[Federal Register Volume 60, Number 103 (Tuesday, May 30, 1995)]
[Notices]
[Pages 28168-28177]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-12561]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Topa Equities (V.I.), Ltd.; Public Comments and
Response on Proposed Final Judgment
Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C.
16(b)-(h), the United States publishes below the comments received on
the proposed Final Judgment in United States v. Topa Equities (V.I.),
Ltd, Civil Action No. 1994-179, United States District Court for the
District of the Virgin Islands St. Thomas/St. John Division, together
with the response of the United States to the comments.
Copies of the response and the public comments are available on
request for inspection and copying in room 3233 of the Antitrust
Division, U.S. Department of Justice, Tenth Street and Pennsylvania
Avenue, NW, Washington, DC 20530, and for inspection at the Office of
the Clerk of the United States District Court for the District of the
Virgin Islands, United States Courthouse, Federal Building and U.S.
Courthouse, 5500 Veterans Drive, St. Thomas, United States Virgin
Islands 00802.
Rebecca P. Dick,
Acting Deputy Director of Operations, Antitrust Division.
United States' Response to Public Comments
[Civil No: 1994-179]
Introduction
Pursuant to section 2(d) of the Antitrust Procedures and Penalties
Act (``APPA''), 15 U.S.C. 16(d), the United States responds to public
comments on the proposed Final Judgment submitted for entry in this
civil antitrust proceeding. [[Page 28169]]
This action began on December 7, 1994, when the United States filed
a Complaint alleging that Topa Equities (V.I.), Ltd. (hereinafter
``Topa'') had violated section 3 of the Sherman Act (15 U.S.C. 3). The
Complaint alleges that through a series of exclusive distribution
agreements with all major suppliers of distilled spirits, Topa holds a
monopoly on the wholesale distribution in the Virgin Islands of almost
every major brand of distilled spirits. The Complaint further alleges
that these exclusive distribution rights, taken together, are contracts
in restraint of trade within the meaning of the Sherman Act.
Simultaneously with the filing of the Complaint, the United States
filed a proposed Final Judgment, a Competitive Impact Statement
(``CIS''), and a Stipulation signed by Topa for entry of the proposal
Final Judgment. The proposed Final Judgment resolves the antitrust
violation alleged in the Complaint by enjoining Topa from taking any
action to prevent its suppliers of distilled spirits from canceling
their distribution arrangements with Topa and appointing new
wholesalers instead. The proposed Final Judgment also imposes a number
of restrictions on Topa's business practices in order to prevent Topa
from unreasonably interfering with the operations of a competitor.
A summary of the terms of the proposed Final Judgment and CIS and
directions for the submission of written comments relating to the
proposal were published in The Washington Post for seven consecutive
days beginning December 25, 1994, and in The Virgin Islands Daily News
on December 21-24 and December 27-29, 1994. The proposed Final Judgment
and CIS were published in the Federal Register on December 30, 1994. 59
FR 67728 (1994).
The 60-day period for public comments commenced on December 30,
1994, and expired on March 2, 1995. The United States received two
comments on the proposed Final Judgment, from St. Thomas Food Products
Corp. (``St. Thomas Foods'') and IPV, Inc. trading as A.H. Riise Liquor
Stores (``A.H. Riise''). Those comments are being filed with the Court
along with this response. Upon careful consideration of these comments,
as fully explained below, the United States urges that the proposed
Final Judgment be entered as originally submitted to the Court.
I. Legal Standards Governing the Court's Public Interest
Determination
The procedural requirements of the APPA are intended to eliminate
secrecy from the consent decree process, to ensure that the Justice
Department has access to public comments bearing on the consent decree,
and to create a public record of the reasoning behind the government's
consent to the decree. Hearings on H.R. 9203, H.R. 9947, and S. 782,
Consent Decree Bills Before the Subcomm. on Monopolies and Commercial
Law of the House Judiciary Committee, 93rd Cong. 1st. Sess. 39-40
(1973) (Statement of Senator Tunney). See also United States v.
American Tel. and Tel. Co., 552 F. Supp. 131, 148 (D.D.C. 1982), aff'd
sub nom. Maryland v. United States, 460 U.S. 1001 (1983).
The APPA requires the Court to determine whether the entry of the
decree is ``in the public interest.'' 15 U.S.C. 16(e). The Court's role
is not to make a de novo determination of facts and issues, but ``to
determine whether the Department of Justice's explanations were
reasonable under the circumstances,'' for ``[t]he 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.'' United States v. Western Electric
Co., 993 F.2d 1572, 1577 (D.C.Cir.), cert. denied, 114 S.Ct. 487
(1993), quoting United States v. Bechtel Corp., 648 F.2d 660, 666 (9th
Cir.), cert. denied, 544 U.S. 1083 (1981). Thus, 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.' '' Bechtel Corp., 648 F.2d at 666.
Congress did not intend to require the courts to follow elaborate
procedures in making the public interest determination under the APPA.
To the contrary, Congress was concerned that unduly protracted
proceedings might interfere with the consent decree process. Thus,
``the court is adjured to adopt `the least complicated and least time-
consuming means possible.' '' United States v. Gillette Co., 406
F.Supp. 713, 715 (D.Mass. 1975), (quoting S. Rep. No. 93-298, 93d
Cong., 1st Sess. 6 (1973); H. Rep. No. 93-1463, 93d Cong., 2d Sess. 8
(1974)).
The Court's public interest inquiry must be conducted in light of
the ``violations set forth in the complaint.'' 15 U.S.C. 16(e)(2). The
enforcement agency's decision about what charges to bring in its
complaint is a matter generally ``committed to the agency's absolute
discretion.'' Heckler v. Chaney, 470 U.S. 821, 831 (1985).
II. Public Comments
A. Comment of St. Thomas Foods
St. Thomas Foods, a Virgin Island wholesaler of beer, wine,
distilled spirits, and other products, commented that the proposed
Final Judgment should be rejected because it does not address the wine
and beer markets, in which St. Thomas Foods alleges that Topa also has
a monopoly, and because it does not require Topa to abandon all rights
to distribute certain brands of distilled spirits. The proposed Final
Judgment should not be amended in response to this comment.
The Complaint alleges that Topa maintained, through an
anticompetitive series of contracts, a monopoly in the wholesale
distribution of distilled spirits in the Virgin Islands, but it does
not allege maintenance of a monopoly in the wholesale distribution of
beer or wine. The United States fully reviewed all of Topa's
distribution businesses and determined to challenge only conduct
relating to its distribution of distilled spirits. The determination of
what conduct to challenge and the scope of any complaint is a matter
solely within the discretion of the United States. Thus St. Thomas
Foods' initial comment falls outside the scope of Tunney Act review.
St. Thomas also questions the relief the United States has
negotiated with Topa relating to the wholesale market for distilled
spirits. This is a matter properly before this Court under the Tunney
Act. As noted in the CIS filed with the Complaint and proposed Final
Judgment, the United States considered whether to pursue litigation in
order to win structural relief terminating some of Topa's exclusive
distribution arrangements with suppliers of distilled spirits. The
United States concluded that this alternative would place an
unacceptably large burden on some suppliers, which are among the
victims of Topa's conduct. The competitive problem in this case arises
from the fact that Topa has had exclusive distribution agreements with
all major suppliers of distilled spirits. If some suppliers shift to
other distributors, exclusive contracts between Topa and remaining
suppliers would not be anticompetitive; competition among brands would
mitigate the lack of intra-brand competition in brands sold exclusively
through a single wholesaler. The Untied States did not have a basis for
determining which suppliers should be shifted to other distributors,
nor for urging a court to single out certain suppliers for such
treatment. Thus the United States concluded that the better course
would be to permit each supplier to determine, for itself, whether to
[[Page 28170]] continue to deal through Topa exclusively. The relief
imposed by the proposed Final Judgment presents an effective means to
invigorate competition in the wholesale distribution of distilled
spirits in the Virgin Islands without establishing unnecessary
regulatory constraints that would interfere with free market forces.
B. Comment of A.H. Riise
A.H. Riise owns four retail liquor stores in the Virgin Islands and
probably is the largest retailer of distilled spirits in the territory.
The defendant, Topa, is A.H. Riise's principal source for distilled
spirits. A.H. Riise objected that the proposed remedies do not bar Topa
from interfering with suppliers that want to sell directly to
retailers. Thus, A.H. Riise urges adoption of a provision prohibiting
Topa from communicating with any supplier for the purpose, or with the
effect, of urging, compelling, or coercing the supplier to refrain from
bypassing the wholesale level of distribution altogether and selling
directly to a retailer. This suggested provision would allow suppliers
to violate their exclusive distribution arrangements with Topa in order
to sell directly to retailers. In addition, A.H. Riise suggests that
price regulation be imposed, forcing Topa to offer lower prices to A.H.
Riise and thus enabling A.H. Riise to compete more effectively in the
tourist duty-free market. Finally, A.H. Riise wants to extend the term
of the Final Judgment form five years to ten.
A.H. Riise may be the only retailer large enough to attract direct
sales from even a small supplier. Conceivably, a supplier might want to
deal directly with A.H. Riise while distributing through a wholesaler
to other retailers. Nothing in the proposed Final Judgment impedes this
type of arrangement, and the provisions A.H. Riise proposes are not
needed to achieve the full relief in this action of enabling distillers
to break free of their exclusive agreements with Topa.
There is no reason to provide for special relief for the duty-free
market. The interbrand competition that will result from the relief in
this case will benefit the duty-free market as well as the retail
market for Virgin Islands consumers.
A.H. Riise has also urged that the term of the proposed Final
Judgment be changed to ten years. The five-year duration of the
proposed Final Judgment is adequate to accomplish its objective. The
time needed for a supplier of distilled spirits to switch wholesalers
is limited, probably no more than thirty to sixty days. All that is
necessary to accomplish the switch is the transfer of existing
inventory from one warehouse to another. In wholesaling as opposed to
manufacturing, start-up times are short. In wholesaling, there is no
need to build a factory, assemble complicated machinery, or arrange for
supplies of raw materials; basically, all that is needed is a warehouse
and a truck. Thus, even a new-entrant wholesaler could have its
business up and running quickly. Sufficient capital to finance
inventory is necessary, of course. But the necessary level of capital,
while not trivial, is far from prohibitive. Also, the proposed Final
Judgment provides that Topa must furnish a copy of the Judgment to each
supplier, so its term will be well-known in the industry within days of
its entry by the Court. For these reasons, the term of the proposed
Final Judgment need be no longer than five years.
The United States also notes statements, cited by A.H. Riise and
attributed to the defendant and its counsel in this action, stating
that the decree is ineffective. This talk is more wishful than
accurate: The decree is carefully designed to ensure full and effective
relief. Moreover, the United States assures the Court, the people of
the Virgin Islands, and the defendant that we will vigorously enforce
this decree and monitor its success. Should competitive problems in the
distribution of alcoholic beverages in the Virgin Islands recur, the
United States stands ready to address them.
The proposed Final Judgment will make it attractive for certain
suppliers to find new wholesalers that will more vigorously promote
their products in the Virgin Islands, thereby correcting the
competitive harms resulting from Topa's past conduct and increasing
competition in the local wholesale distilled spirits market. Therefore,
the proposed Final Judgment should be entered as proposed by the
parties.
Conclusion
For the reasons set forth above, entry of the decree as submitted
by the parties to the Court is in the public interest. St. Thomas
Foods' comment, A.H. Riise's comment, and this response will be
published in the Federal Register.
Dated: May 5, 1995.
Respectfully submitted,
Anne K. Bingaman,
Assistant Attorney General.
John T. Orr,
Justin M. Nicholson,
James L. Weis,
Attorneys, Antitrust Division, Department of Justice, Richard B.
Russell Building, Suite 1176, 75 Spring Street, SW., Atlanta, GA 30303,
(404) 331-7100.
Certificate of Service
I hereby certify that I have caused a copy of the foregoing UNITED
STATES' RESPONSE TO PUBLIC COMMENTS to be served upon Ernest Gellhorn,
2907 Normanstone Lane NW., Suite 100, Washington, DC 20008-2725, by
first class mail, postage prepaid.
Dated: May 5, 1995.
Justin M. Nicholson,
Antitrust Division, U.S. Department of Justice, Richard B. Russell
Building, Suite 1176, 75 Spring Street, SW., Atlanta, GA 30303, (404)
331-7100.
January 19, 1995
Mr. John T. Orr,
Chief, Atlanta Field Office,
Antitrust Division, Dept. of Justice,
Richard B. Russell Federal Building,
75 Spring Street, SW.,--Suite 1176,
Atlanta, Georgia 30303.
Re: U.S. v. Topa Equities (V.I.), Civil No. 1994-179
Dear Mr. Orr: I have read with great interest the Complaint,
Stipulation and proposed Final Judgment in the above referenced
case, which was provided to me by Mr. James L. Weis of your office.
This letter is being written to give you my comments on the proposed
Final Judgment.
To say the least I am simply amazed at the conclusion of this
case. Justice has accomplished absolutely nothing after many years
of investigation and I am sure the expenditure of several hundreds
of thousands of dollars.
The Topa Equities (V.I.), Ltd., monopoly remains intact. There
is no provision in the proposed Final Judgment for any kind of
divestiture of liquor brands where Topa has an exclusive agency
arrangement. Therefore Topa remains is full control of 90% plus of
all the liquor imported and sold in the Virgin Islands. This leaves
Topa with the same monopoly position they enjoyed prior to the
extensive investigation of the Dept. of Justice. The fact that the
Final Judgment precludes Topa from interfering with a supplier
moving liquor brands from Topa to another agent is simply a joke.
Topa being fully aware of their mononuclear position in the liquor
market never would have sued or interfered with a supplier moving
brands because they are fearful of their monopolistic practices
becoming public in open court.
Another observation I have on the proposed Final Judgment is
that it does not address the Wine and Beer business in the Virgin
Islands. I am sure that your investigation revealed that Topa also
controls and monopolizes the Wine and Beer [[Page 28171]] importing/
distributing business in the Virgin Islands. Topa has the exclusive
agency rights for all the major brands of United States beers,
Anheuser Busch, Coors and Miller Brewing. Topa also represents many
of the major brands of imported beers, Becks, Corona, Carlsberg,
Caribe, Guiness, Tennants, and Red Stripe. This then gives Topa 85%
market share of all beers of U.S. manufacturer and 70% market share
of all imported beers. Yet your Final Judgment makes no mention of
the beer business in the Virgin Islands.
The same is true of the Wine importing/distribution business in
the Virgin Islands. Topa owned companies have control of over 80% of
this business and again the Final Judgment makes no provisions to
address this monopoly.
In my opinion the proposed Final Judgment should not be accepted
by the District Court of the Virgin Islands. The Judgment should be
sent back to the Dept. of Justice and the investigation reopened to
address the oversights that I have made above. Topa should be forced
to divest itself of brands it controls to once and for all end the
monopoly it has enjoyed for all these years. These brands should not
only be liquor agencies but should include beer as well as wine.
Further Topa should be assessed money damages to at least cover the
costs of the investigation and whatever fines the Court deems
appropriate.
All in all I am very dissatisfied with the results of your
investigation and the proposed Final Judgment. I feel that your
investigation was a waste of your time, my time and great deal of
tax payer money.
Sincerely.
St. THOMAS FOOD PRODUCT CORP.
Bruce Kimelman.
President
BK/lf
cc. District Court of the Virgin Islands, Division of St. Thomas-St.
John
February 24, 1995
John T. Orr, Chief, Atlanta Field Office, Antitrust Division, U.S.
Department of Justice, Richard B. Russell Federal Building, Suite
1176, 75 Spring Street, Atlanta, GA 30303
Re: United States of America v. Topa Equities (V.I.), Ltd., D.V.I.
Civil No. 1994-179
Dear Chief Orr: In response to the Notice published in the
Federal Register on December 30, 1994 (59 FR 67728), I am submitting
herewith, on behalf of my client IPV, Inc. trading as A.H. Riise
Liquor Stores, the enclosed ``Comments of A.H. Riise Liquor Stores
on Proposed Final Judgment'' in the above case.
Very truly yours,
Samuel H. Seymour.
SHS/ced
Enclosures
cc: Justin M. Nicholson, Esq., James L. Weis, Esq.
Comments of A.H. Riise Liquor Stores on Proposed Final Judgment
Moore & Bruce
Samuel H. Seymour, Jonathon R. Moore, 1627 Eye Street, NW., Suite 880,
Washington, DC 20006, Tel: (202) 775-5980, Counsel for IPV, Inc.,
trading as A.H. RIISE LIQUOR SHOPS
Table of Contents
I. The defendant's own comments demonstrate that the proposed final
judgment is not in the public interest.
II. A.H. Riise is an interested party.
III. The court has the authority to reject the proposed final
judgment if competition will not be restored.
IV. The proposed final judgment is not in the public interest.
A. The Proposed Final Judgment Is Premised on a Complaint that
Overlooks Material Factors in the Relevant Markets.
1. The proposed Final Judgment Defines Away the Most Immediate
Prospect for Restoring Competition.
2. The Complaint, Proposed Final Judgment and CIS Overlook the
Significance of the Tourist Submarket to the Public Interest.
3. It Is Contrary to the Public Interest to Permit Defendant's
Monopolistic Pricing to Continue.
B. The Remedies in the Proposed Final Judgment Do Not Adequately
Address the Competitive Harm Identified.
V. At a minimum, any final judgment should expressly recognize and
protect retailers' rights to deal directly with suppliers, without
interference from defendant.
VI. The five year duration for the proposed final judgment is
patently inadequate.
Conclusion.
Exhibits
TOPA Press Release.
``Red-lined'' Proposed Final Judgment Showing Recommended Revisions
to be in the Public Interest.
Comments of A.H. Riise Liquor Stores on Proposed Final Judgment
IPV, Inc., trading as A.H. Riise Liquor Stores, P.O. Box 6280, St.
Thomas, U.S. Virgin Islands 00804-6280 (``A.H. Riise''), through its
attorneys, hereby responds to the Federal Register notice soliciting
public comments on the Proposed Final Judgment and Competitive Impact
Statement (``CIS'') in the above-captioned case, 59 FR 67728 (Dec. 30,
1994). A.H. Riise respectfully submits that adoption of the Final
Judgment in the form proposed is not in the public interest, because
the remedies proposed provide no tangible or immediate prospect for
achieving the goals set forth in the CIS: The restoration of
competition in the wholesale market for distilled spirits in the Virgin
Islands.
I. The Defendant's Own Comments Demonstrate That the Proposed Final
Judgment Is Not in the Public Interest
As a threshold matter, before we describe A.H. Riise or analyze the
Proposed Final Judgment, it is incumbent upon us to bring to the
attention of the Court and the Department the contemptuous manner in
which the Defendant holds the Proposed Final Judgment. A Press Release
issued by Defendant Topa upon the announcement of the settlement with
the Department states:
According to Ernest Gellhorn, an antitrust lawyer from
Washington, D.C. retained by Topa, ``the proposed remedy is all bark
and no bite.'' Pointing to the decree's ``meaningless provisions
that would modify contract terms written by suppliers or would make
supposed scarce warehouse space available to new entrants,''
Gellhorn called ``this probably the weakest consent decree ever
negotiated by the Department of Justice.'' (Emphasis added.)
A copy of Defendant's Press release is attached hereto as Exhibit 1.
Significantly, the Defendant distributed this Press Release to its
suppliers two days before the Department filed the Complaint and the
Proposed Final Judgment with the Court. The message is clear: Nothing
will change.
The Court--and the Department--should scrutinize the motives and
substance behind Defendant's Press Release. It is a red flare. It sends
a vivid warning: something is seriously wrong with the Proposed Final
Judgment. The Press Release belies any assertion in the CIS that the
Proposed Final Judgment is in the public interest.
Under the circumstances, the only proper course is for the
Department to withdraw its consent to the Proposed Final Judgment.
Should it fail to do so, the Court should not rubber stamp the apparent
oversights or miscalculations that have brought this case to the brink
of approval, lest it, too, be the subject of Defendant's derision.
II. A.H. Riise is an Interested Party
A.H. Riise owns and operates four retail stores for distilled
spirits \1\ in St. Thomas, Virgin Islands. It is among the class of
retailers of distilled spirits in the Virgin Islands which has ``been
deprived of the benefits of free and open competition'' by Defendant's
actions. Complaint, para. 19(c). A.H. Riise is a family-owned business,
whose current owners are the third and fourth generations of the family
to be involved [[Page 28172]] in the ownership and management of retail
liquor businesses in the Virgin Islands.
\1\ Unless otherwise noted, the defined terms from Section III
of the Complaint are utilized in these comments.
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Defendant Topa is A.H. Riise's major source of supply of distilled
spirits. Based upon the description of Defendant's business in
Paragraph 3 of the Complaint, A.H. Riise purchases represent at least
20% of Defendant's sales in the Virgin Islands. As such, A.H. Riise is
a significant participant in the market which is the subject of the
Complaint in this action.
A.H. Riise is also a major factor in the tourist market for
distilled spirits in the Virgin Islands. Although conspicuously omitted
from the Complaint, the Proposed Final Judgment and the CIS, the
tourist submarket for duty-free distilled spirits in the Virgin Islands
may represent as much as 60% of the relevant market. On information and
belief, A.H. Riise's sales constitute more than half of the sales of
distilled spirits to this submarket. A.H. Riise is among the class of
retailers most adversely effected by Defendant's monopolistic pricing
practices and anti-competitive efforts to dissuade suppliers from
selling directly to retailers.
III. The Court Has the Authority To Reject the Proposed Final
Judgment if Competition Will Not Be Restored
The Antitrust Procedures and Penalties Act (the ``Tunney Act'')
provides in pertinent part that ``before entering any consent judgment
proposed by the United States * * *, the court shall determine that
entry of such judgment is in the public interest.'' 15 U.S.C. 16(e).
The power of the courts in connection with determining the public
interest and the legal standard of review to be applied is
comprehensively set forth in United States v. American Tel. & Tel. Co.,
552 F. Supp. 131, 147-153 (D.D.C. 1982), aff'd sub nom Maryland v.
United States, 460 U.S. 1001 (1983).
In reviewing the purposes of the Tunney Act, the AT&T Court
referred to the legislative history, which asserted that previously
``consent decrees often fail(ed) to provide appropriate relief, either
because of miscalculations by the Justice Department or because of the
`great influence and economic power' wielded by antitrust violators.''
Id at 148. In support, the Court cited Senator Tunney: ``Regardless of
the ability and negotiating skill of the Government's attorneys, they
are neither omniscient nor infallible.'' Id at 148, note 70, citing 119
Cong. Rec. 3452 (1973). In response, the public comment procedure was
added to the antitrust laws, along with judicial review based on the
public interest standard. The express purpose of such review is to
``eliminate judicial rubber-stamping'' of proposed consent orders
submitted to courts by the Department. Id at 149.
Senator Tunney's comments are particularly appropriate in this
case. As discussed below, it is apparent that the Complaint, the
Proposed Final Judgment and the CIS overlook highly relevant and
significant facts relating to the Defendant's anti-competitive
practices. The legislative history makes it clear that the Court here,
as the Court did in the recent decision in the United States v.
Microsoft Corporation, C.A. No. 94-1564 (Memorandum Order dated Feb.
14, 1995), can and should look beyond the four corners of the complaint
in determining whether the public interest is being served by the
Proposed Final Judgment.
In examining the legal standard to be applied in determining the
public interest, the AT&T Court stated that antitrust ``decisions
granting relief after a finding of liability form the most relevant
yardstick for determining whether the proposed consent decree will
further antitrust policies.'' After noting that the purpose of
antitrust remedies is to restore competition and end monopoly power,
the Court stated that proposed decrees ``must leave the Defendant
without the ability to resume the action which constituted the
antitrust violation in the first place. For these reasons, the decree
should not be limited to past violations; it must also effectively
foreclose the possibility that antitrust violations will occur or
reoccur.'' Id at 150. As discussed below, the Proposed Final Judgment
is particularly deficient in addressing restoration of competition in
the future. When evaluated under the standards articulated by the AT&T
Court, the Proposed Final Judgment will be found to be inconsistent
with the public interest.
The AT&T Court premised its analysis upon the fundamental purpose
of the Tunney Act to ``fully promote the goals of the antitrust laws
and further public confidence in their fair enforcement.'' The Court
noted that the consent order procedure prior to the enactment of the
Tunney Act was essentially secret, and thereby ``undermin(ed)
confidence in the legal system.'' It is submitted that the Defendant's
arrogant and disparaging characterizations of the Proposed Final
Judgment should be the catalyst that brings these fundamental concerns
into sharp focus in the Court's determination of the public interest.
IV. The Proposed Final Judgment Is Not in the Public Interest
A. The Proposed Final Judgment Is Premised on a Complaint That
Overlooks Material Factors in the Relevant Markets
Both the Complaint and the Proposed Final Judgment are based on an
incorrect view of the market for distilled spirits in the Virgin
Islands. The Department apparently has misunderstood or overlooked
important facts concerning the channels of distribution in the Virgin
Islands market, the important of the submarket for distilled spirits
sold to tourists, and, most importantly, the Defendant's monopolistic
pricing practices. Accordingly, the Complaint and Proposed Final
Judgment overlook the only way in which existing market forces can be
used to restore competition: By permitting suppliers and retailers to
deal directly with each other without interference from the Defendant.
1. The Proposed Final Judgment Defines Away the Most Immediate Prospect
for Restoring Competition
Deficiencies in the Proposed Final Judgment's analysis are first
evident in the definitional provisions in the Complaint and the
Proposed Final Judgment. The term ``retailer'' is defined in Paragraph
7 of the Complaint and Paragraph IID of the Proposed Final Judgment to
mean ``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 * * *
(Emphasis added.) Significantly, however, some retailers, including
A.H. Riise, purchase directly from suppliers, and would do so to a
greater extent if it were not for the Defendant's active interference.
Yet the possibility that retailers can purchase from suppliers is not
even recognized by this definition. Accordingly, the one present and
tangible means by which Defendant's monopoly power can be reduced under
existing competitive conditions is obviated definitionally.
The definition of ``supplier'' in Paragraph 8 of the Complaint and
Paragraph IIE of the Proposed Final Judgment is similarly deficient.
This definition provides that supplier means ``any licensed
manufacturer, distiller, or importer of distilled spirits from which
Defendant or any other licensed wholesaler, as defined herein,
purchases or has purchased distilled spirits.'' (Emphasis added.)
Again, the Complaint and the Proposed Final Judgment do not even
recognize that suppliers do sell [[Page 28173]] directly to retailers
and would do so to a greater extent if Defendant's interference were
eliminated. Although Virgin Islands law does not permit vertical
integration of retailers and wholesalers, Complaint para. 10 and para.
CIS II, there is no prohibition against retailers dealing directly with
suppliers.
In fact, Defendant's monopoly power has enabled it to prevent most
retailers from obtaining distilled spirits directly from suppliers.
This interference occurs particularly where Defendant has exclusive
arrangements with suppliers, and even where it does not. The Proposed
Final Judgment, as drafted, could be understood by the Defendant to
sanction its activities in this regard, which could well intensify as a
result. Failure to recognize that retailers can purchase directly from
suppliers, and that such arrangements require protection from
Defendant's monopoly power, are glaring deficiencies in the Complaint.
2. The Complaint, Proposed Final Judgment and CIS Overlook the
Significance of the Tourist Submarket to the Public Interest
The Complaint, the Proposed Final Judgment and the CIS also
conspicuously omit any mention of the tourist market for distilled
spirits. Tourism is a significant part of the Virgin Islands economy.
The duty-free rules, which allow visitors from the United States
mainland to enter up to five bottles per person duty-free into the
United States from the Virgin Islands,\2\ are important enhancements
for tourism in the Virgin Islands and, indeed, are a substantial
feature of the competitive landscape of the market defined by the
Complaint. Tourists, however, will only purchase distilled spirits
``duty-free'' in the Virgin Islands if they are priced competitively
with products that they can purchase on cruise ships and at other
Caribbean destinations, and, of course, in the continental United
States.
\2\ Persons returning to the United States mainland from the
Virgin Islands are exempted from duty on four liters (the equivalent
of five fifths) of distilled spirits, plus an additional liter of
any such product produced in the Virgin Islands. Heading 9804.00.70,
Harmonized Tariff Schedule of the United States (1995).
---------------------------------------------------------------------------
Defendant's monopolistic pricing practices have had a material
adverse impact on commerce in distilled spirits in the Virgin Islands
in the tourist market, but no one would ever know this from the
Complaint, the Proposed Final Judgment and the CIS.\3\ Without any
competition at the wholesale level, Defendant Topa is able to take far
larger wholesale mark-ups than are customary. Retailers like A.H. Riise
have had no alternative other than to accept Defendant's monopolistic
pricing, except in instances where they have been able to by-pass Topa
and purchase directly from suppliers. Even after cutting their margins
to the bone, retailers often cannot compete with prices of distilled
spirits on cruise ships, other Caribbean Islands and, even sometimes on
the U.S. mainland, since monopolistic margins are exacted by Defendant
at the wholesale level. Thus, A.H. Riise's sales--and those of other
retailers--are far lower than they otherwise would be. Accordingly,
tourists buy less in the Virgin Islands, and the Virgin Islands economy
loses substantial excise and gross receipts tax revenues, as well as
lost employment opportunities for retailers and others who serve the
tourists trade.
\3\ The impact of Defendant's monopolistic practices is far more
significant in the tourist market for distilled spirits than in the
local market. This is because residents of the Virgin Islands have
no choice but to purchase locally, whereas tourists can buy
distilled spirits on board cruise ships, on other Caribbean Islands
or on the U.S. mainland.
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3. It is Contrary to the Public Interest To Permit Defendant's
Monopolistic Pricing to Continue
Since the Complaint does not allege anti-competitive pricing
practices on the part of Defendant, it is hardly surprising that such
practices are not remedied in the Proposed Final Judgment. It is
remarkable that after citing injury to suppliers and retailers,
Complaint para. 19 (c) and (d), CIS para. IIB, there is no mention of
injury to consumers. Yet there is no single factor that has a greater
bearing on the Court's determination of the public interest in this
case than Defendant's pricing practices. Defendant's monopolistic
pricing damages consumers--both Virgin Islands residents and tourists--
to the detriment of the Virgin Islands economy.
On those occasions when suppliers have been willing to sell
directly to A.H. Riise, often over interference from the Defendant,
A.H. Riise has been able to substantially reduce prices offered to
tourists so that they are more competitive with prices offered by
cruise ship stores, on other Caribbean islands and in the U.S. As a
result, sales increased dramatically, as did profits. Further, A.H.
Riise was able to spend considerably more on advertising and promotion
to encourage cruise ship passengers to purchase distilled spirits in
the Virgin Islands, rather than at foreign ports.
These results were demonstrated again recently when A.H. Riise was
finally able to conclude arrangements to purchase directly from a
supplier, which had previously sold only through Defendant Topa.
Without excessive wholesale margins, A.H. Riise was able to lower the
per unit price by $5.00, which increased the gap between its prices and
U.S. mainland prices from $1-$2 to $6-$7 per unit. In only a two week
period, sales increased 500% and profits increased 100%. Corresponding
increases were realized in revenues paid to the Virgin Islands taxing
authority.
Conversely, when the prices it receives from Defendant Topa compel
retail pricing that a higher, the same or only slightly lower than
competing sources available to tourists, sales decline, profits are
non-existent, and resources available for promotion are marginal. In
A.H. Riise's experience, tourists are generally well-educated on the
subject of distilled spirits prices. Accordingly, when they can
purchase distilled spirits at substantial savings, they are inclined to
make most of their duty-free purchases from retailers in the Virgin
Islands. Moreover, once tourists see that duty-free prices for
distilled spirits are lower, they tend to purchase greater amounts of
other duty-free merchandise in the Virgin Islands as well. Thus, it is
not difficult to see how monopolistic pricing at the wholesale level
has an immediate negative and depressing impact on sales, profits and
promotional activities, with a corresponding impact on employment, tax
revenues and the Virgin Islands economy.
In its review of the proposed consent order in United States v.
Microsoft, supra, the Court recognized that the failure of the
Department to address significant anti-competitive practices by the
defendant was grounds for a determination that the proposed order was
not in the public interest. Notwithstanding the vehement objections of
the defendant and the Department in that case, the Court refused to
accept an order that was limited to operating systems software for X86
microprocessors. There, as here, the proposed Complaint and relief are
too narrow, and for that reason must be found not to be in the public
interest.
B. The Remedies in the Proposed Final Judgment Do Not Adequately
Address the Competitive Harm Identified
The Complaint and the CIS correctly point out that the Defendant
has virtual monopoly in the wholesale distilled spirits market in the
Virgin Islands. Complaint para. 17; CIS para. II B. Certain effects of
this monopoly are then identified: (1) Retailers are deprived of
alternative sources for competing products; and (2) suppliers are
deprived [[Page 28174]] of the benefits of free and open competition,
in part because Defendant Topa has inherent conflicts of interest in
the representation of competing products and cannot represent all
competing brands equally. Complaint, para. 19 (c) and (d); CIS para. II
B. The CIS then states that the purpose of the Proposed Final Judgment
is to remedy these effects. But not only are the Complaint and Proposed
Final Judgment drafted too narrowly, the remedies proposed are also
ineffective.
Rather than ordering a breakup of the Defendant, divestiture of the
acquisitions by which it obtained its monopoly, Complaint para. 17, or
unilateral termination of its distribution agreements, CIS para. VI,
the Proposed Final Judgment merely attempts to establish new ground
rules for the distilled spirits wholesale market in the Virgin Islands
that purport to make it more likely for new entrants to dilute the
Defendant's monopoly power and thereby restore a competitive
environment. There are two main features of the Proposed Final
Judgment: (1) Permitting suppliers to break exclusive contracts with
Defendant, but only to deal with another wholesaler; and (2) enjoining
Defendant from enforcing its rights under Title 12A, Sections 131 and
132, of the Virgin Islands Code for ``wrongful termination.'' Once new
entrants appear, the Defendant would be enjoined from (1) interfering
with any of the potential new entrants' employees and (2) from
acquiring any stock or interest in such new entrants.\4\ Proposed Final
Judgment Paras. IV (b), (c), (f) and (g).
\4\ We have deliberately omitted any analysis of the problem of
the scarcity of warehouse space, which is given inordinate
attention. Complaint at para. 16, Proposed Final Judgment para. IV
E, CIS para. II. Defendant's reference to this issue as ``supposed
scarce warehouse space'' in its Press Release, Exhibit 1, suggests
that this issue is be a straw man.
---------------------------------------------------------------------------
In a moment of candor, the Defendant characterized the foregoing as
``meaningless provisions'' that are ``all bark and no bite.'' Press
Release, Exhibit 1. A.H. Riise agrees.
Rather than providing a mechanism for existing market forces to
restore competitiveness, the proposed remedies depend on new entrants
coming into the wholesale distilled spirits business in the Virgin
Islands. The relief proposed, therefore, is merely hopeful. At best, it
poses a theoretical framework for competition to develop in the future.
Whether the proposed remedies will in fact have any immediate and
tangible effect on the competitive environment in the Virgin Islands
must depend totally on extrinsic factors, the existence of which are
unknown or speculative.
How likely is it that ``new players'' will arrive to compete on the
new theoretical ``level playing field'' constructed by the Proposed
Final Judgment? Not likely at all.\5\ To become viable, potential
entrants will need very substantial capital for inventory and warehouse
facilities, employees who know the business, and the ability to attract
suppliers' business. Each of these factors is far more significant to
entering the market than the elements of the proposed remedies. In
determining whether the remedies in the Proposed Final Judgment have a
reasonable chance of achieving their stated goals, the Court should not
overlook the fact that every potential entrant that has tried to come
into this market in the last decade has failed. CIS para. 2. At the
present time, A.H. Riise knows of no company or individual with the
necessary capital, personnel and know-how that could enter the Virgin
Islands wholesale market for distilled spirits. Further, based on
discussions with wholesalers outside the Virgin Islands, little
incentive to enter the Virgin Islands market is perceived.
\5\ See CIS para. VI. The only reason that unilateral
termination of Defendant's exclusive arrangements with suppliers
might ``place an unacceptably large burden'' on them is if no other
wholesaler entered the market, notwithstanding the proposed relief.
---------------------------------------------------------------------------
The lack of confidence that the proposed remedies will achieve
their stated goals is seen in the CIS. For example, the CIS states:
``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.'' (Emphasis added.) CIS para. III. They also
may not. Indeed, potential entrants will need substantial capital to
succeed much more than Topa's noninterference with their employees.
Moreover, as a practical matter, once suppliers are freed from
exclusive arrangements with the Defendant, it does not necessarily
follow that suppliers will switch to new entrants. Indeed, without a
strong track record, why should a major supplier of distilled spirits
trust a new entrant to develop its market in the Virgin Islands? The
CIS recognizes this problem: ``Any disatisfied supplier will be free to
find an alternative distributor if the supplier chooses to do so* * *''
(Emphasis added.) CIS para. III. The CIS candidly admits that suppliers
will have to be dissatisfied with Topa before they would switch to new,
unknown wholesalers.
Because any decision to switch must lie with the suppliers, there
can be no guarantee that the model in the Proposed Final Judgment will
restore competition.
In fact, the ingredients needed to restore this market to a
competitive one are already in place, but have been overlooked in the
Proposed Final Judgment. Existing retailers already know the products,
the suppliers, and the markets. It is the retailers, in their pricing
and promotion, that make markets for each brand. But for the on-going
interference by the Defendant, retailers would be in the position now
to restore competition to the distilled spirits market in the Virgin
Islands by dealing directly with suppliers. It is therefore contrary to
the public interest to rely solely upon speculative, future, unknown,
external factors to enter the wholesale market, as posited by the
Proposed Final Judgment. Instead, suppliers' and retailers' rights to
deal with each other need to be recognized--and protected.
V. At a Minimum, Any Final Judgment Should Expressly Recognize and
Protect Retailers' Rights To Deal Directly With Suppliers, Without
Interference From Defendant
Even though the Proposed Final Judgment is deficient in its
theoretical approach to restoration of competition, A.H. Riise does not
believe that divestiture or the termination of exclusivity arrangements
with suppliers are the only remedies that can help erode Defendant's
monopoly. With slight modifications, the Proposed Final Judgment can be
rectified to achieve the stated goal of providing retailers with
alternative sources and freeing suppliers from a single wholesaler that
also represents their competitors. That remedy is to recognize--and
protect--suppliers and retailers' rights to deal directly with one
another without interference from the Defendant. We have attached as
Exhibit 2 a ``red-lined'' copy of the Proposed Final Judgment on which
we have made recommended revisions that, with minor modifications,
would permit the Proposed Final Judgment to achieve the competitive
goals set forth in the CIS.
The following language, which could be added after Paragraph IV A
of the Proposed Final Judgment, would implement this approach: (Topa is
enjoined and restrained from:)
Communicating with any supplier, wholesaler or other person for
the purpose or with the effect of urging, compelling, or coercing
any supplier or wholesaler to refrain from selling distilled spirits
to any retailer in the Virgin Islands. Nothing in this paragraph
[[Page 28175]] of Section IV shall be construed to inhibit Topa from
negotiating, entering into and adhering to a contract dealing with a
supplier on an exclusive basis; provided, that such designation
shall not directly or indirectly prevent any retailer in the Virgin
Islands from acquiring distilled spirits directly from any supplier.
The suggested language is derived from the consent order issued in
United States v. Maryland State Licensed Beverage Association, Inc.,
CCH Trade Reg. Rep. para. 69,261 (D. Md., 1958). In that case,
distributors and wholesalers were charged with collusion in attempting
to keep retailers from dealing directly with suppliers. The appropriate
remedy to enjoin such anti-competitive practices was to recognize
retailers' and suppliers' rights to deal directly with each other,
while continuing to permit exclusive arrangements between wholesalers
and suppliers. The same approach is appropriate here.
In addition, the current Paragraph D of Section IV of the Proposed
Final Judgment should be amended as follows:
(Topa is enjoined and restrained from:)
D. Refusing to deal with any retailer because that retailer
deals with another wholesaler or directly with a supplier.''
(Suggested revision emphasized.)
In commenting on Paragraph IVD of the Proposed Final Judgment, the CIS
points out: ``Even if Topa loses some brands to a new or existing
wholesaler, Topa will retain enormous influence over retailers. This
provision (as drafted) will prevent Topa from abusing that position in
the retail trade * * *.'' However, unless language is added to
Paragraph IVD expressly protecting retailers' and suppliers' rights to
deal directly with each other, the Proposed Final Judgment could be
read by Defendant Topa to sanction refusals to deal in circumstances
where suppliers deal directly with retailers.
It is imperative that the Proposed Final Judgment expressly
prohibit Topa's interference with efforts on the part of retailers to
deal directly with suppliers. It is this omission that poses the
greatest threat to competition in the Virgin Islands. As one of
Defendant's attorneys points out in the Press Release, Exhibit 1: ``nor
will (the Proposed Final Judgment) change how Topa does business
`because the company is not being asked to anything different from what
it has been doing over the past five years.' '' One of the things Topa
has been doing over the past five years is interfering with direct
supplier-retailer relationships. Unless Topa's behavior changes,
competition will not be restored to the wholesale distilled spirits
market in the Virgin Islands.
Only by recognizing and protecting suppliers' and retailers' rights
to deal directly with each other can the discipline of competition be
restored. For example, if A.H. Riise is able to purchase from
suppliers, there is nothing to prevent the Defendant or other
wholesalers from selling to A.H. Riise if they can provide better
price/service/delivery than can be obtained from suppliers directly.
Presumably the wholesale prices that Defendant and other wholesalers
can obtain for providing wholesaler functions will be lower than the
prices retailers will be able to obtain directly. Therefore, there will
always be a role for the Defendant to play in the Virgin Islands
distilled spirits wholesale market, provided the Defendant prices
competitively.
VI. The Five Year Duration for the Proposed Final Judgment Is
Patently Inadequate
There is probably no other area that more accurately demonstrates
Defendant's characterization that the Proposed Final Judgment is the
``weakest * * * ever negotiated by the Department of Justice'' than the
five-year term proposed for the order. Proposed Final Judgment para.
VIII. Defendant has enjoyed its monopoly power for over a decade. Old
habits die hard. Even if A.H. Riise's recommended modifications in the
Proposed Final Judgment were to be adopted, such an order should remain
in effect for a minimum of ten years to give competitive forces an
opportunity to develop and become viable and effective.
Conclusion
The Proposed Final Judgment is not in the public interest, because
it is too narrowly drawn and its remedies will not restore competition
in the distilled spirits market in the Virgin Islands. The Complaint
and the proposed remedies totally overlook Defendant's monopolistic
pricing practices. Moreover, the terms of the Proposed Final Judgment
which purport to provide fertile soil for potential new entrants to
enhance competition, in the words of the Defendant, are ``meaningless
provisions.'' Topa Press Release, Exhibit 1.
Price competition will be quickly restored if suppliers are freed
to deal directly with retailers. Competitive pricing in this market is
in the public interest, because it will boost tourism and tourism-
related commerce, thereby enhancing employment and tax revenues in the
Virgin Islands. Unfortunately, the Proposed Final Judgment does not
promote this goal. It should therefore be rejected.
Conversely, adoption of the Proposed Final Judgment as drafted will
permit Defendant's monopoly power to go unchecked. Since, as correctly
characterized by Defendant's Press Release, Exhibit 1, Defendant is not
required to change its behavior, adoption of the Proposed Final
Judgment will legitimize and institutionalize its anti-competitive
practices and monopolistic power. A continuation of these practices
would be detrimental to suppliers, retailers, the consuming public,
and, more generally, the economy of the Virgin Islands, and thus, the
public interest. Therefore, the Proposed Final Judgment should be
withdrawn and modified as suggested in Exhibit 2.
Respectfully submitted,
Samual H. Seymour
Jonathan R. Moore
Note: Retyped by Department of Justice
TOPA Press Release
Topa Equities (V.I.), Ltd. today announced that it had reached a
settlement with the Department of Justice closing down the government's
drawn out investigation of acquisitions by Topa of distilled spirits
distributors in the early 1980's.
``Topa conceded nothing nor did it acknowledge that these
acquisitions had any effect on competition,'' said Maria Hodge, counsel
for Topa. ``The case was settled and a proposed consent decree was
accepted for one reason--to end the five-year investigation.''
Hodge further stated that ``the decree would have no effect on
Topa's business activities'' even though the investigation ``had
examined all of its on-going business activities. Apparently they
couldn't find anything wrong that could be challenged under the
antitrust laws except some acquisitions over a decade ago.''
According to Ernest Gellhorn, an antitrust lawyer from Washington,
DC retained by Topa, ``the proposed decree is all bark and no bite.''
Pointing to the decree's ``meaningless provisions that would modify
contract terms written by suppliers or that would make supposed scare
warehouse space available to new entrants,'' Gellhorn called ``this
probably the weakest consent decree ever negotiated by the Department
of Justice.''
Gellhorn also said that the reason that the Department of Justice
was willing to accept this ``moral defeat'' was that ``after combing
through ten years of Topa's records and interviewing scores
[[Page 28176]] of others, the government could not find anything to
object to about how Topa conducts its business.''
Topa's decision to settle this matter ``involves no finding or
acknowledgment of any wrong-doing,'' attorney Hodge emphasized. Nor
will it change how Topa does business ``because the Company is not
being asked to do anything different from what it has been doing over
the past five years.''
All the government has complained about is that Topa's acquisitions
resulted in it being the sole wholesale distributor for major distilled
spirits in the U.S. Virgin Islands. ``What the government fails to
note,'' according to Ms. Hodge, ``is that Topa has been successful
because it has served both its suppliers and its customers so well.''
Nonetheless, ``it has accepted this settlement in order to end what has
been a significant drain on the company's resources,'' Hodge said.
Topa owns West Indies Corp. and Bellows International, Ltd. in the
U.S. Virgin Islands. ``None of the acquisitions we have made in the
Virgin Islands have been sought out by us,'' said Topa Chairman, John
Anderson. ``In several cases, we were asked to help a failing company,
which in turn allowed many employees to keep their jobs. Our only aim
has been to be a good employer and a good corporate citizen in the V.I.
community and a solid performer for our many quality brands.'' Topa
employees (sic) over 225 employees in the Territory.
For additional information, please call Maria Hodge (809-774-6845).
December ________, 1994
Note: Retyped by Department of Justice. Brackets (``[ ]'')
substituted by Department of Justice for redlining in the original.
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 of 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. Sec. 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 [or suppliers], 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 [or any retailer], 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 other 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.] Communicating with any supplier, wholesaler or other person
for the purpose or with the effect of urging, compelling, or coercing
any supplier or wholesaler to refrain from selling distilled spirits to
any retailer in the Virgin Islands. Nothing in this paragraph of
Section IV shall be construed to inhibit Topa from negotiating,
entering into, and adhering to a contract dealing with a supplier on an
exclusive basis; provided, that such designation shall not directly or
indirectly prevent any retailer in the Virgin Islands from acquiring
distilled spirits directly from any supplier.]
[C.] Entering into with, of 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;
[D.] Making unsolicited offers of employment to any executive
employee [[Page 28177]] 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;
[E.] Refusing to deal with any retailer because that retailer deals
with another wholesaler [or directly with a supplier];
[F.] Intentionally preventing, or attempting 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. Topa may, in
the ordinary course of business, seek, retain and acquire warehouse
space to meet its ordinary and necessary business requirements;
[G.] 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
[H.] 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.
V
For the purpose of determining or 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 defendent 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 this 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 [delete ``fifth''] [tenth]
anniversary of its date of entry.
IX
Entry of this Final Judgment is in the public interest.
Dated:
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United States District Judge, District of the Virgin Islands.
[FR Doc. 95-12561 Filed 5-26-95; 8:45 am]
BILLING CODE 4410-01-M
