[Federal Register Volume 64, Number 155 (Thursday, August 12, 1999)]
[Notices]
[Pages 44046-44057]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-20806]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Cargill, Incorporated and Continental Grain
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 District of
Columbia in United States of America v. Cargill, Inc. and Continental
Grain Company, Civil Action No. 99-1875. The Complaint in this case
alleged that the proposed acquisition of Continental Grain Company's
(Continental) worldwide commodity marketing business by Cargill, Inc.
(Cargill) would substantially lessen competition for grain purchasing
services to farmers and other suppliers in many areas in the United
States, and would increase the concentration of authorized delivery
capacity for settlement of Chicago Board of Trade corn and soybean
futures contracts, in violation of Section 7 of the Clayton Act, 15
U.S.C. Sec. 18. The Complaint further alleged that the Covenant Not To
Compete in the Purchase Agreement between the two companies is an
unreasonable agreement in restraint of trade in violation of Section 1
of the Sherman Act, 15 U.S.C. Sec. 1.
The proposed Final Judgment requires Cargill to divest all of its
property rights in its port elevator in Seattle, Washington and its
river elevators in East Dubuque and Morris, Illinois. The proposed
Final Judgment further requires Continental to divest all of its
property rights in its river elevators at Lockport, Illinois and
Caruthersville, Missouri, its rail elevators at Salina, Kansas and
Troy, Ohio; and its port elevators at Beaumont, Texas, Stockton,
California, and Chicago, Illinois. Cargill is also required to enter
into a ``throughput agreement'' to make one-third of the loading
capacity at its Havana, Illinois river elevator available to an
independent grain company. Cargill is prohibited from acquiring any
interest in the facilities being divested by Continental, or in the
river elevator at Birds Point, Missouri in which Continental previously
held a minority interest. The proposed Final Judgment also makes
Cargill subject to various restrictions if it seeks to enter into an
throughput agreement with the acquirer of the Seattle port facility.
[[Page 44047]]
Public comment is invited within the statutory 60-day comment
period. Such comments, and responses thereto, which will be published
in the Federal Register and filed with the Court. Comments, should be
directed to: Roger Fones; Chief, Transportation, Energy, and
Agriculture Section, Antitrust Division; U.S. Department of Justice,
325 Seventh Street, NW; Room 500; Washington, DC 20530 (telephone:
(202) 307-6351).
Constance K. Robinson,
Director of Operations.
Stipulation and Order
It is hereby 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 United States District Court for the District of
Columbia.
2. The parties stipulate that a Final Judgment in the form hereto
attached 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 and Penalties Act (15
U.S.C. Sec. 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 defendants 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 by the
Court, 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 signing of this Stipulation by the parties, 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 Section VI.B 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 that 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 divestitures 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.
Respectfully submitted,
For Plaintiff United States of America
Robert L. McGeorge,
Attorney, U.S. Department of Justice, Antitrust Division, 325 Seventh
Street, N.W., Suite 500, Washington, D.C. 20530, Telephone: (202) 307-
6361, Facsimile (202) 307-2784.
For Defendant Cargill, Incorporated
Marc G. Schildkraut
Howrey & Simon, 1299 Pennsylvania Avenue, N.W., Washington, DC 20004,
Telephone: (202) 383-7448, Facsimile: (202) 383-6610.
For Defendant Continental Grain Company
Paul T. Denis,
Swidler, Berlin Shereff Friedman, LLP, 3000 K Street, N.W.; Suite 300,
Washington, DC 20007-5116, Telephone: (202) 424-7810, Facsimile: (202)
424-7645.
Jack Quinn,
Arnold & Porter, 555 Twelfth Street, N.W., Washington, DC 20004,
Telephone: (202) 942-5000, Facsimile: (202) 942-5999.
Dated: July 8, 1999.
Order
It is so ordered, this ______ day of ____________, 1999.
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United States District Court Judge
Final Judgment
Whereas plaintiff, the United States of America (hereinafter
``United States''), having filed its Complaint herein, and defendants
Cargill, Incorporated (``Cargill'') and Continental Grain Company
(``Continental''), by their respective 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 party with
respect to any issue of law of 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
third parties is the essence of this agreement;
And whereas, the United States requires defendants to maker certain
divestitures for the purpose of remedying the loss of competition
alleged in the Complaint;
And whereas, defendants have represented to the United States that
the divestitures 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 defendants under Section 7 of
the Clayton Act, as amended (15 U.S.C. Sec. 18).
II. Definitions
As used in this Final Judgment:
A. ``Acquirer'' means the person or persons to whom defendants
shall transfer the Assets (as defined in subsection B).
B. ``Assets'' means all property rights held by Cargill or
Continental in the river, rail and port elevators defined in
subsections C, F, H, J, L, M, Q, R, T and V.
C. ``Beaumont port elevator'' means the port elevator operated by
Continental at or near Beaumont, Texas, and all Related Assets.
D. ``Capacity'' when used in connection with a grain elevator may
be based on the maximum number of bushels that can be stored in the
facility at any one time (storage capacity), or the maximum number of
bushels that can be moved through the facility over the course of a
designated unit of time (throughput capacity). When one grain company
obtains the right to a certain percentage of the capacity of the
storage or loading capacity at another grain company's elevator
pursuant to a throughput agreement or other
[[Page 44048]]
commercial arrangement, it obtains the right to the stipulated portion
of total storage or throughput capacity at the facility, and not
necessarily the exclusive right to use a specific area in that
facility.
E. ``Cargill'' means defendant Cargill, Incorporated, and includes
its successors and assigns, their subsidiaries, divisions, groups,
partnerships and joint ventures, affiliates, directors, officers,
managers, agents and employees.
F. ``Caruthersville river elevator'' means the river elevator
operated by Continental at or near Caruthersville, Missouri, and all
Related Assets.
G. ``Continental'' means defendant Continental Grain Company and
includes its successors and assigns, their subsidiaries, divisions,
groups, partnerships and joint ventures, affiliates, directors,
officers, managers, agents and employees.
H. ``Chicago port elevator'' means the river elevator operated by
Continental (also known as ``Chicago B'') at or near Chicago, Illinois,
and all Related Assets.
I. ``Divest'' means to sell or transfer a defendant's rights in
property that it owns, or to assign or sublease a defendant's rights in
property that it leases or rents.
J. ``East Dubuque river elevator'' means the river elevator
operated by Cargill at or near East Dubuque, Illinois, and all Related
Assets.
K. ``Grain'' means corn, wheat and other grains, and soybeans and
other oilseeds, in their unprocessed, commodity form.
L. ``Lockport river elevator'' means the river elevator operated by
Continental at or near Lockport, Illinois, and all Related Assets.
M. ``Morris river elevator'' means the river elevator operated by
Cargill at or near Morris, Illinois, and all Related Assets.
N. ``Person'' means any natural person, corporation, association,
firm or other business or legal entity.
O. ``Property rights'' means all legal rights possessed by
defendants relating primarily to the use, control or operation of a
specific river, rail or port elevator, including but not limited to:
fee simple ownership rights, easements and all other real property
rights for land, improvements and fixtures owned by that defendant;
leasehold and rental rights for facilities that are leased or rented to
that defendant, including all renewal or option rights; personal
property ownership rights for equipment and other personal property
owned by that defendant and used in the operation of those facilities;
stockholder interests; and contract rights.
P. ``Related Assets'' means all real, personal and contract rights
associated primarily with the operation of a particular river, rail or
port elevator, including but not limited to: all bins, silos and other
grain storage facilities; all improvements and equipment used for
handling, receiving, unloading, weighing, sampling, grading, elevating,
storing, drying, conditioning and loading grain; all of the real
property on which the facility is located; all inventory, accounts
receivable, pertinent correspondence, files, customer lists and
information and advertising materials relating to the facility; and all
assignable contract rights specific to a facility with suppliers,
customers and transportation firms for that specific facility.
Q. ``Salina rail elevator'' means the elevator with outbound rail
capability (also known as ``Salina East'') operated by Continental at
or near Salina, Kansas, and all Related Assets.
R. ``Seattle port elevator'' means the port elevator operated by
Cargill at or near Seattle, Washington (commonly referred to as ``Pier
86''), and all Related Assets.
S. ``Standard Throughput Agreement'' means an agreement that allows
one grain company to move its grain through an elevator operated by
another person, with unloading, storage, loading and ancillary services
provided by the operator pursuant to terms, conditions and rates that
are common in the grain industry.
T. ``Stockton port elevator'' means the port elevator operated by
Continental at or near Stockton, California, and all Related Assets.
U. ``Tacoma port elevator'' means the port elevator operated by
Continental at or near Tacoma, Washington.
V. ``Troy rail elevator'' means the elevator with outbound rail
capability operated by Continental at or near Troy, Ohio, and all
Related Assets.
III. 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.
B. The pertinent defendant shall require, as a condition of the
divestiture of the Assets, that the Acquirer agree to be bound by the
provisions of this Final Judgment.
IV. Divestiture of Assets
A. Cargill is hereby ordered and directed, within five (5) 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 all of its property rights in the
East Dubuque river elevator and Morris river elevator to an Acquirer
acceptable to the United States in its sole discretion. It 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 all of its property rights in the Seattle port
elevator 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 the time period, and shall notify the Court in such
circumstances.
B. Notwithstanding Section IV.A, the Acquirer of the Seattle port
elevator may enter into a Standard Throughput Agreement with Cargill,
or any joint venture involving the Tacoma elevator to which Cargill is
a party (the ``Cargill Joint Venture''), provided that: (1) the
Acquirer has no interest in Cargill or the Cargill Joint Venture; (2)
the throughput agreement gives Cargill or the Cargill Joint Venture no
more rights concerning the operations of the facility than are commonly
granted to sublessees in Standard Throughput Agreements; (3) and
Cargill or the Cargill Joint Venture obtains continuing rights to move
no more than 8.5 million bushels of grain and oilseeds combined in any
given month through the Seattle port elevator.
C. Notwithstanding Section IV.A and IV.B, Cargill need not divest
the Seattle port elevator if it does not buy, lease or otherwise
acquire an interest in Continental's port elevator at or near Tacoma,
Washington.
D. Continental is hereby ordered and directed, within five (5)
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 all of its property rights
in the Lockport river elevator, Caruthersville river elevator, Salina
rail elevator, Troy rail elevator, Beaumont port elevator, Stockton
port elevator and Chicago port elevator 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 the time period, and
shall notify the Court in such circumstances.
E. Unless the United States consents in writing, the divestiture
pursuant to
[[Page 44049]]
Section IV or by trustee appointed pursuant to Section V of this Final
Judgment, shall include the entire Assets defined above (as qualified
by Section IV.B and IV.C). Divestiture shall be accomplished in such a
way as to satisfy the United States, in its sole discretion, that the
Assets can and will be operated by the Acquirer as a viable, ongoing
business. Divestiture of the Assets, whether pursuant to Section IV or
Section V of this Final Judgment, shall be made to an Acquirer for whom
it is demonstrated to the sole satisfaction of the United States that:
(1) the purchase is for the purpose of using the Asset to compete
effectively in the grain business, (2) the Acquirer has the managerial,
operational, and financial capability to use the Asset to compete
effectively in the grain business; and (3) none of the terms of any
agreement between the Acquirer and defendant(s) give defendant(s) the
ability unreasonably to raise the Acquirer's costs, to lower the
Acquirer's efficiency, or otherwise to interfere in the ability or
incentive of the Acquirer to compete effectively. Moreover, the United
States must be satisfied, in its sole discretion, that any Standard
Throughput Agreement that may be negotiated between Cargill or the
Cargill Joint Venture and the Acquirer of the Seattle port elevator:
(1) would leave the Acquirer with sufficient capacity for it to be a
viable and effective competitor for the purchase of corn and soybeans
in the Pacific Northwest draw area; and (2) would not adversely affect
the Acquirer's ability or incentives to compete vigorously for the
origination of corn and soybeans in the Pacific Northwest draw area, by
raising the Acquirer's costs, lowering its efficiency, or otherwise
interfering in the ability or incentive of the Acquirer to compete
effectively.
F. In accomplishing the divestiture ordered by this Final Judgment,
defendants shall make known, by usual and customary means, the
availability of the Assets. Defendants shall provide any person making
inquiry regarding a possible purchase a copy of the Final Judgment. The
pertinent defendant shall also offer to furnish to any prospective
purchaser, subject to customary confidentiality assurances, all
information regarding the Assets customarily provided in a due
diligence process, except such information subject to attorney client
privilege or attorney work product privilege. The pertinent defendant
shall make available such information to the United States at the same
time that such information is made available to any other person. The
pertinent defendant shall permit prospective purchasers 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 information customarily provided as part of a due
diligence process.
G. Defendants shall not interfere with any negotiations by the
Acquirer to employ any employee whose primary responsibility involves
the use of the Assets.
H. Defendants shall take all reasonable steps to accomplish the
prompt divestitures contemplated by this Final Judgment. Defendants
shall not take any action other than in the ordinary course of business
that will impede in any way the operation of the Assets.
I. Cargill shall not purchase, lease or acquire any interest in the
Lockport river elevator, Caruthersville river elevator, Salina rail
elevator, Troy rail elevator, Beaumont port elevator, Stockton port
elevator or Chicago port elevator, or any interest in the river
elevator at or near Birds Point, Missouri (in which Continental
formerly owned a minority interest, and had a right of first refusal to
purchase grain). If another firm acquires the Tacoma port elevator
pursuant to a right of first refusal (and Cargill therefore retains the
Seattle port elevator), Cargill shall not subsequently purchase or
lease the Tacoma port elevator. If another firm acquires the Tacoma
port elevator pursuant to a right of first refusal, Cargill shall not
subsequently acquire any other interest in that facility (including a
joint venture interest) without the written consent of the United
States.
J. Cargill shall enter into a throughput agreement that makes one-
third (\1/3\) of the daily loading capacity at its river elevator
located at or near Havana, Illinois, or one barge-load per day,
whichever is greater, to an independent grain company acceptable to the
United States in its sole discretion (the ``Havana Throughput
Agreement''). Daily loading capacity shall be the capacity registered
with the CBOT. The independent grain company that obtains the
throughput right from Cargill (the ``third party'') must be qualified
under CBOT rules and regulations to make delivery of at least one
barge-load of corn and soybeans per day for the settlement of CBOT corn
and soybean futures contracts, and must agree to register that capacity
at the Havana facility with the CBOT.
The Havana Throughput Agreement shall allow the third party to use
its share of the loading capacity at the Havana facility to transload
grain from trucks onto barges for commercial purposes unrelated to
futures contract deliveries, as well as to make deliveries under CBOT
futures contracts. Cargill shall not be obligated by this Final
Judgment to provide storage services to the third party in excess of
the storage services required to accommodate the transloading of grain
shipments from trucks to barges. Cargill's load-out fees, and its fees
for any storage services that Cargill elects to provide for storage in
excess of twenty-four hours from the time of truck unload to barge
loading, may not exceed the load-out fees and daily storage rates
published in applicable CBOT tariffs.
As part of the Havana Throughput Agreement, any dispute or
disagreement between Cargill and the third party arising from or
relating to the throughput agreement or the third party's use of
Cargill's loading capacity at Havana shall be submitted, governed, and
resolved in accordance with the arbitration rules of the CBOT to the
extent such dispute or disagreement falls within the jurisdiction of
the CBOT Arbitration Committees. To the extent such dispute or
disagreement does not fall within CBOT jurisdiction, such dispute or
disagreement shall be submitted, governed and resolved in accordance
with the arbitration rules of the National Grain and Feed Association,
or other arbitration body that is mutually agreed upon by Cargill and
the third party. Cargill shall abide by the decisions of such
arbitrators.
Cargill shall enter into the Havana Throughput Agreement within
five (5) 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. The United States, in
its sole discretion, may agree to an extension of the time period, and
shall notify the Court in such circumstances. If Cargill has not
entered into a Havana Throughput Agreement within this time period, a
trustee shall be appointed to satisfy this requirement pursuant to the
same conditions as are set forth in Section V.
V. Appointment of Trustee
A. In the event that Cargill has not divested the East Dubuque
river elevator, Morris river elevator or Seattle port elevator, or
entered in the Havana Throughput Agreement, to the extent required by
Section IV of the Final Judgment within the time period specified
therein, or that Continental has not divested the Lockport river
elevator, Caruthersville river elevator, Salina rail elevator, Troy
rail elevator, Beaumont port elevator, Stockton port elevator or
Chicago port elevator, to the
[[Page 44050]]
extend required by Section IV of the Final Judgment, within the time
period specified, it shall notify the United States of that fact in
writing. In that event, and upon application of the United States, the
Court shall appoint a trustee selected by the United States to effect
the divestiture of the Assets. Until such time as a trustee is
appointed, defendants shall continue their efforts to effect the
divestiture as specified in Section IV.
B. After the appointment of a trustee becomes effective, only the
trustee shall have the right to divest the Assets. 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 in its sole discretion, 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 United States and the trustee within ten (10) calendar
days after the trustee has provided the notice required under Section
VI of this Final Judgment.
C. The trustee shall serve at the cost and expense of the pertinent
defendant, 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 the pertinent defendant
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 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. The pertinent defendant shall use its best efforts to assist the
trustee in accomplishing the required divestiture, including their best
efforts to effect all regulatory approvals and its best efforts to
obtain any necessary consent of any persons from whom they lease the
Assets. 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 Assets, and the pertinent defendant 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. The pertinent defendant
shall permit any prospective Acquirer 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 divestitures 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 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 Assets, 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
Assets. 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 with respect to any of the Assets, the pertinent defendant or
the trustee, whichever is then responsible for effecting the
divestiture required herein, shall notify the United States of any
proposed divestiture required by Section IV or V of this Final
Judgment. If the trustee is responsible, it shall similarly notify the
pertinent defendant. 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
Assets, together with full details of the same. Within fifteen (15)
calendar days after receipt of the notice, the United States may
request from the pertinent defendant, the proposed purchaser, or any
third party additional information concerning the proposed divestiture,
the proposed purchaser, and any other potential purchaser. The
pertinent defendant 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 the pertinent defendant and the trustee, if
there is one, whether or not it objects to the proposed divestiture. If
the United States notifies in writing the pertinent defendant and the
trustee, if there is one, that it does not object, then the divestiture
may be consummated, subject only to the pertinent defendant'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 a defendant
under Section V.B., the proposed divestiture under Section V
[[Page 44051]]
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, each
defendant shall deliver to the United States 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 Assets, 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 the pertinent defendant has taken to
solicit an Acquirer for the relevant Assets and to provide required
information to prospective Acquirers including the limitations, if any,
on such information. Assuming that the information set forth in the
affidavit is true and complete, any objection by the United States to
the information provided by the defendants, including limitations of
information, shall be made within fourteen (14) calendar days of
receipt of such affidavit. Until one year after each defendant has
completed such divestitures, that defendant shall maintain full records
of all efforts made to divest all or any portion of the Assets.
VII. Financing
Defendants shall not finance all or any part of any purchase of the
Assets made pursuant to Section IV or V of this Final Judgment. With
respect to Assets leased by a defendant, however, the pertinent will
not violate this condition if: (1) The lessor holds the pertinent
defendant responsible for lease payments under an assignment or
sublease of the defendant's leasehold interests; or (2) the pertinent
defendant makes up any shortfall between its lease payment obligations
and the lease payments negotiated by the person to whom it assigns or
subleases its leasehold interests.
VIII. Hold Separate and Preservation of Assets Requirements
Unless otherwise indicated, from the date of filing of this
proposed Final Judgment with the Court and until the divestitures
required by Sections IV.A, IV.D and/or V of the Final Judgment, and the
execution of the Havana Throughput Agreement required by Section IV.J,
have been accomplished:
A. Subject to force majeure, defendants shall: (1) Take all steps
necessary to assure that the Assets and Cargill's Havana river elevator
are maintained as separate, distinct and salable assets; and extend all
reasonable efforts to maintain these facilities in a condition that
makes them usable as grain elevators; (2) not sell, assign, transfer,
or otherwise dispose of theses facilities, or pledge them as collateral
for loans, except in accordance with the Final Judgment; (3) take all
steps necessary to preserve these facilities in a state of repair equal
to their current state of repair, ordinary wear and tear excepted; (4)
take all steps necessary to preserve the documents, books, customers
lists and records relating to these facilities; (5) refrain from taking
any actions that would jeopardize the sales of these facilities; and
(6) continue to operate these facilities as grain elevators.
Notwithstanding the foregoing: (a) if Continental's lease of the Salina
rail elevator expired on or before April 30, 1999 and was not renewed,
that facility shall not be subject to this section of the Final
Judgment, and (b) if Cargill's lease of the East Dubuque river elevator
expires prior to divestiture, Cargill shall not thereafter be subject
to the provisions of this section if it has offered to extend the lease
at rates and conditions substantially similar to the rates and
conditions in its current lease, and the lessor has rejected that
offer.
B. Except in the ordinary course of business or as is otherwise
consistent with this Final Judgment, defendants 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 June 24, 1999 worked at any of the Assets, unless such
individual has a written offer of employment from a third party for a
like or better position.
C. Until such time as the Assets are divested: William F. Winnie
shall manage the Beaumont port elevator, Caruthersville river elevator,
Chicago port elevator, Lockport river elevator, Stockton port elevator
and Troy rail elevator; Peter Reed shall manage the East Dubuque river
elevator; Sharon Spies shall manage the Morris river elevator; and
Donald Vogt shall manage the Seattle port elevator. These individuals
shall have complete managerial responsibility for the Assets, subject
to the provisions of the Final Judgment. In the event that these
individuals are unwilling or unable to perform these duties, defendants
shall appoint, subject to the United States' approval, a replacement
acceptable to the United States within ten (10) working days. Should
defendants fail to appoint a replacement acceptable to the United
States within ten (10) working days, the United States may appoint a
replacement.
D. Defendants 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
Acquirer.
E. Continental shall operate the Lockport river elevator,
Caruthersville river elevator, Troy rail elevator, Beaumont port
elevator, Stockton port elevator and Chicago port elevator
independently from and in competition with Cargill. Defendants shall
not implement any non-compete agreements until all of the Assets have
been divested. The term of any such non-compete agreement shall not be
more than three (3) years.
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 United States, 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 defendants 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 matter 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
United States to any person other than a duly
[[Page 44052]]
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 (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 United States, 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 Civil Procedure,'' then the
United States 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: July ____, 1999.
Court approval subject to procedures of Antitrust Procedures and
Penalties Act, 15 U.S.C. Sec. 16.
----------------------------------------------------------------------
United States District Judge
Competitive Impact Statement
The United States, pursuant to Section 2(b) of the Antitrust
Procedures and Penalties Act (``APPA''), 15 U.S.C. Sec. 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
On July 8, 1999, the United States filed a civil antitrust
Complaint alleging that the proposed acquisition by Cargill,
Incorporated (``Cargill'') of the Commodity Marketing Group of
Continental Grain Company (``Continental'') would violate Section 7 of
the Clayton Act, 15 U.S.C. Sec. 18. The Complaint alleges that Cargill
is the second largest grain trader in North America, and that, until
recently, Continental was the third largest grain trader in North
America. The Complaint alleges that if the acquisition is permitted to
proceed, it will substantially lessen competition for grain purchasing
services to farmers and other suppliers in a number of areas in the
United States in violation of Section 7 of the Clayton Act, 15 U.S.C.
Sec. 18. The Complaint further alleges that unless the acquisition is
enjoined, many American farmers and other suppliers likely will receive
lower prices for their grain and oilseed crops, including corn,
soybeans, and wheat (collectively referred to as ``grain''). The
request for relief in the Complaint seeks: (1) Preliminary and
permanent injunctive relief preventing the consummation of the
transaction; and (2) such other relief as is proper.
When the Complaint was filed, the United States also filed a
proposed consent decree (``Final Judgment'') that would permit Cargill
to complete its acquisition of Continental's commodity marketing
business, but requires divestitures and other relief that would
preserve competition for grain purchasing services to farmers and other
suppliers in a number of areas in the United States.\1\ The proposed
Final Judgment orders defendant Cargill to divest all of its property
rights in the river elevators located in East Dubuque, Illinois and
Morris, Illinois within five (5) months after the filing of the
proposed Final Judgment or within five (5) calendar days after notice
of entry of the Final Judgment, whichever is later. The proposed Final
Judgment also orders defendant Cargill to divest all of its property
rights in the Seattle port elevator within six (6) months after the
filing of the proposed Final Judgment or within five (5) calendar days
after notice of entry of the Final Judgment, whichever is later. The
proposed Final Judgment orders defendant Continental to divest all of
its property rights in the river elevators located at Lockport,
Illinois and Caruthersville, Missouri, the rail elevators located at
Salina, Kansas and Troy, Ohio, and the port elevators located at
Beaumont, Texas, Stockton, California, and Chicago, Illinois within
five (5) months after the filing of the proposed Final Judgment or
within five (5) calendar days after notice of entry of the Final
Judgment, whichever is later. The proposed Final Judgment also requires
defendant Cargill to enter into a ``throughput agreement''--an
agreement providing for one grain trader to lease elevator capacity
from another--to make one-third of the loading capacity at its Havana,
Illinois river elevator available to an independent grain company,
within five (5) months after the filing of the proposed Final Judgment
or within five (5) calendar days after notice of entry of the Final
Judgment, whichever is later.
---------------------------------------------------------------------------
\1\ Cargill and Continental entered into a Stipulation (filed
contemporaneously with the Final Judgment) in which they agreed to
be bound by the proposed final Judgment pending final determination
by the Court.
---------------------------------------------------------------------------
In addition, the proposed Final Judgment prohibits defendant
Cargill from acquiring any interest in the facilities to be divested by
Continental, or the river elevator at Birds Point, Missouri, in which
Continental until recently had held a minority interest. The proposed
Final Judgment also makes defendant Cargill subject to various
restrictions in the event it seeks to enter into a throughput agreement
with the acquirer of the Seattle port facility.
If the defendants should fail to accomplish the divestitures or to
enter into a Havana throughput agreement within the prescribed time
periods, a trustee appointed by the Court would be empowered to divest
these assets or otherwise satisfy the Havana throughput requirement.
The plaintiff and 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. Events Giving Rise to the Alleged Violations
A. The Defendants and the Proposed Transaction
Cargill is a Delaware corporation with its principal place of
business in Minnetonka, Minnesota. It is the second largest grain
trader in North America. Continental is a Delaware corporation with its
principal place of business in New York City, New York. It was, as
recently as 1997, North America's third largest grain trader. The
defendants are also the first and third largest U.S. grain exporters,
collectively exporting approximately 40 percent of all U.S.
agricultural commodities. Both Cargill and Continental purchase grain
and
[[Page 44053]]
other crops from farmers, brokers, and elevator operators throughout
the United States.
On October 9, 1998, Cargill and Continental entered into an
agreement entitled ``Purchase Agreement'' under which Cargill agreed to
purchase Continental's Commodity Marketing Group.
B. The Grain Purchasing Market
Grain traders such as Cargill and Continental operate extensive
grain distribution networks, which facilitate the movement of grain
from farms to domestic consumers of these commodities and to foreign
markets. Country elevators are often the first stage of the grain
distribution system, with producers hauling wheat, corn, and soybeans
by truck from their farms for sale to the country elevators. Here, the
grain is off-loaded, sampled, graded, and put into storage. Sometimes
other services are offered by the country elevators, such as grain
drying and conditioning services. The grain is then transported by
truck, rail, or barge to larger distribution facilities, such as river,
rail, or port elevators, which may or may not be affiliated with the
country elevators, or to feedlots or processors.
River elevators or rail terminals may receive grain directly from
the farm or from country elevators. From the river elevator, grain
typically moves outbound by barge to port elevators. From the rail
terminal, grain typically moves outbound by rail to port elevators or
to domestic feedlots or processors.
The final stage in the grain distribution system for grain intended
for export is a port elevator, where it is transferred to ocean vessels
for shipment to foreign buyers. Grain normally comes to port elevators
from river elevators (via barge) and rail terminals, although some port
elevators receive grain directly from farmers and country elevators
located within a relatively short distance from the port elevator.
Because the transportation of grain is relatively costly and time-
consuming, farmers generally sell their grain within a limited
geographic area surrounding their farms, usually to a country
elevator--although farmers located near river, rail, or port elevators
sometimes bypass the country elevator and ship their grain directly to
those facilities. Grain traders purchase grain at these country, rail,
river, and port elevators from farmers and from other suppliers, such
as brokers and independent elevator operators who have purchased grain
from the farmers.
the Complaint alleges that the purchasing of wheat, corn, and
soybeans each constitutes a relevant product market and a line of
commerce within the meaning of the Clayton Act.
The draw area for a country, river, rail, or port elevator is the
geographic area from which the facility receives grain. The draw area
of one grain company's country, river, rail or port elevator will
overlap the draw area of a competitor's elevator if their facilities
are relatively close to each other--and the cost of shipping grain from
the producer to both elevators is comparable. Cargill and Continental
operate a number of facilities with overlapping draw areas, and
therefore compete with one another in a number of markets for the
purchase of wheat, corn, and soybeans from the same producers or other
suppliers.
Many farmers and other suppliers located within overlapping
Cargill/Continental draw areas depend solely on competition among
Cargill, Continental, and perhaps a small number of other nearby grain
companies to obtain a competitive price for their products. The areas
in which these suppliers are located are referred to as ``captive draw
areas'' in the Complaint. The Complaint alleges that these captive draw
areas are relevant geographic markets and separate sections of the
country within the meaning of the Clayton Act.
The following are the overlapping and captive draw areas for
competing Cargill and Continental facilities:
The Pacific Northwest. Cargill's port elevator in Seattle
competes with Continental's port elevator in Tacoma for the purchase of
corn and soybeans. The overlapping draw area for these facilities
includes portions of North Dakota, South Dakota, Minnesota, Nebraska,
and Iowa. Captive suppliers are located primarily in eastern North
Dakota, eastern South Dakota, and western Minnesota.
Central California. Cargill's port elevator in Sacramento
competes with Continental's port elevator in Stockton for the purchase
of wheat and corn. The overlapping draw area for these facilities is
located in the Sacramento/Stockton area, where all suppliers are
captive
Texas Gulf. Cargill's port elevator in Houston competes
with Continental's port elevator in Beaumont for the purchase of
soybeans and wheat. The overlapping draw area for these facilities
includes portions of Texas, Louisiana, Oklahoma, Kansas, New Mexico,
Colorado, Nebraska, Missouri, Iowa, and Illinois. Captive suppliers are
located primarily in eastern Texas and western Louisiana.
Rail and River Elevators. Cargill and Continental compete
for the purchase of grain from captive suppliers located near their
rail elevators in Salina, Kansas and Troy, Ohio, and their river
elevators in the vicinity of Morris, Illinois, Lockport, Illinois,
Dubuque, Iowa/East Dubuque, Illinois, and New Madrid/Caruthersville,
Missouri.
According to the Complaint, if Cargill were allowed to acquire the
Continental facilities that purchase grain in these captive draw areas,
it would be in a position unilaterally, or in coordinated interaction
with the few remaining competitors, to depress prices paid to farmers
and other suppliers, because transportation costs would preclude them
from selling to other grain traders or purchasers in sufficient
quantities to prevent an anticompetitive price decrease.
The Complaint also alleges that producers of corn, soybeans, and
wheat would not switch to an alternative crop in sufficient numbers to
prevent a small but significant decrease in price because of the length
of growing seasons and of the suitability of those crops to certain
climates and regions. Nor are processors or fedlots that purchase grain
to manufacture food products or fatten livestock likely to constrain
pricing decisions by grain trading companies because their purchasing
decisions are based on factors other than small but significant changes
in crop prices. Therefore, significant changes in concentration among
grain trading companies can have an anticompetitive impact upon prices
received by farmers and other suppliers.
C. The Chicago Board of Trade Futures Markets
In addition, Cargill and Continental compete to purchase corn and
soybeans from grain sellers seeking to deliver these crops to river
elevators on the Illinois River that, beginning in year 2000, will be
authorized as delivery points for the settlement of Chicago Board of
Trade (CBOT) corn and soybean futures contracts. The provision of
authorized delivery points for corn and soybean futures contracts is a
relevant product market within the meaning of the Clayton Act. These
delivery points are regulated by the Commodities Futures Trading
Commission. The authorized delivery points, running the entire length
of the Illinois River for soybeans, and from Chicago to Peoria,
Illinois for corn, each constitutes a relevant geographic market within
the meaning of the Clayton Act; and undue concentration in these
markets would increase the possibilities
[[Page 44054]]
of anticompetitive manipulations of the futures markets.
D. Harm to Competition as a Consequence of the Acquisition
The Complaint alleges that Cargill's acquisition of Continental's
Commodity Marketing Group will substantially lessen competition for the
purchase of corn, soybeans, and wheat in each of the relevant
geographic markets by enabling Cargill unilaterally to depress the
prices paid to farmers and other suppliers. The Complaint further
alleges that the proposed transaction will also make it more likely
that the few remaining grain trading companies that purchase corn,
soybeans, and wheat in these markets will engage in anticompetitive
coordination to depress grain prices. Moreover, it is not likely that
Cargill's exercise of market power in any of these relevant geographic
markets would be thwarted by significantly increased purchases of corn,
soybeans, or wheat by processors, feedlots, or other buyers, by new
entry, by farmers and other suppliers transporting their products to
more distant markets, or by any other countervailing force.
In addition, the Complaint alleges that by consolidating the
Cargill and Continental river elevators on the Illinois River, this
transaction would give two firms approximately 80% of the authorized
delivery capacity for settlement of CBOT corn and soybeans futures
contracts. This concentration would increase the likelihood of price
manipulation of futures contracts by those firms, resulting in higher
risks for buyers and sellers of futures contracts.
Finally, the Complaint alleges that the defendants' Purchase
Agreement includes a Covenant Not to Compete that is longer than is
reasonably necessary for Cargill to have a fair opportunity to gain the
loyalty of Continental's suppliers and customers, and has the effect of
unlawfully dividing markets between the two companies in violation of
Section 1 of the Sherman Act, 15 U.S.C. Sec. 1.
III. Explanation of the Proposed Final Judgment
The provisions of the proposed Final Judgment are designed to
preserve existing competition for grain purchasing services to farmers
and other suppliers in numerous areas in the United States, and to
prevent anticompetitive manipulation of CBOT corn and soybean futures
markets. To preserve existing competition for grain purchasing
services, it requires divestitures of Cargill or Continental river
elevators at Morris, Illinois, Lockport, Illinois, East Dubuque,
Illinois, and Caruthersville, Missouri; rail terminals at Troy, Ohio
and Salina, Kansas; and port elevators at Beaumont, Texas, Stockton,
California, and Seattle, Washington. This relief is intended to
maintain the level of competition that existed preacquisition, and
ensures that farmers and other suppliers in the affected markets will
continue to have effective alternatives to Cargill when selling their
crops. to prevent manipulations of CBOT corn and soybean futures
markets, the proposed Final Judgment requires divestitures of Cargill
or Continental elevators along the Illinois River at Morris, Lockport
and Chicago, Illinois, as well as providing one-third of Cargill's
capacity at Havana, Illinois to a new entrant pursuant to a throughput
agreement.\2\
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\2\ The divestitures of the Morris and Lockport river elevators
provide relief for both the grain purchasing markets and the CBOT
futures markets.
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A. East Dubuque and Morris River Elevators, and Seattle Port Elevator
Provisions
Section IV.A of the proposed Final Judgment provides that, within
five (5) months from the filing of the proposed Final Judgment with the
Court, or five (5) calendar days after notice of the entry of the Final
Judgment by the Court, whichever is later, defendant Cargill must
divest all of its property rights in the East Dubuque, Illinois river
elevator and the Morris, Illinois river elevator to an acquirer
acceptable to the United States. Section IV.A of the proposed Final
Judgment also provides that, within six (6) months from the filing of
the proposed Final Judgment with the Court, or five (5) calendar days
after notice of the entry of the Final Judgment by the Court, whichever
is later, defendant Cargill must divest all of its property rights in
the Seattle port elevator to an acquirer acceptable to the United
States.
Section IV.B of the proposed Final Judgment imposes conditions on
Cargill and the acquirer of the Seattle port elevator, should the
acquirer decide to enter into a throughput agreement with Cargill or
any joint venture involving the Tacoma elevator to which Cargill is a
party (``Cargill Joint Venture''). Throughput agreements, which are
common in the grain industry, allow one firm to move its grain through
another firm's elevator for a fee. Under the terms of the Final
Judgment: (a) Cargill may not obtain continuing rights to move more
than 8.5 million bushels of grain per month through the Seattle port
elevator (which ensures that the acquirer of that facility will have
continuing rights to a substantial majority of the facility's
throughput capacity); (b) the throughput agreement gives Cargill no
more rights concerning the operations of the Seattle facility than are
commonly granted to sublessees in standard throughput agreements (which
insures that the acquirer will retain overall operational control of
the facility); and (c) that, in any event, the throughput agreement
will not interfere with the ability or incentive of the acquirer to
compete for the purchase of corn and soybeans.
Section IV.C of the proposed Final Judgment provides that Cargill
need not divest the Seattle port elevator if it does not buy, lease, or
otherwise acquire an interest in Continental's port elevator at or near
Tacoma, Washington.
B. Lockport River Elevator, Caruthersville River Elevator, Salina Rail
Elevator, Troy Rail Elevator, Beaumont Port Elevator, Stockton Port
Elevator, and Chicago Port Elevator Provisions
Section IV.D of the proposed Final Judgment provides that, within
five (5) months from the filing of the proposed Final Judgment with the
Court, or five (5) calendar days after notice of the entry of the Final
Judgment by the Court, whichever is later, defendant Continental must
divest all of its property rights in the river elevators located at
Lockport, Illinois and Caruthersville, Missouri; the rail terminals
located at Salina, Kansas and Troy, Ohio; and the port elevators
located at Beaumont, Texas, Chicago, Illinois, and Stockton,
California, to an acquirer acceptable to the United States. These
facilities were originally part of the defendants' Purchase Agreement.
This divestiture requirement will ensure that these facilities are sold
to purchasers who will operate these assets as grain elevators; and it
is intended to preserve the market structure that existed in those
geographic areas prior to the acquisition.
C. General Divestiture Provisions
Sections IV.E through IV.H of the proposed Final Judgment apply to
all the divestitures ordered in Sections IV.A and IV.D (as qualified by
Sections IV.B and IV.C). Section IV.E provides that unless the United
States consents in writing, the divestitures shall include the entire
assets defined in Sections IV.A and IV.D. The divestitures must be
accomplished in such a way to satisfy the United States, in its sole
discretion, that the assets can and will be operated by the acquirer as
a viable, ongoing entity capable of competing in the grain business. In
addition, any Standard Throughput Agreement that may be
[[Page 44055]]
negotiated between Cargill or the Cargill Joint Venture and the
purchaser of the Seattle port elevator must be acceptable to the United
States, in its sole discretion.
Under Section IV.F of the proposed Final Judgment, defendants shall
make known, by usual and customary means, the availability of the
assets and provide any prospective purchasers with a copy of the Final
Judgment. The pertinent defendant is required to offer to furnish any
prospective purchaser, subject to customary confidentiality assurances,
all information regarding the assets customarily provided in a due
diligence process, except such information subject to attorney-client
privilege or attorney work-product privilege. The pertinent defendant
must also permit prospective purchasers to have reasonable access to
personnel and to make inspection of physical facilities and financial,
operational, or other documents and information customarily provided as
part of a due diligence process.
Section IV.G prohibits defendants from interfering with any
negotiations by the purchaser to hire any employee whose primary
responsibility involves the use of the assets. Under Section IV.H,
defendants must take all reasonable steps necessary to accomplish the
prompt divestitures contemplated by the proposed Final Judgment, and
may not impede the operation of the assets.
Section IV.I of the proposed Final Judgment prohibits Cargill from
purchasing, leasing, or acquiring any interest in any of the assests
required to be divested by defendant Continental pursuant to Section
IV.D, or any interest in the river elevator at or near Bird's Point,
Missouri (in which Continental formerly owned a minority interest and
had a right of first refusal to purchase grain). Section IV.I also
prohibits Cargill from subsequently purchasing or leasing the Tacoma
port elevator should another firm acquire that facility, or from
acquiring any other interest in that facility (including a joint
venture interest) without the written consent of the United States.
Section IV.I does not explicitly prohibit Cargill from reacquiring the
assets that it will divest, because that prohibition is inherent in the
requirement that Cargill divest these assets for the ten-year term of
the Final Judgment.
Pursuant to Section IV.J of the proposed Final Judgment, defendant
Cargill must enter into a throughput agreement that makes one-third
(\1/3\) of the daily loading capacity at its river elevator located at
or near Havana, Illinois, or one barge-load per day, whichever is
greater, to an independent grain company acceptable to the United
States in its sole discretion (the ``Havana Throughput Agreement'').\3\
Unless the United States agrees to an extension, Cargill must enter
into the Havana Throughput Agreement within five (5) months from the
date the Final Judgment is filed with the Court, or five (5) calendar
days after notice of the entry of the Final Judgment by the Court,
whichever is later.
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\3\ The divestitures of the facilities at Morris, Lockport, and
Chicago were sufficient to resolve concerns about consolidation of
authorized delivery points for CBOT corn futures markets, which
extend from Chicago to Pekin. To resolve concerns about
concentration of authorized delivery points for CBOT soybean futures
markets, which extend the entire length of the Illinois River, it
was necessary to provide delivery capacity for a new entrant on the
southern portion of the Illinois River.
---------------------------------------------------------------------------
D. Trustee Provisions
If the defendants fail to complete any of the divestitures or to
enter into the Havana Throughput Agreement within the required time
periods, the Court will appoint a trustee, pursuant to Section V of the
proposed Final Judgment, to accomplish the divestitures. Once
appointed, only the trustee will have the right to sell the divestiture
assets or enter into the Havana Throughput Agreement, and the pertinent
defendant 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 such professionals or agents shall be reasonable
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. The proposed Final Judgment also requires the
pertinent defendant to use its best efforts to assist the trustee in
accomplishing the required divestitures.
Pursuant to Section V.E, the trustee must file monthly reports with
the parties and the Court, setting forth the trustee's efforts to
accomplish the divestitures ordered under the proposed Final Judgment.
If the trustee does not accomplish the divestitures 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 divestitures, (2) the reasons, in the trustee's judgment,
why the required divestitures have not been accomplished, and (3) the
trustee's recommendations. At the same time, the trustee will furnish
such report to the United States and defendants, who will each have the
right to be heard and to make additional recommendations. The Court
shall thereafter enter such orders as appropriate in order to carry out
the purpose of the Final Judgment, including extending the term of the
trustee's appointment.
E. Notification Provisions
Section VI of the proposed Final Judgment assures the United States
an opportunity to review any proposed sale, whether by the pertinent
defendant or the trustee, before it occurs. Under this provision, the
United States is entitled to receive complete information regarding any
proposed sale or any prospective purchaser prior to consummation. Upon
objection by the United States to a sale of any of the divestiture
assets by the pertinent defendant or the trustee, any proposed
divestiture may not be completed. Should a defendant object to a
divestiture by the trustee pursuant to Section V.B., that sale shall
not be consummated unless approved by the Court.
Section VII of the proposed Final Judgment prohibits defendants
from financing all or any part of any purchase of the assets made
pursuant to Sections IV or V of the Final Judgment. However, the
pertinent defendant will not violate this condition with respect to
assets leased by a defendant if: (1) The lessor holds the pertinent
defendant responsible for lease payments under an assignment or
sublease of the defendant's leasehold interests; or (2) the pertinent
defendant makes up any shortfall between its lease payment obligations
and the lease payments negotiated by the person to whom it assigns or
subleases its leasehold interests.
F. Hold Separate Provisions
Under Section VIII of the proposed Final Judgment, defendants must
take certain steps to ensure that, until the required divestitures and
the execution of the Havana Throughput Agreement have been
accomplished, all the previously defined assets and Cargill's Havana
river elevator will be maintained as separate, distinct and saleable
assets, and maintained as usable grain elevators. Until such
divestitures, the defendants shall continue to operate these facilities
as grain elevators. The defendants must maintain all these facilities
so that they continue to be saleable, including maintaining all
records, loans, and personnel necessary for their operation. Defendant
Continental must operate the Lockport river elevator, Caruthersville
river elevator, Troy rail elevator, Beaumont port elevator, Stockton
port elevator, and Chicago port elevator independently from and in
competition with Cargill.
[[Page 44056]]
G. Non-Compete Provisions
The Cargill/Continental Purchase Agreement contains a five-year
non-compete provision. Under the proposed Final Judgment, defendants
are prohibited from implementing any non-compete agreements until all
of the assets have been divested. Furthermore, the term of any such
non-compete agreement may not be more than three (3) years.
H. Compliance Inspection, Retention of Jurisdiction and Termination
Provisions
Section IX requires defendants to make available, upon request, the
business records and the personnel of its businesses. This provision
allows the United States to inspect defendants' facilities and ensure
that they are complying with the requirements of the proposed Final
Judgment. Section X provides for jurisdiction to be maintained by the
Court. Section XI of the proposed Final Judgment provides that it will
expire on the tenth anniversary of its entry by the Court.
IV. Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. Sec. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
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.
Sec. 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 United States and 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 United States 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 for a period of at least sixty days preceding the
effective date of the proposed Final Judgment within which any person
may submit to the United States written comments regarding the proposed
Final Judgment. Any person who wishes to comment should do so within
sixty days of the date of publication of this Competitive Impact
Statement in the Federal Register. The United States will evaluate and
respond to the comments. All comments will be given due consideration
by the Department of Justice, which remains free to withdraw its
consent to the proposed Final Judgment at any time prior to its entry.
The comments and the response of the United States will be filed with
the Court and published in the Federal Register. Written comments
should be submitted to: Roger W. Fones, Chief, Transportation, Energy &
Agriculture Section, Antitrust Division, United States Department of
Justice, 325 Seventh Street, N.W., Suite 500, Washington, DC 20530.
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and the parties may apply to the Court
for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
VI. Alternatives to the Proposed Final Judgment
the United States considered, as an alternative to the proposed
Final Judgment, a full trial on the merits against Cargill and
Continental. The United States is satisfied, however, that the
divestitures and other relief contained in the proposed Final Judgment
should preserve competition in grain purchasing services as it was
prior to the proposed acquisition, and that the proposed Final Judgment
would achieve all of the relief that 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-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 competitive 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
consideration 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 trail.
15 U.S.C. Sec. 16(e). As the Court of Appeals for the District of
Columbia Circuit held, the APPA permits the 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 (D.C. Cir. 1995).
In conducting this inquiry, ``the 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. \4\ Rather,
---------------------------------------------------------------------------
\4\ 119 Cong. Rec. 24598 (1973); see also 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. Sec. 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. 93-1463, 93rd Cong. 2d Sess. 8-9, reprinted in (1974)
U.S.C.C.A.N. 6535, 6538.
absent 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), quoting United States v. Bechtel
Corp., 648 F.2d 660, 666 (9th Cir.), cert. denied, 454 U.S. 1083
(1981). Precedent requires that
[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. 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
[[Page 44057]]
effectiveness of antitrust enforcement by consent decree.\5\
\5\ United States v. Bechtel, 648 F.2d at 666 (internal
citations omitted) (emphasis added); see United States v. BNS Inc.,
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 United States v. American Cyanamid Co., 719 F. 2d 558, 565
(2d Cir. 1983).
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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.' ''.\6\
---------------------------------------------------------------------------
\6\ United States v. American Tel. & Tel. Co., 552 F. Supp. 131,
150 (D.D.C. 1982) (citations omitted), aff'd sub nom. Maryland v.
United States, 460 U.S. 1001 (1983), quoting Gillette, 406 F. Supp.
at 716; United States v. Alcan Aluminum, Ltd., 605 F. Supp. 619, 622
(W.D. Ky. 1985).
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Moreover, the Court's role under the Tunney Act is limited to
reviewing the remedy in relationship to the violations that the United
States has alleged in its complaint, and the Act does not authorize the
Court to ``construct [its] own hypothetical case and then evaluate the
decree against that case.'' Microsoft, 56 F.3d at 1459. Since ``[t]he
court's authority to review the decree depends entirely on the
government's exercising its prosecutorial discretion by bringing a case
in the first place,'' it follows that the court ``is only authorized to
review the decree itself,'' and not to ``effectively redraft the
complaint'' to inquire into other matters that the United States might
have but did not pursue. Id.
VIII. Determinative Documents
There are no determinative materials or documents within the
meaning of the APPA that were considered by the United States in
formulating the proposed Final Judgment.
For Plaintiff United States of America
Dated: July 23, 1999.
Respectfully submitted,
Robert L. McGeorge, D.C. Bar No. 91900,
Trial Attorney, U.S. Department of Justice, Antitrust Division, 325
Seventh Street, N.W.; Suite 500, Washington, DC 20530, Telephone: (202)
307-6361 or (202) 307-6351, Facsimile: (202) 307-2784.
[FR Doc. 99-20806 Filed 8-11-99; 8:45 am]
BILLING CODE 4410-11-M
