Sugar industry lawyers call Imperial weak for takeover; Justice Department fears coordination – Agweek
WILMINGTON, Delaware — Tom Cruise plays Pete “Maverick” Mitchell in the summer hit movie “Top Gun: Maverick.” But defense attorneys call Imperial Sugar a sugar industry “maverick”.
“Imperial is a high-cost refiner struggling to compete; he is not a “maverick”, sugar industry lawyers say in court filings over a proposed Imperial takeover.
The Department of Justice files a lawsuit to stop United States Sugar Corp. to buy Imperial Sugar, arguing that the consolidation of the sugar sector would hurt consumers, especially those in the southeastern United States, where United States Sugar and Imperial refine cane sugar.
Minnesota-based United Sugars Corp is also named in the lawsuit. United Sugar is a marketing partnership that includes United States Sugar, as well as three sugar beet cooperatives: American Crystal Sugar, based in Moorhead, Minnesota; Minn-Dak Farmers Co-op, based in Wahpeton, North Dakota; and Wyoming Sugar.
Lawyers for both sides presented their arguments before a federal judge in Delaware in April. The judge then asked the lawyers to file briefs in support of their cases; these were filed at the end of May. It’s unclear when the judge might rule on the case.
United States Sugar, which owns a refinery in Florida, wants to buy Imperial Sugar, which owns a refinery near the port city of Savannah, Georgia. Imperial is owned by Louis Dreyfus, an international agribusiness company based in Holland.
Louis Dreyfus “has been trying to sell Imperial for the past five years,” the defense attorneys note in their filings. “In the absence of an acquisition by US Sugar, Imperial’s CEO is ‘fairly worried’ about Imperial’s future prospects.”
US Sugar said it would invest in the Georgia refinery to make it and the entire company more efficient, which it said would keep prices lower for consumers. Lawyers say that by acquiring Imperial’s retail brands, it will be able to offer products it currently cannot make at its Florida refinery, including brown and powdered sugar, and different sizes bagged products.
The Justice Department for its case cites an Imperial analysis describing US Sugar as a “close competitor” and that the merger is clearly illegal.
“Defendants repeatedly argue that Imperial is a ‘residual or relief seller’, based on nothing more than statements by their executives. But that – even if it’s true – doesn’t negate the evidence of direct competition on the record.
A footnote in the Federals notes that the “Defendants incorrectly suggest that the United States must show Imperial to be a ‘maverick’ company…”. But continues that Imperial need not be a maverick, “the question is simply whether the merging parties are close substitutes…”
“Acquiring even a less ‘efficient’ competitor can still cause damage.”
The Justice Department also says United Sugars and Domino Foods already exchange too much information to ensure fair markets.
“There was overwhelming evidence at trial that Domino and United, the two largest players in the industry, already coordinate by exchanging detailed and competitively sensitive information through an intermediary of a way that can help potential competitors coordinate to limit competition,” the Justice Department said. argue.
The sugar industry counters that the information is shared with third-party industry analysts. “These documents, however, do not show actual coordination or that the industry is vulnerable to coordination.”
“The only pricing information shared by United and Domino was publicly available,” the filing continues. “The prices shared by United… are cash or ‘list’ prices (not the price paid by any particular customer).”
The sugar industry cited reasons why coordination is unlikely, including:
- Sugar is sold to sophisticated customers who use tenders, blind tenders and long-term contracts.
- Suppliers cannot restrict production.
- Production is variable, citing the 2019 sugar beet freeze as an example.
- Pricing is client specific and each contract is different.
- The demand for sugar is elastic.
Much of the legal battles in the briefs include each side trying to thwart testimony and analysis from economic experts about the U.S. sugar trade and how non-producer distributors affect competition.
Another argument made by the sugar industry is that it is already federally regulated, citing testimony from Barbara Fecso of the US Department of Agriculture.
The briefing says Fecso testified that “if for any reason United (Sugars) tried to raise prices, and if for some reason the domestic supply response was not sufficient to make lower prices, then the USDA has many tools that it could use to increase supply and lower prices.