corporation shall not
hire and shall not transfer or terminate, or alter, to the detriment of
any employee, any current employment or salary agreements for any
employees who on the date of the filing of this proposed Final Judgment
work at the Southern Belle Dairy, unless such individual has a written
offer of employment from a third party for a like position.
J. Until such time as the Southern Belle Dairy is divested, it
shall be managed by Martin Shearer. Mr. Shearer shall have complete
managerial responsibility for the Southern Belle Dairy, subject to the
provisions of the Final Judgment. Following consummation of Suiza Foods
Corporation's acquisition of Broughton Foods Company and until the
divestiture required by Section IV.A. or V of the Final Judgment has
been accomplished, and in the event that Mr. Shearer is unwilling or
unable to perform these duties, Suiza Foods Corporation shall appoint,
subject to plaintiffs approval, a replacement acceptable to plaintiff
within ten (10) working days. Should Suiza Foods Corporation fail to
appoint a replacement acceptable to plaintiff within ten (10) working
days, plaintiff shall appoint a replacement.
K. Suiza Foods Corporation shall take no action that would
interfere with the ability of any trustee appointed pursuant to the
Final Judgment to complete the divestiture pursuant to the Final
Judgment to a suitable purchaser.
L. Within twenty (20) calendar days of the filing of this Final
Judgment, Suiza Foods Corporation shall deliver to the United States an
affidavit which describes in detail all actions Suiza Foods Corporation
has taken and all steps Suiza Foods Corporation has implemented on an
on-going basis to preserve the Southern Belle Dairy pursuant to Section
VIII of this Final Judgment. The affidavit also shall describe, but not
be limited to, Suiza Foods Corporation's efforts to maintain and
operate the Southern Belle Dairy as an active competitor, maintain the
independent management, staffing, sales, marketing, and pricing of the
Southern Belle Dairy and maintain the Southern Belle Dairy in operable
condition at current capacity levels. Suiza Foods Corporation shall
deliver to the United States an affidavit describing any changes to the
efforts and actions outlined in Suiza Foods Corporation's earlier
affidavit(s) filed pursuant to this Section within fifteen (15)
calendar days after the change is implemented.
IX. Compliance Inspection
For the purpose of determining or securing compliance with this
Final Judgment, and subject to any legally recognized privilege, from
time to time:
A. Duly authorized representatives of the plaintiff, including
consultants and other persons retained by the United States, shall,
upon the written request of the Assistant Attorney General in charge of
the Antitrust Division, and on reasonable notice to Suiza Foods
Corporation or Broughton Foods Company made to their principal offices,
be permitted:
1. access during office hours to inspect and copy all books,
ledgers, accounts, correspondence, memoranda, and other records and
documents in the possession or under the control of defendants, which
may have counsel present, relating to any matters contained in this
Final Judgment; and
2. subject to the reasonable convenience of defendants and without
restraint or interference from them, to interview either informally or
on the record, directors, officers, employees, and agents of
defendants, which may have counsel present, regarding any such matters.
B. Upon the written request of the Assistant Attorney General in
charge of the Antitrust Division, made to defendants at their principal
offices, defendants shall submit 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 nor any documents obtained by the means provided
in Sections VIII or IX shall be divulged by any representative of the
plaintiffs 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 plaintiff is a party (including grand
jury proceedings), or for the purpose of securing compliance with this
Final Judgment, or as otherwise required by law.
D. If at the time information or documents are furnished by a
defendant to the plaintiff, such defendant represents and identifies in
writing the material in any such information or documents for which a
claim of protection may be asserted under Rule 26(c)(7) of the Federal
Rules of Civil Procedure, and defendant marks each pertinent page of
such material, ``Subject to claim of protection under Rule 26(c)(7) of
the Federal Rules of
[[Page 26787]]
Civil Procedure,'' then the plaintiff shall give ten (10) calendar
days' notice to defendant prior to divulging such material in any legal
proceeding (other than a grand jury proceeding) to which defendant is
not a party.
X. Retention of Jurisdiction
Jurisdiction is retained by this Court for the purpose of enabling
any 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, implementation, or modification of
any of the provisions of this Final Judgment, for the enforcement of
compliance herewith, and for the punishment of any violations hereof.
XI. Termination of Provisions
Unless this Court grants an extension, this Final Judgment will
expire on the tenth anniversary of the date of its entry.
XII. Public Interest
Entry of this Final Judgment is in the public interest.
Dated:-----------------------------------------------------------------
Court approval subject to procedures of Antitrust Procedures and
Penalties Act, 15 U.S.C. 16.
----------------------------------------------------------------------
United States District Judge
Competitive Impact Statement
Plaintiff, the United States of America, pursuant to Section 2(b)
of the Antitrust Procedures and Penalties Act (``APPA''), 15 U.S.C.
16(b)-(h), files this Competitive Impact Statement relating to the
proposed Final Judgment submitted for entry in this civil antitrust
proceeding.
I. Nature and Purpose of the Proceeding
Plaintiff filed a civil antitrust Complaint on March 18, 1999, in
United States District Court for the Eastern District of Kentucky,
London Division, alleging that the proposed acquisition of Broughton
Foods Company (``Broughton'') by Suiza Foods Corporation (``Suiza '')
would violate Section 7 of the Clayton Act, 15 U.S.C. 18. The Complaint
alleges that Suiza and Broughton compete head-to-head to sell milk to
school districts, and that in 55 of those school districts located in
South Central Kentucky, the acquisition is likely to substantially
lessen competition in the sale of school milk, and that therefore
school districts and students would likely pay higher school milk
prices or experience lower school milk quality and service.
The prayer for relief seeks: (a) an adjudication that the proposed
transaction described in the Complaint would violate Section 7 of the
Clayton Act; (b) preliminary and permanent injunctive relief preventing
the consummation of the transaction; (c) an award to the United States
of the costs of this action; and (d) such other relief as is proper.
After this suit was filed, a proposed settlement was reached that
permits Suiza to complete its acquisition of Broughton, yet preserves
competition in the South Central Kentucky school districts where the
transaction raises significant competitive concerns. A Stipulation and
proposed Final Judgment embodying the settlement have been filed with
the Court.
The proposed Final Judgment orders Suiza to divest the entire
Southern Belle Dairy plant based in Pulaski County, Kentucky, and all
related assets. Unless the plaintiff grants a time extension, Suiza
must divest the Southern Belle Dairy and related assets within six (6)
months after the filing of the Complaint in this action or within five
(5) business days after notice of entry of the Final Judgment,
whichever is later. If Suiza does not divest the Southern Belle Dairy
and related assets within the divestiture period, the Court, upon
plaintiff's application, is to appoint a trustee to sell the assets.
The proposed Final Judgment also requires that, until the divestiture
mandated by the Final Judgment has been accomplished, Suiza and
Broughton shall take all steps necessary to maintain and operate the
Southern Belle Dairy as an active competitor, such that the sale and
marketing of its products shall be conducted separate from, and in
competition with, all of Suiza's products, maintain sufficient
management and staffing, and maintain the Southern Belle Dairy in
operable condition at current capacity configurations.
The plaintiff and the defendants have stipulated that the proposed
Final Judgment may be entered after compliance with the APPA. Entry of
the proposed Final Judgment would terminate this action, except that
the Court would retain jurisdiction to construe, modify, or enforce the
provisions of the proposed Final Judgment and to punish violations
thereof.
II. The Alleged Violations
A. The Defendants
Suiza, a large nationwide operator of milk processing plants, is a
Delaware corporation headquartered in Dallas, Texas. Suiza had sales of
approximately $1.8 billion in 1997. Using the Flav-O-Rich, PET and
Trauth names, Suiza distributes its products to Kentucky grocery
stores, convenience stores, schools, and institutions from its dairies
located in London and Newport, Kentucky; and Bristol and Kingsport,
Tennessee.
Broughton is an Ohio corporation with its headquarters in Marietta,
Ohio. Broughton had sales of approximately $87.2 million in 1997. In
Kentucky, Broughton, using the Southern Belle and Broughton's names,
distributes its products to grocery stores, convenience stores,
independent distributors, schools, and institutions from its dairies in
Somerset, Kentucky and Marietta, Ohio.
B. Description of the Events Giving Rise to the Alleged Violations
On September 10, 1998, Suiza and Broughton entered into an
agreement and plan of merger, pursuant to which Suiza intends to
purchase all of the stock of Broughton for $109.7 million and assume
Broughton liabilities of $13 million. The statutory waiting period
during which the firms were prohibited from completing their proposed
acquisition expired March 19, 1999, 15 U.S.C. 18a(e)(2). The Complaint
was filed on March 18, 1999, together with a Motion For Preliminary
injunction. On April 9, 1999, the defendants agreed to not complete
their proposed acquisition pending trial and the Motion For Preliminary
Injunction was withdrawn. On April 29, 1999, the Stipulation and
Proposed Final Judgment to resolve the suit was filed with the Court in
London, Kentucky.
C. Anticompetitive Consequences of the Proposed Transaction
The Complaint alleges that the sale of school milk constitutes a
relevant product market and a line of interstate commerce. Milk is a
product that has special nutritional characteristics and no practical
substitutes, and dairies sell milk to schools with special services,
including storage coolers, daily or every-other-day delivery to each
school, limited hours delivery, constant rotation of old milk and
replacement of expired milk. Moreover, school districts must provide
milk in order to receive substantial funds under federal school meal
subsidy programs. The Complaint defines the sale of milk together with
its delivery services as the product ``school milk.'' There are no
other products that school districts would substitute for school milk
in the event of a small but significant price increase. If the price of
school milk rose by a small but significant amount, school districts
would be forced to pay the increase.
[[Page 26788]]
The Complaint alleges that the relevant geographic market in which
to assess the competitive effects of the proposed acquisition is a 39-
county area of Kentucky (``South Central Kentucky''), and narrower
markets contained therein, including each of the 55 listed school
districts likely to be affected by the acquisition (``South Central
Kentucky School Districts''). As a practical matter, South Central
Kentucky School Districts would be unable to turn to additional school
milk producers not currently bidding or not currently intending to bid
for school milk contracts within South Central Kentucky School
Districts to supply them with school milk if the price of school milk
were to increase by a small but significant amount.
The Complaint alleges that Suiza's proposed acquisition of
Broughton would lessen competition substantially in the sale of school
milk in each of the South Central Kentucky School Districts. In 32 of
the listed school districts, only two competitors would likely remain
after the acquisition. Because dairies bid on each school milk contract
separately, where the acquisition would reduce the number of bidders on
these contracts from three to two, the likelihood that the remaining
bidders will bid less aggressively against each other on both price and
service terms is significantly increased.
In 23 of the listed school districts, the effect of the proposed
acquisition would be to establish a monopoly. In these counties, the
proposed acquisition would give the post-acquisition firm the power
unilaterally to raise prices or to decrease the level or quality of
service provided to these school districts.
The Complaint also alleges that entry by other dairies or
distributors would not be timely, likely or sufficient to deter any
anticompetitive effect caused by the acquisition. Dairies or
distributors would be unlikely to decide that it has become profitable
to compete for this low margin, low volume, seasonal business as a
result of a small but significant increase in school milk prices.
The Complaint also alleges, in support of its allegations
concerning relevant product market, likely competitive effects, and
entry, the existence of an admitted school milk bid-rigging conspiracy
between Southern Belle Dairy and Flav-O-Rich Dairy continuing from the
late 1970s through 1989, in 23 of the 39 counties likely to be affected
by the acquisition. Although the dairies involved in the conspiracy
were later purchased by Broughton (Southern Belle) and Suiza (Flav-O-
Rich), the history of school milk bid rigging in South Central Kentucky
indicates that school milk markets there are conducive to collusion.
The proposed acquisition would likely increase the danger of tacit or
overt collusion in those school districts where the acquisition would
reduce the number of competing firms from three to two, and in
districts with no remaining competition, the proposed acquisition would
recreate the harmful effects of the criminal bid-rigging conspiracy.
For all of these reasons, plaintiff concludes that the proposed
transaction is likely to lessen competition substantially in the sale
of school milk in South Central Kentucky, and result in increased
prices and/or reduced quality and services, all in violation of Section
7 of the Clayton Act.
III. Explanation of the Proposed Final Judgment
The proposed Final Judgment would preserve existing competition in
the sale of school milk in South Central Kentucky. It requires the
divestiture of all of the Southern Belle Dairy operation. This relief
maintains the level of competition that existed premerger and ensures
that the affected markets will suffer no reduction in competition as a
result of the merger, and the South Central Kentucky School Districts
will continue to have alternatives to Suiza/Flav-O-Rich in purchasing
school milk.
Unless plaintiff grants an extension of time, the divestiture must
be completed within six (6) months after the filing of the Complaint in
this matter or within five (5) business days after notice of entry of
this Final Judgment by the Court, whichever is later. The proposed
Final Judgment also requires that, until the divestiture mandated by
the Final Judgment has been accomplished, Suiza and Broughton shall
take all steps necessary to maintain and operate the Southern Belle
Dairy as an active competitor, such that the sale and marketing of its
products shall be conducted separate from, and in competition with, all
of Suiza's products; maintain sufficient management and staffing, and
maintain the Southern Belle Dairy in operable condition at current
capacity configurations.
The divestiture must be to a purchaser or purchasers acceptable to
the plaintiff in its sole discretion. Unless plaintiff otherwise
consents in writing, the divesture shall include all the assets of the
Southern Belle Dairy being divested, and shall be accomplished in such
a way as to satisfy plaintiff, in its sole discretion, that such assets
can and will be used as a viable, ongoing business. In addition, the
purchaser must intend in good faith to continue the operations of the
Southern Belle Dairy business that were in place prior to the filing of
the Complaint, unless any significant change in the operations planned
by a purchaser is accepted by the plaintiff in its sole discretion.
This provision is intended to ensure that the business to be divested
remains competitive with Suiza in South Central Kentucky.
If defendants fail to divest the Southern Belle Dairy within the
time period specified in the Final Judgment, the Court, upon
plaintiff's application, is to appoint a trustee nominated by plaintiff
to effect the divestiture. If a trustee is appointed, the proposed
Final Judgment provides that defendants will pay all costs and expenses
of the trustee and any professionals and agents retained by the
trustee. The compensation paid to the trustee and any persons retained
by the trustee shall be both reasonable in light of the value of the
Southern Belle Dairy, and based on a fee arrangement providing the
trustee with an incentive based on the price and terms of the
divestiture and the speed with which its is accomplished. After
appointment, the trustee will file monthly reports with the plaintiff,
defendants and the Court, setting forth the trustee's efforts to
accomplish the divestiture ordered under the proposed Final Judgment.
If the trustee has not accomplished the divestiture within six (6)
months after its appointment, the trustee shall promptly file with the
Court a report setting forth (1) the trustee's efforts to accomplish
the required divestiture, (2) the reasons, in the trustee's judgment,
why the required divestiture has not been accomplished and (3) the
trustee's recommendations. At the same time the trustee will furnish
such report to the plaintiff and defendants, who will each have the
right to be heard and to make additional recommendations.
The relief in the proposed Final Judgment is intended to remedy
only the likely anticompetitive effects of Suiza's proposed acquisition
of Broughton in South Central Kentucky. Nothing in this Final Judgment
is intended to limit the plaintiff's ability to investigate or to bring
actions, where appropriate, challenging other past or future activities
of the defendants.
IV. Remedies Available to Potential Private 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
[[Page 26789]]
three times the damages the person has suffered, as well as costs and
reasonable attorneys' fees. Entry of the proposed Final Judgment will
neither impair nor assist the bringing of any private antitrust damage
action. 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 subsequent private lawsuit that may be brought against defendants.
V. Procedures Available for Modification of the Proposed Final Judgment
The plaintiff and the defendants have stipulated that the proposed
Final Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that the plaintiff has not withdrawn
its consent. The APPA conditions entry upon the Court's determination
that the proposed Final Judgment is in the public interest.
The APPA provides a period of at least sixty (60) days preceding
the effective date of the proposed Final Judgment within which any
person may submit to the plaintiff written comments regarding the
proposed Final Judgment. Any person who wishes to comment should do so
within sixty (60) days of the date of publication of this Competitive
Impact Statement in the Federal Register. The plaintiff will evaluate
and respond to the comments. All comments will be given due
consideration by the Department of Justice, which remains free to
withdrawn its consent to the proposed Final Judgment at any time prior
to entry. The comments and the response of the plaintiff will be filed
with the Court and published in the Federal Register.
Written comments should be submitted to: Craig W. Conrath, Chief,
Merger Task Force, Antitrust Division, United States Department of
Justice, 1401 H Street, NW; Suite 4000, Washington, DC 20530.
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and that the parties may apply to the
Court for any order necessary or appropriate for the modifications,
interpretation or enforcement of the Final Judgment.
VI. Alternatives to the Proposed Final Judgment
Plaintiff considered, as an alternative to the proposed Final
Judgment, a full trial on the merits of its Complaint against the
defendants. Plaintiff is satisfied, however, that the divestiture
contained in the proposed Final Judgment will preserve competition in
the sale of school milk in South Central Kentucky as it was prior to
the proposed acquisition, and that the proposed Final Judgment would
achieve all the relief the government would have obtained through
litigation, but merely avoids the time and expense of a trial.
VII. Standard of Review Under the APPA for Proposed Final Judgment
The APPA requires that proposed consent judgments in antitrust
cases brought by the United States be subject to a sixty (60) day
comment period, after which the Court shall determine whether entry of
the proposed Final Judgment ``is in the public interest.'' In making
that determination, the Court may consider--
(1) The competition impact of such judgment, including
termination of alleged violations, provisions for enforcement and
modification, duration or relief sought, anticipated effects of
alternative remedies actually considered and any other
considerations bearing upon the adequacy of such judgment;
(2) The impact of entry of such judgment upon the public
generally and individuals alleging specific injury from the
violations set forth in the complaint including consideration of the
public benefit, if any, to be derived from a determination of the
issues at trial.
15 U.S.C. 16(e).
As the United States Court of Appeals for the D.C. Circuit held,
this statute permits a court to consider, among other things, the
relationship between the remedy secured and the specific allegations
set forth in the government's complaint, whether the decree is
sufficiently clear, whether enforcement mechanisms are sufficient and
whether the decree may positively harm third parties. See United States
v. Microsoft, 56 F.3d 1448, 1461-62 (D.C. Cir. 1995).
In conducting this inquiry, ``[t]he Court is nowhere compelled to
go to trial or to engage in extended proceedings which might have the
effect of vitiating the benefits of prompt and less costly settlement
through the consent decree process.'' \1\
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\1\ 119 Cong. Rec. 24598 (1973). See United States v. Gillette
Co., 406 F. Supp. 713, 715 (D. Mass. 1975). A ``public interest''
determination can be made properly on the basis of the Competitive
Impact Statement and Response to Comments filed pursuant to the
APPA. Although the APPA authorizes the use of additional procedures,
15 U.S.C. 16(f), those procedures are discretionary. A court need
not invoke any of them unless it believes that the comments have
raised significant issues and that further proceedings would aid the
court in resolving those issues. See H.R. Rep. 93-1463, 93rd Cong.
2d Sess. 8-9 (1974), reprinted in U.S.C.C.A.N. 6535, 6538.
---------------------------------------------------------------------------
Rather,
[a]bsent a showing of corrupt failure of the government to discharge
its duty, the Court, in making its public interest finding, should *
* * carefully consider the explanations of the government in the
competitive impact statement and its responses to comments in order
to determine whether those explanations are reasonable under the
circumstances.
United States v. Mid-America Dairymen, Inc., 1977-1 Trade Cas. para.
61,508, at 71,980 (W.D. Mo. 1977).
Accordingly, with respect to the adequacy of the relief secured by
the decree, a court may not ``engage in an unrestricted evaluation of
what relief would best serve the public.'' United States v. BNS, Inc.,
858 F.2d 456, 462 (9th Cir. 1988), citing United States v. Bechtel
Corp., 648 F.2d 660, 666 (9th Cir.), cert. denied, 454 U.S. 1083
(1981); see also Microsoft, 56 F.3d at 1460-62. Precedent requires that
the balancing of competing social and political interests affected
by a proposed antitrust consent decree must be left, in the first
instance, to the discretion of the Attorney General. The court's
role in protecting the public interest is one of insuring that the
government has not breached its duty to the public in consenting to
the decree. The court is required to determine not whether a
particular decree is the one that will best serve society, but
whether the settlement is ``within the reaches of the public
interest.'' More elaborate requirements might undermine the
effectiveness of antitrust enforcement by consent decree.\2\
\2\ Bechtel, 648 F.2d at 666 (citations omitted) (emphasis
added); see BNS, 858 F.2d at 463; United States v. National
Broadcasting Co. 449 F. Supp. 1127, 1143 (C.D. Cal. 1978);
Gillette, 406 F. Supp. at 716 See also Microsoft, 56 F.3d at 1461
(whether ``the remedies [obtained in the decree are] so inconsonant
with the allegations charged as to fall outside of the reaches of
the public interest'') (citations omitted).
---------------------------------------------------------------------------
The proposed Final Judgment, therefore, should not be reviewed
under a standard of whether it is certain to eliminate every
anticompetitive effect of a particular practice or whether it mandates
certainty of free competition in the future. Court approval of a final
judgment requires a standard more flexible and less strict than the
standard required for a finding of liability. ``[A] proposed decree
must be approved even if it falls short of the remedy the court would
impose on its own, as long as it falls within the range of
acceptability or is `within the reaches of public interest.' '' \3\
---------------------------------------------------------------------------
\3\ United States v. American Tel. and Tel. Co., 552 F. Supp.
131, 151 (D.D.C. 1982), aff'd. sub nom. Maryland v. United States,
460 U.S. 1001 (1983), quoting Gillette, 406 F. Supp. at 716
(citations omitted); United States v. Alcan Aluminum, Ltd., 605 F.
Supp. 619, 622 (W.D. Ky. 1985).
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The relief obtained in this case is strong and effective relief
that should fully address the competitive harm posed by the proposed
transaction.
[[Page 26790]]
VIII. Determination Documents
There are not determinative materials or documents within the
meaning of the APPA that were considered by the plaintiff in
formulating the proposed Final Judgment.
Dated April 28, 1999.
Respectfully submitted,
James K. Foster,
Merger Task Force, U.S. Department of Justice, Antitrust Division, 1401
H Street, NW; Suite 4000, Washington, DC 20530, (202) 307-0001.
Certificate of Service
I, James K. Foster, hereby certify that, on April 28, 1999, I
caused the foregoing document to be served on defendants Suiza Foods
Corporation and Broughton Foods Company, by facsimile and first-class
mail, postage prepaid, to:
Paul Denis, Esq.,
Arnold & Porter, 555 12th Street, NW, Washington DC 20004-1202, Counsel
for Suiza Foods Corporation.
William Kolasky,
Wilmer, Cutler, & Pickering, 2445 M Street, NW, Washington, DC 20037,
Counsel for Broughton Foods Company.
James K. Foster
[FR Doc. 99-12340 Filed 5-14-99; 8:45 am]
BILLING CODE 4410-11-M
