[Federal Register: April 16, 2003 (Volume 68, Number 73)]
[Notices]
[Page 18674-18684]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16ap03-110]
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DEPARTMENT OF JUSTICE
Antitrust Division
U.S. v. Archer-Daniels-Midland Company and Minnesota Corn
Processors, LLC; Public Comments and Plaintiff's Response
Notice is hereby given pursuant to section 2(d) of the Antitrust
Procedures and Penalties Act, 15 U.S.C. 16(d), that the Public Comments
and Plaintiff's Response thereto have been filed with the United States
District Court of the District of Columbia in United States v. Archer-
Daniels-Midland Company, Case Number: 1:02-cv-1768 (JDB).
On September 6, 2002, the United States filed a civil antitrust
Complaint alleging that the proposed acquisition by Archer-Daniels-
Midland Company (``ADM'') of Minnesota Corn Processors, LLC (``MCP'')
would violate section 7 of the Clayton Act, 15 U.S.C. 18. The Complaint
alleged that ADM and MCP are two of the largest corn wet millers in the
United States, competing to manufacture and sell corn syrup and high
fructose corn syrup (``HFCS'') to many of the same purchasers
throughout the United States and Canada. ADM's acquisition of MCP would
have eliminated this competition and increased concentration in the
already highly concentrated corn syrup and HFCS markets, making
anticompetitive coordination among the few remaining corn wet millers
in these markets more likely. As as result, the proposed acquisition
would have substantially lessened competition for the manufacture and
sale of corn syrup and HFCS products in violation of section 7 of the
Clayton Act.
Public comment was invited within the statutory 60-day comment
period. The three comments received, and the response thereto, are
hereby published in the Federal Register and filed with the Court.
Copies of these materials are available for inspection at the U.S.
Department of Justice, Antitrust Division, Suite 215 North, 325 7th
Street, NW., Washington, DC 20530 (telephone: 202-514-2692), and at the
Clerk's Office of the U.S. District Court for the District of Columbia,
333 Constitution Avenue, NW., Washington, DC 20001.
Constance K. Robinson,
Director of Operations, Antitrust Division.
Response of the United States to Public Comments on the Proposed Final
Judgment
Communications with respect to this document should be addressed
to:
Roger W. Fones, Chief, Donna N. Kooperstein, Assistant Chief; Michael
P. Harmonis, Jessica K. Delbaum, Attorneys.
Transportation, Energy & Agriculture Section, Antitrust Division, U.S.
Department of Justice, 325 Seventh Street, NW., Washington, DC 20530.
(202) 307-6357.
Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C.
16(b) (``Tunney Act''), plaintiff, the UNITED STATES OF AMERICA, acting
under the direction of the Attorney General, hereby files comments
received from members of the public concerning the proposed Final
Judgment in this civil antitrust suit and the Response of the United
States to those comments.
I. Factual Background
A. The Parties to the Transaction
Archer-Daniels-Midland Company (``AMD'') and Minnesota Corn
Processors, LLC (``MCP'') were two of the largest corn wet millers in
the United States, competing to manufacture and sell corn syrup, high
fructose corn syrup (``HFCS'') and other wet-milled products
principally to the food and beverage industries in the United States
and Canada. In addition, both firms manufactured and sold fuel ethanol,
and they also procured, transported, stored, manufactured, processed,
and merchandised a wide variety of other agricultural commodities and
products.
B. The Proposed Acquisition
On July 11, 2002, ADM entered into an agreement with MCP to acquire
MCP's corn wet milling business, including MCP's two corn wet milling
plants in Marshall, Minnesota and Columbus, Nebraska and its network of
regional blending, storage, and distribution stations. As a result of
the transaction, MCP has become a wholly-owned subsidiary of ADM.
C. The Complaint
On September 6, 2002, the United States Department of Justice (the
``Department'') filed a complaint with this Court alleging that ADM's
acquisition of MCP substantially would lessen competition in the
markets for
[[Page 18675]]
corn syrup and HFCS in the United States and Canada, in violation of
section 7 of the Clayton Act (15 U.S.C. 18). The transaction would have
eliminated the competition between ADM and MCP, making anticompetitive
coordination among the few remaining corn wet millers more likely in
those markets.
D. The Proposed Settlement
The Department, ADM, and MCP filed a joint stipulation for entry of
a proposed Final Judgment settling this action on September 6, 2002.
The proposed Final Judgment contains three principal provisions for
relief. First, it requires ADM and MCP to have dissolved
CornProductsMPC Sweeteners LLC (``CPMCP'') on or prior to December 31,
2002. CPMCP was the marketing and sales joint venture that MCP had
formed with Corn Products International (``CPI'' to serve as the
exclusive sales and distribution outlet in the United States, Canada,
and Mexico for most corn syrup and HFCS products made by CPI and MCP in
the United States. Second, prior to or simultaneously with the closing
of ADM's acquisition of MCP, the proposed Final Judgment requires the
defendants to have provided CPI written notice of their election to
dissolve CPMCP. Upon written notice of their election to dissolve
CPMCP, the defendants additionally were required to have provided CPI
with written notice that CPI is permitted to conduct independent
operations in competition with the defendants and CPMCP. Third, the
proposed Final Judgment requires the defendants to compete
independently of CPMCP and CPI. The proposed Final Judgment does not
affect or alter any obligations of ADM and MCP to facilitate or ensure
that CPMCP completes the performance of any existing contracts or
commitments to its customers.
E. Compliance With The Tunney Act
To date, the parties have compiled with the provisions of the
Tunney Act as follows:
(1) The Complaint and proposed Final Judgment were filed on
September 6, 2002;
(2) The Competitive Impact Statement (``CIS'') was filed on
September 13, 2002;
(3) Defendants filed statements pursuant to 15 U.S.C. 16(g) on
September 17 and 18, and October 2, 2002;
(4) A summary of the terms of the proposed Final Judgment and CIS
was published in the Washington Post, a newspaper of general
circulation in the District of Columbia, for seven days during the
period September 23, 2002, through September 29, 2002;
(5) The Complaint, proposed Final Judgment and CIS were published
in the Federal Register on November 7, 2002, 67 FR 67,864 (2002); \1\
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\1\ The Department also posted the Complaint, proposed Final
Judgment and the CIS on its Web site, http://www.usdoj.gov/atr/cases/indx358.htm
.
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(6) The 60-day public comment period specified in 15 U.S.C. 16(b)
commenced on November 7, 2002, and terminated on January 7, 2003; and
(7) The United States hereby files the comments of members of the
public (attached as Appendix A) together with this Response of the
United States to the comments, pursuant to 15 U.S.C. 16(b).
The United States will move this Court for entry of the proposed
Final Judgment after the comments and the Response are published in the
Federal Register. The proposed Final Judgment cannot be entered before
that publication. 15 U.S.C. 16(d).
II. Legal Standard Governing the Court's Public Interest Determination
Upon the publication of the public comments and this Response, the
United States will have fully complied with the Tunney Act. After
receiving the United States' motion for entry of the proposed Final
Judgment, the Court must determine whether it ``is in the public
interest.'' 15 U.S.C. 16(e). In doing so, the Court must apply a
deferential standard and should withhold its approval only under very
limited conditions. See, e.g., Mass. Sch. of Law at Andover, Inc. v.
United States, 118 F.3d 776, 783 (D.C. Cir. 1997). Specifically, the
Court should review the proposed Final Judgment ``in light of the
violations charged in the complaint and * * * without approval only [a]
if any of the terms appear ambiguous, [b] if the enforcement mechanism
is inadequate, [c] if third parties will be positively injured, or [d]
if the decree otherwise makes `a mockery of judicial power.' '' Id.
(quoting United States v. Microsoft Corp., 56 F.3d 1448, 1462 (D.C.
Cir. 1995)).
With this standard in mind, the Court should review the comments of
members of the public concerning the proposed Final Judgment and the
United States' Response to those comments. As this Response makes
clear, entry of the proposed Final Judgment is in the public interest.
III. Summary of Public Comments
In a total of three comments, nine individuals and three
organizations expressed their views on the proposed Final Judgment.
Their comments are summarized below.
Peter C. Carstensen, Professor of Law at the University of
Wisconsin Law School, writing on behalf of himself, the National
Farmers Union, the Organization for Competitive Markets, and Professors
Paul Brietzke, John Connor, Thomas Greaney, Neil E. Harl, Delbert
Robertson, Stephen Ross, and Kyle Stiegert, filed a comment that is
critical of the Department's CIS in several respects. Professor
Carstensen states that the Department's CIS failed to disclose or
discuss: (1) MCP's and CPI's separate market shares in the corn syrup
and HFCS markets identified in the complaint; (2) ADM's direct and
indirect ownership interests in Tate & Lyle PLC (``Tate & Lyle''), the
corporate parent of A.E. Staley Manufacturing Company (``Staley''); (3)
a recent decision by the United States Court of Appeals for the Seventh
Circuit, in the HFCS antitrust litigation; (4) additional relief that
would go beyond the competitive harm from the merger; and (5) the
impact of ADM's acquisition of MCP in the market for ethanol. Professor
Carstensen concludes that the Department should file a revised CIS, one
that provides additional factual and other information he requests.
The American Antitrust Institute (``AAI''), an independent
education, research, and advocacy organization, filed a comment
endorsing the comment filed by Professor Carstensen.
C. LeRoy Deichman, a former farmer-member of MCP and certified
professional agronomist, complains that MCP may have manipulated the
shareholder vote on ADM's proposal to acquire MCP. Mr. Deichman also is
disappointed that the acquisition eliminates MCP as a positive role
model for other farmer-cooperative organizations, and he is concerned
that the transaction might lead to lower prices for farmers and higher
prices to consumers of corn sweeteners and ethanol.
IV. The Department's Response To Specific Comments
We now turn to the comments that raise questions about our analysis
or that suggest relief different or supplemental to that contained in
the proposed Final Judgment. Copies of this Response, without the
Appendix, are being mailed to those who filed comments.
A. Professor Carstensen's Comment
Congress enacted the Tunney Act, among other reasons, ``to
encourage additional comment and response by providing more adequate
notice [concerning a proposed consent judgment] to the public,'' S.
REp. No.
[[Page 18676]]
93-298, at 5 (1973); H.R. Rep. No. 93-1463, at 7 (1974), reprinted in
1974 U.S.C.C.A.N. 6535, 6538. The CIS is the primary means by which
Congress sought to provide more adequate notice to the public. The
Tunney Act requires that the CIS recite:
(1) The nature and purpose of the proceeding;
(2) A description of the practices or events giving rise to the
alleged violation of the antitrust laws;
(3) An explanation of the proposal for a consent judgment,
including an explanation of any unusual circumstances giving rise to
such proposal or any provision contained therein, relief to be obtained
thereby, and the anticipated effects on competition of such relief;
(4) The remedies available to potential private plaintiffs damaged
by the alleged violation in the event that such proposal for the
consent judgment is entered in such proceeding;
(5) A description of the procedures available for modification of
such proposal; and
(6) A description and evaluation of alternatives to such proposal
actually considered by the United States.
15 U.S.C. 16(b). In this case, the Department has satisfied all of
these requirements. See CIS at 1-3 (explaining the nature and purpose
of the proceeding), 3-6 (describing events that gave rise to the
alleged violation of the antitrust law), 6-7 (explaining the proposed
Final Judgment), 7 (explaining remedies available to potential private
plaintiffs), 7-8 (explaining procedures available for modifying the
proposed Final Judgment), and 8 (describing and evaluating alternatives
to the proposed Final Judgment).
Professor Carstensen's comments purport to challenge the content of
the CIS but are in fact criticisms of the Department's enforcement
decisions, specifically the scope of the Complaint and the substance of
the proposed Final Judgment. As explained below, these criticisms are
without merit.
1. The Department Is Not Required To Disclose in the Complaint or the
CIS MCP's and CPI's Separate Market Shares in the Corn Syrup and HFCS
Markets
The Complaint at, ]] 19-20, sets out market concentration data,
including individual capacity shares for ADM and CPMCP (the joint
venture of MCP and CPI), in the relevant corn syrup and HFCS markets in
the United States and Canada, alleging that these markets are highly
concentrated and that the concentration levels will substantially
increase after the transaction.\2\ This is a sufficient allegation of
market concentration in a Section 7 case. See, e.g., United States v.
Philadelphia Nat'l Bank, 374 U.S. 321, 363-64 (1963) (noting that
acquisition by a firm that would control 30% of the market after the
acquisition threatens undue concentration and is presumptively
unlawful). Professor Carstensen contends that the CIS should set forth
separate market shares attributable to each of the CPMCP partners, MCP
and CPI, so that the post-remedy change in the Herfindahl-Hirschman
Index (``HHI'') can be calculated. See Professor Carstensen's Comment
at 5.\3\
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\2\ CPI and MCP were selling all of their corn syrup and HFCS
products in the United States through the CPMCP joint venture, and
so they effectively were competing as one firm.
\3\ The Department uses the HHI to measure market concentration,
and it is calculated by summing the squares of the individual shares
of all firms in the market. See U.S. Department of Justice/Federal
Trade Commission's Horizontal Merger Guidelines Sec. 1.5 issued
1992, revised 1997, reprinted in 4 Trade Reg. Rep. (CCH) at ]
13,104, available at http://www.atrnet.gov/policies/mergers. A
market is broadly characterized as being highly concentrated if its
HHI is above 1800. See id.
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But such precise calculations are neither required by law nor very
informative in assessing the effectiveness of the remedy in this
case.\4\ As the Complaint alleges and the CIS explains, the harm from
ADM's acquisition of MCP was an increased likelihood of successful
anticompetitive coordination among the remaining firms. The goal of the
proposed Final Judgment, therefore, is to preserve the number of
effective independent competitors. An independent competitor is
effective if it has enough productive capacity to increase its output
significantly in response to anticompetitive price increases. The
proposed Final Judgment accomplishes this goal by requiring that ADM
and MCP dissolve CPMCP by December 31, 2002, thus preserving the number
of effective independent competitors, including CPI.
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\4\ HHI statistics provide a useful framework, but they are only
the starting point for merger analysis. See Horizontal Merger
Guidelines at Sec. 1.51(c). For the Court's information, however,
the net effect of the acquisition and proposed relief is to decrease
the relevant HHI in corn syrup by about 50 points, to increase the
relevant HHI in HFCS 42 by about 300 points, and to increase the
relevant HHI in HFCS 55 by about 100 points.
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Professor Carstensen suggests without explanation that ADM and CPI
may not compete after acquisition. See Professor Carstensen's Comment
at 7. Based on the Department's investigation, both ADM and CPI will
have the ability and incentive to compete to increase their sales at
their rivals' expense. There is excess capacity throughout the corn wet
milling industry, a condition that gives ADM, CPI, and their
competitors the incentive to respond aggressively to any increase in
price.
In summary, the Department found that ADM's acquisition of MCP, as
originally structured, would have enhanced the prospects for
coordination among the four remaining corn wet millers, likely raising
domestic prices for corn syrup and HFCS above competitive levels. The
Department has concluded that the restructuring of the acquisition as
required by the proposed Final Judgment resolves these competitive
concerns by preserving the pre-acquisition number of effective,
competitive sellers of corn syrup and HFCS.
2. ADM's Ownership Interest in Tate & Lyle Does Not Threaten
Competition
Professor Carstensen contends that ADM ``directly and indirectly''
has a 25% stake in Tate & Lyle, the corporate parent of Staley, which
is one of the five corn wet milling operations in the United States. In
Professor Carstensen's view, this stake in Staley threatens
competition, and so it should have been discussed in the CIS. See
Professor Carstensen's Comment at 5-7.
The Complaint and CIS appropriately focus on the potential
anticompetitive effects of the acquisition being challenged, not pre-
existing or prior transactions, such as ADM's acquisition of Tate &
Lyle stock. The relevance of the ADM-Staley cross ownership to this
case is limited to whether ADM's acquisition of MCP should be analyzed
as reducing the number of competitors from five to four or from four to
three. The Department's investigation revealed that ADM and Staley
should be treated as independent competitors.
Professor Carstensen overstates ADM's equity interest in Tate &
Lyle. His own citations reveal that ADM has a 41.5% interest in
Compagnie Industrielle et Financiere des Produits Amylaces (``CIP''), a
European firm with a 10% interest in Tate & Lyle.\5\ ADM also has a
direct 5.76% interest in Tate & Lyle. See Tate & Lyle, 2002 Annual
Report 63 (2002). Thus, even assuming for purposes of analysis that
ADM's 41.5% ownership of CIP gives ADM control of CIP's 10% interest in
Tate & Lyle (and Staley), ADM's interest in Tate & Lyle is less than
16%, and its
[[Page 18677]]
share of Staley's profits is not quite 10% ((10% x 41.5%) + 5.76% =
9.91%).
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\5\ See Archer-Daniels-Midland Co., 1998 Annual Report 5 (1998),
http://www.sec.gov/Archives/edgar/data/7084/0000007084-98-000029.txt
; Tate & Lyle, 2002 Annual Report 63 (2002), http://www.tateandlyle.com/IR/financials/annual--reports/documents/2002--
TL--AR--Full.pdf.
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Based on its investigation, the Department concluded that ADM's 16%
stake in Tate & Lyle does not give ADM control or influence over
Staley's business decisions, give ADM access to competitively sensitive
information at Staley, or materially affect competition in more subtle
ways; e.g., by realigning incentives so that ADM is less inclined to
compete aggressively against Staley because of its share of Staley's
profits. Department staff thus determined that ADM's ownership interest
in Tate & Lyle (and Staley) does not support treating ADM's acquisition
of MCP as a four to three rather than a five to four situation, and so
there was no reason to mention that interest in the CIS.
3. The Seventh Circuit's Decision in the High Fructose Corn Syrup
Litigation Is Consistent With the Department's Complaint
Professor Carstensen contends that the Department's CIS should have
discussed the Seventh Circuit's decision in In re High Fructose Corn
Syrup Litig., 295 F.3d 651, 653-54 (7th Cir. 2002), cert. denied, 71
U.S.L.W. 3352 (U.S. Feb. 24, 2003) (No. 02-692), 71 U.S.L.W. 3353 (U.S.
Feb. 24, 2003) (No. 02-705), 71 U.S.L.W. 3367 (U.S. Feb. 24, 2003) (No.
02-736). See, e.g., Professor Carstensen's Comment at 2. Professor
Carstensen believes the decision is particularly relevant because it
suggests to him that ADM should not be permitted to acquire MCP
``without any other change in the structure'' of the HFCS industry. See
id. at 6-8.
Beyond what is said about how to decide summary judgment motions in
antitrust cases, the HFCS decision suggests that the manufacturers of
corn syrup and HFCS operate in concentrated markets under conditions
that are conducive to coordinated interaction. The Department reached a
similar conclusion and thus brought this case. That said, the
Department had no reason, and certainly no obligation, to discuss the
HFCS litigation in the CIS.
4. The Department Has Considered All Appropriate Forms of Relief
Professor Carstensen contends that the Department did not consider
alternative remedies, including a remedy he proposes to dissolve the
CPMCP joint venture, to divest ADM's interest in Tate & Lyle and to bar
ADM's acquisition of MCP. Professor Carstensen would have the
Department ``increase [ ] the number of separate firms from 5 to 6,''
see Professor Carstensen's Comment at 8, thereby increasing rather than
preserving the existing competition. This remedy is inappropriate--the
purpose of an antittrust remedy is to restore or protect competition,
but not to enhance it. See, e.g., Ford Motor Co. v. United States, 405
U.S. 562, 573 (1972). Professor Carstensen's remedy is also
inappropriate because it reaches beyond the Complaint. See United
States v. Microsoft Corp., 56 F.3d 1448, 1459 (D.C. Cir. 1995). By
proposing this remedy, Professor Carstensen improperly invites the
Court to restructure an industry without legal basis and to intrude on
the Department's prosecutorial role. See id.
The Department did consider the only appropriate relief raised by
Professor Carstensen, barring the acquisition. See CIS at 8. However,
that relief would have required a full trial on the merits against the
defendants. The Department concluded that the proposed Final Judgment
would preserve the existence of five independent competitors, while
avoiding the time, expense, and uncertainty of trial. Id.
5. The Department Considered the Impact of the Acquisition in the
Ethanol Market
Professor Carstensen also has asserted that ``this merger may
create significant competitive issues'' and that there is ``a plausible
basis for concern'' in the ethanol market. See Professor Carstensen's
Comment at 10-11 (emphasis added). He goes on to construct his own
hypothetical case, and now demands that the Court evaluate the proposed
Final Judgment against that case. Id. at 8-15. Under the principles of
Microsoft Corp., however, this demand is improper, for it too reaches
far beyond the Complaint. See 56 F.3d at 1459. In any event, Department
staff, in the course of its investigation, carefully considered the
competitive implications of ADM's acquisition of MCP in the market for
ethanol and found no evidence to support any credible theory of
antitrust violation.
B. AAI's Comment
AAI's comment voices many of the same concerns expressed by
Professor Carstensen, all of which were addressed supra.
C. C. LeRoy Deichman's Comment
C. LeRoy Deichman's principal concern appears to be the MCP
manipulated the shareholder vote on ADM's acquisition of MCP. That
concern, and Mr. Deichman's concern that MCP is being eliminated as a
role model for other farmer cooperatives that might be interested in
building their own ethanol producing facilities, do not raise antitrust
issues, and it is inappropriate for the Department to respond to them
in this memorandum. Mr. Deichman's concerns that the acquisition may
lead to higher prices in ethanol and sweetener markets raise antitrust
issues that we have already addressed. In short, consumers would be
forced to pay ethanol and sweetener prices above competitive levels
only if the acquisition enable makers of these products to behave in a
noncompetitive manner, and it is highly unlikely that the acquisition
will have that effect. See sections IV.A.1. and 5. Finally, Mr.
Deichman's concern about farm prices (which we take to mean corn
prices) is unwarranted. Having carefully reviewed the facts, the
Department found no reason to believe that the acquisition would have
an adverse impact on competition in markets other than the corn syrup
and HFCS markets alleged in the Complaint. Indeed, in addition to the
five corn wet millers preserved as a result of the proposed Final
Judgment, there exist many other alternative buyers of corn to whom
farmers can sell their crops. Therefore, the acquisition is highly
unlikely to give corn wet millers monopsony power to depress the prices
they pay farmers for corn.
Conclusion
The Competitive Impact Statement and this Response to Comments
demonstrate that the proposed Final Judgment serves the public
interest. Accordingly, after publication of the Response in the Federal
Register pursuant to 15 U.S.C. 16(b), the United States will move this
Court to enter the Final Judgment.
Dated this 1st day of April, 2003.
Michael P. Harmonis, Jessica K. Delbaum,
Attorneys; United States Department of Justice, Antitrust Division,
325 7th Street, NW., Suite 500, Washington, DC 20530. (202) 307-
6371.
Certificate of Service
I hereby certify that on this 1st day of April, 2003, I have caused
a copy of the foregoing Response of the United States to Public
Comments on the Proposed Final Judgment and the attached Appendix to be
served by first class mail, postage prepaid, and by facsimile on
counsel for defendants in this manner:
David James Smith, Vice President, Secretary & General Counsel, Archer-
Daniels-Midland Company, 4666 Faries Parkway, Decatur, IL 62526.
Telephone: (217) 424-6183. Facsimile: (217) 424-6196. Counsel
[[Page 18678]]
for Defendant Archer-Daniels-Midland Company.
Paul B. Hewitt, Akin Gump Strauss Hauer & Feld L.L.P., 1333 New
Hampshire Avenue, Northwest, Washington, DC 20036. Telephone: (202)
887-4000. Facsimile: (202) 887-4288. Counsel for Defendant Archer-
Daniels-Midland Company.
Neil W. Imus, Vinson & Elkins L.L.P., 1455 Pennsylvania Avenue,
Northwest, Washington, DC 20004. Telephone: (202) 639-6675. Facsimile:
(202) 879-8875. Counsel for Defendant Minnesota Con Processors, LLC.
Jessica K. Delbaum,
Attorney, Antitrust Division, U.S. Department of Justice, 325
Seventh St., NW., Suite 500, Washington, DC 20530. Telephone: (20)
616-1636. Facsimile: (202) 616-2441.
Appendix A
University of Wisconsin Law School, 975 Bascom Mall, Madison,
Wisconsin 53706.
December 27, 2002.
Roger W. Fones,
Chief, Transportation, Energy & Agriculture Section Antitrust
Division, United States Department of Justice, 325 Seventh Street,
NW., Suite 500, Washington, DC 20530.
Re: Proposed Settlement of United States v. Archer-Daniels-Midland
Co and Minnesota Corn Processors, LLC.
Dear Mr. Fones: Enclosed is a Tunney Act comment on the proposed
settlement of the suit challenging ADM's acquisition of Minnesota
Corn Processors. The goals motivating this comment are to contribute
to the improvement of antitrust analysis and enforcement. My work
was entirely pro bono and uncompensated.
I am honored that seven distinguished scholars of antitrust and
economics have agreed to support this statement. Their names are
listed therein. In addition, two major organizations, the National
Farmers Union and the Organization for Competitive Markets also
support this statement.
If you or any of your staff have any questions about this
comment, please feel free to contact me at the above address or by
phone (608/263-7416). I can also be reached by email at
pccarste@facstaff.wisc.edu.
Yours truly
Peter C. Carstensen,
Young-Bascom Professor of Law.
Tunney Act Comments on the Proposed Settlement of United States v.
Archer-Daniels-Midland Co and Minnesota Corn Processors, LLC, Federal
District Court, District of Columbia, Civil Case No. 02-1768
Submitted by Professor Peter C. Carstensen on behalf of himself and
The National Farmers Union, The Organization for Competitive
Markets, Professor Paul Brietzke, Professor John Connor, Professor
Thomas Greaney, Professor Neil E. Hari, Professor Delbert Robertson,
Professor Stephen Ross, Professor Kyle Stiegert
At a time when the U.S. government and the American public are
demanding that private enterprises provide full and complete
disclosure of essential information to avoid repetition of the
scandals that have destroyed Enron, Worldcom, and Arthur Anderson,
it is incumbent on the Department of Justice to make the same kind
of full and complete disclosure of information and analysis in
connection with its obligations under the Tunney Act. Only then, can
the court and the public in fact judge the appropriateness of the
proposed settlement of this or any other major antitrust case. The
court should not grant approval to this proposed consent decree
until the requirements of the Tunney Act are fully satisfied.
I am joined in these comments by two important organizations,
the National Farmers Union and the Organization for Competitive
Markets, concerned with competition policy and its impact on the
markets for agricultural products as well as a group of seven
scholars in the fields of economics and antitrust law. Appendix A
provides additional background information about both the
organizations and individuals supporting these comments.
The government is proposing to settle its challenge to Archer-
Daniels-Midland's (ADM) acquisition of Minnesota Corn Processors
(MCP) by allowing the acquisition on condition that MCP withdraw
from a joint marketing arrangement with Corn Products International
(Corn Products) concerning high fructose corn syrup (HFCS). As
demonstrated below, the disclosure contained in the Competitive
Impact Statement filed in connection with the proposed settlement of
the government's does not satisfy the basic requirements of the
Tunney Act.
The Competitive Impact Statement fails to disclose essential
facts about the impact of this acquisition on the directly affected
markets and ADM's status and role in those markets. Further it does
not explain how the proposed decree, in light of those facts and an
apparent failure to consider relevant relief options as well as the
Antitrust Division's own Merger Guidelines, can successfully protect
the identified markets from increased risks of anticompetitive
conduct. Finally, the Competitive Impact Statement omits entirely
any discussion of the impact of allowing this combination in the
related ethanol markets in which ADM is by many orders of magnitude
the largest firm and MCP is the second largest.
It is our position that the government must file a revised
Competitive Impact Statement that discloses all relevant information
and analysis relating to the competitive implications of this
settlement. Without such disclosure, the record will not disclose
``the competitive impact of such judgment'' nor its ``impact . . .
upon the public generally. . . .'' Clayton Act, Section 5(e)(1) and
(2); 15 USC sec. 16(e)(1) and (2).; As result, the District Court
can not perform its obligation to ``determine that the entry of such
judgment is in the public interest.'' Section 5(e); 15 USC sec.
16(e).
Summary
In order to determine whether the proposed settlement of this
merger case will serve the public interest in preserving competition
in all the markets in which the combining enterprises both compete,
it is essential that all relevant facts be fully disclosed. This
acquisition will cause a substantial change in the market structure
of the corn syrup, HFCS and ethanol markets. In all of these markets
the effect of this transaction will or may be to increase
concentration.
The initial focus of concern should be the analysis of the corn
syrup and HFCS markets. Yet, the Competitive Impact Statement fails
to disclose certain essential facts about those markets, ADM's
position in them, and the government's basis for believing that the
remedy proposed would eliminate the anticompetitive risks posed by
the disclosed as well as undisclosed facts about those markets.
First, there is no disclosure of MCP's separate market share in corn
syrup or either of the two HFCS markets that the complaint and
Competitive Impact Statement focus on. Hence, it is not possible to
tell what impact this acquisition will have on concentration in
these already concentrated markets where entry of new competitors is
unlikely. Second, the Competitive Impact Statement does not disclose
or discuss ADM's ownership directly and indirectly of 25% of the
stock of the corporate parent of one of its major, putative
competitors in these markets. Third, the Competitive Impact
Statement does not report the decision of the 7th Circuit that
examined the risks of anticompetitive, interdependent conduct in the
HFCS markets and found them to be real and substantial. Fourth, the
Competitive Impact Statement discussion of alternative remedies
implies that the government did not consider obvious additional
relief that would have both allowed this merger and reduced the
ownership linkages among ostensible competitors within both the HFCS
and ethanol markets. Finally, and most seriously, the Competitive
Impact Statement does not explain why, in light of the foregoing
facts, the proposed remedy, separating MCP from Corn Products but
allowing its combination with ADM, is likely to achieve the goal of
preserving and enhancing competition in these markets. Because of
these omissions of facts and explanations of essential analysis, it
is not possible for a court, under even the most lax version of the
government's self-serving standard for review, to approve this
proposed decree.
In respect to the markets involving ethanol, the Competitive
Impact Statement is totally silent. The facts are that ADM is the
largest producer of ethanol with a very large market share, and MCP
is the second largest producer. In addition, ADM is one of an
apparently limited number of firms that have the resources to market
and distribute ethanol to end users. Thus, this combination will
substantially increase ADM's share of the ethanol production market
and may further entrench its position in the marketing of ethanol.
It is possible that there are good reasons why, despite these prima
facie anticompetitive implications of this acquisition, it is
unlikely to have such
[[Page 18679]]
effects. Given that the government has chosen to challenge the
combination of these two firms, and their respective position in the
ethanol market is well known, it is incumbent on the government to
explain why this aspect of the combination does not raise any
antitrust concerns. The government, as is evident from its statement
of its interpretation of the standard for review, takes an
unjustifiedly narrow view of its obligation to the court and the
public in explaining its enforcement decisions. It is notable that
the Antitrust Division in other contexts and the FTC in the context
of announcing a decision not to challenge a merger have been able to
make informative statements about the merits of their decisions.
I. The Facts in the Case
ADM is a very large diversified company with extensive
activities in a variety of markets. Among its major activities are
the production of corn syrup, HFCS and ethanol. In the corn syrup
and HFCS markets, ADM is a major producer. According to the
government's complaint, it has 10% of the relevant production
capacity for corn syrup, 33% for HFCS 42 and 25% for HFCS 55, the
two distinct types of HFCS. The markets for all three of these
products are, according to the government, highly concentrated and
not amenable to entry even if prices are increased substantially
above cost.
ADM is also the leading producer of ethanol.\1\ Various
estimates of its productive capacity and production exist. Its
present share of production is unlikely to be less than 30% of all
domestic production and may exceed 50%. In addition it is one of a
relatively few firms with the specialized skills, equipment and
volume to engage in the distribution and marketing of ethanol. As
will be discussed infra, this may involve substantially more
economies of scale and scope than actual production of ethanol. It
also appears to be the case that ADM like the handful of other major
marketers acts as a marketing agent for a number of producers who
lack the skill, volume and specialized equipment to market their own
production.
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\1\ The Renewable Fuels Association (RFA) web site lists ADM
with total capacity of 950 million gallons. www.ethanolrfa.org/eth_prod_fac.html
(visited on Oct. 9, 2002).
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MCP was originally a cooperative that operated two plants
engaged in the ``wet'' milling of corn. From the wet milling
process, it produced corn syrup, HFCS and ethanol. Its market share
in the corn syrup and HFCS markets is not known. Prior to the
conclusion of this merger, MCP sold its corn syrup and HFCS
production through a joint venture with Corn Products. In
combination, those two firms had productive capacity of 20% of corn
syrup, 15% of HFCS 42 and 15% of HFCS 55. In production of ethanol,
MCP was the second largest producer with 6% of total production
capacity and one of only four firms, including ADM, with productive
capacity exceeding 100 million gallons a year.\2\
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\2\ The RFA site, see note 1 supra, reports that MCP has a
capacity of 140 million gallons. Williams Bio-Energy (135 million)
and Cargill (110 million) are the only other producers with a
capacity over 100 million gallons according to this source.
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The Antitrust Division's challenge to this acquisition focused
only on the corn syrup and HFCS markets. The Division proposes to
settle its suit against this merger by obtaining termination of
MCP's joint venture with Corn Products concerning the marketing of
HFCS and corn syrup. The settlement would then allow ADM to acquire
MCP's two facilities.
Although for litigation purposes a focus primarily on the HFCS
markets is sensible because those are the best markets in which to
challenge this merger, once the government has decided to settle the
HFCS element based on a partial divestiture of unrelated facilities,
then it becomes essential to examine the impact of the merger not
only in the HFCS markets but also in the other markets where MCP and
ADM have substantial, competitive market positions.
II. The HFCS Market
The government's objection to this merger was based only on its
impact on the HFCS market and the more general corn syrup market.
HFCS comes in two varieties--HFCS 42 and HFCS 55 (signifying the
percentage of fructose in each type). The government contends that
each type has unique uses and no good substitutes, given current
prices for alternative sweeteners. These markets are concentrated
with a limited number of competitors. The government also contends
that there are substantial barriers to entry into the production of
corn syrup or either type of HFCS. Hence, normal market forces are
unlikely to reverse any increase in concentration. For these
reasons, a substantial merger within these markets creates
significant risks of anticompetitive harms. Those risks are, first,
the danger of tacit or explicit coordination among competitors to
impose higher prices on buyers and, second, that a sufficiently
dominant firm can engage in unilateral, anticompetitive acts that
exclude new competition and/or exploit existing buyers.
Prior to this merger, there were 5 producers of HFCS, treating
the MCP-Corn Products combination as a single firm because of the
joint marketing arrangement. It appears from the Competitive Impact
Statement and complaint that MCP has substantial corn syrup and HFCS
production capacity. Neither the complaint nor the Competitive
Impact Statement provides the breakdown in capacity between MCP and
Corn Products.\3\ As a direct result of that omission, neither the
public nor the court can determine the impact of acquisition of
MCP's facilities on the concentration levels in any of these
markets.
---------------------------------------------------------------------------
\3\ ADM and probably Corn Products act as agents for the sale of
HFCS and corn syrup produced by smaller local plants including
cooperatives. Presumably, given the contractual control over such
output, it has been included in the market share totals that the
government has identified for the major market participants. If such
controlled production has not been included, it would increase the
market share of ADM in particular and so only make the structural
impact of this acquisition more significant.
---------------------------------------------------------------------------
Tate & Lyle, based in the U.K., is a processor of corn products
operating on a global basis. Its American subsidiary, A.E. Staley,
is among the five leaders in the HFCS market. Staley also has an
ethanol plant in Tennessee with a capacity of 60 million gallons.
ADM is the largest single shareholder in Tate & Lyle with 15.8% of
its voting stock.\4\ In addition, ADM owns 41% of Compagnie
Industrielle et Financiere des Produits Amylaces SA (CIP) and refers
to it as an ``affiliate'' in its most recent 10-K.\5\ CIP in turn
holds 10% of Tate & Lyle's stock.\6\ Thus, directly and indirectly
ADM has a 25% stake in its ostensible competitor. While neither its
direct nor its total stake gives ADM and absolutely controlling
position, a block this size confers substantial leverage. It is
obvious that Tate & Lyle's management would be foolish indeed to
initiate vigorous competition in the corn syrup, HFCS or ethanol
markets with its largest shareholder.
---------------------------------------------------------------------------
\4\ Tate & Lyle Annual Report, 2002, at page 63.
\5\ The stock ownership in CIP is reported in ADM's 1998, 10-K
at Item 1, page 5; Exhibit 13, of ADM's 10-K for 2002, describes CIP
is an ``unconsolidated affiliate'' of ADM.
\6\ Tate & Lyle Annual Report, 2002, at page 63.
---------------------------------------------------------------------------
Given the dissolution of the MCP-Corn Products deal, there will
remain five separate producers in the corn syrup and HFCS markets,
but one, ADM, will be larger and another, Corn Products, will be
smaller. Unfortunately, the Competitive Impact Statement does not
say how much larger ADM will be. Although current theories of merger
enforcement emphasize the examination of the likely competitive
effects of a merger, it is still the case that the initial, prima
facie, case rests on a change in the HHI statistic. Where there is a
partial transfer of market share, the resulting change in the HHI
requires comparing the sum of the buyer's share and acquired share
to the share retained by the seller (or former joint venturer). If
the sum from the merger is greater than the retained share, the
result will be an increase in the HHI; if the sum is less, then the
HHI will decline. Thus to determine the likely HHI effect of the
combination of MCP's position with ADM's given the reduction in Corn
Products's share it is essential to know the relative shares of MCP
and Corn Products.
Even without that information, some general conclusions exist.
Concentration is well above the 1800 level, pre-merger, in all three
markets. It is highest in the ``42'' market where the pre-merger HHI
exceeds 3000; in corn syrup and HFCS 55, it is about 2600, pre-
merger. In the syrup market, unless the capacity transferred exceeds
10% (i.e., ADM's new position exceeds 20% in total) the HHI will
remain the same or decline. In the case of the HFCS markets, the HHI
is certain to increase because market share is moving from a smaller
factor to a larger one. The only question in those markets is how
much the HHI will increase. In the ``42'' market where concentration
is higher and ADM's share is large, the transfer of 3% or more will
result in a net increase of HHI by ore than 100 points. In the
``55'' market, a transfer of more than 4% would also yield an
increase of 100 or more points. As MCP's share increases in the two
HFCS markets, there would be an even greater increase in the HHI.
Without capacity information on MCP, the net effect on the HHI in
corn syrup
[[Page 18680]]
or the extent of the increase in the HFCS markets is unknown. But it
appears substantially likely that there will be a more than 100
point increase in the HHI in one or both of the HFCS markets.
Further, if ADM has influence over A.E. Staley's competition in
these markets because of ADM's stake in Tate & Lyle, the
implications of resulting change in the HHI would be even more
pronounced because the disparity between ADM/Staley/MCP and Corn
Products will be even greater.
This merger will thus increase the level of concentration in
both HFCS markets. Section 1.51(c) of the Merger Guidelines states
that: ``Where the post-merger HHI exceeds 1800, it will be presumed
that mergers producing an increase in the HHI of more than 100
points are likely to create or enhance market power or facilitate
its exercise. The presumption may be overcome by a showing that
factors set forth in sections 2-5 of the Guidelines make it unlikely
that the merger will create or enhance market power or facilitate
its exercise. . . .'' (Emphasis added.) Moreover, the HFCS markets
are ones that, on objective criteria of the sort set forth in
sections 2-5 of the Guidelines, are vulnerable to collective action
by competitors. The products are homogeneous, the entry barriers are
high, and there is excess capacity that can be used to discipline
competitors who break ranks. While some buyers are very large, e.g.,
Coke and Pepsi, the vast majority of sales are to smaller businesses
with little bargaining power. A further reason for concern is that
the key players, notably ADM, have a history of unlawful collusion
in other comparable product markets. See, e.g., U.S. v. Andreas, 216
F3d 645 (7th Cir. 2000)(affirming conviction of ADM executives for
pricing fixing of lysine). To allow ADM to increase its direct
ownership of HFCS capacity while retaining its substantial stake in
Tate & Lyle would seem to exacerbate the risks of tacit or express
collusion.
Even more directly relevant, ADM and its ``competitors'' (A.E.
Staley, Cargill, American Maize-Products, and Corn Products) have
been charged in a buyer class action with overt price fixing in HFCS
(Corn Products has actually settled with the plaintiffs already)
from 1988 to 1995. Although the trial court dismissed the suit on
summary judgment, the 7th Circuit in an opinion written by Chief
Judge Posner in June of this year reversed. In re High Fructose Corn
Syrup Antitrust Litigation, 295 F3d 651 (7th Cir. 2002). Judge
Posner's analysis of industry structure and context is that this is
an industry with characteristics and incentives to engage in
collusive behavior. ``[D]efendants pretty much conceded that the
structure of the HFCS market, far from being inimical to secret
price fixing, is favorable to it.'' Id. at 656. The opinion pointed
out a number of factors that demonstrated the capacity and incentive
to engage in collusive conduct. However, the opinion focused on the
claim that there was express agreement and not merely tacit,
interdependent price setting. On that issue, it found that the HFCS
markets are ones where ``the overall evidence of conspiracy . . .
was abundant although not conclusive.'' Id. at 655. Despite the
manifest relevance of this detailed analysis of the nature of the
HFCS markets, pre-merger, to the likely effect of this acquisition
on competition in those markets, the Competitive Impact Statement
makes no reference whatsoever to it.
The anticompetitive conduct at issue in the 7th Circuit decision
occurred in the context of five firm competition in these markets
with a lower HHI than will exist after ADM acquires MCP. Thus, it
would seem that allowing this acquisition without any other change
in the structure, e.g., terminating ADM's stake in Tate & Lyle, will
continue and potentially make more likely interdependent conduct
among the producers of HFCS.
The Competitive Impact Statement fails to reference or discuss
MCP's share of the corn syrup, HFCS 42 or HFCS 55 markets; it makes
no mention of ADM's continuing stake in Tate & Lyle or the option of
requiring divestiture of this stake as an added element of remedy;
it does not refer to the 7th Circuit decision; nor does it discuss
the Guideline factors that make collective anticompetitive conduct
likely. It focuses on the dissolution of the MCP-Corn Products joint
venture and the obligation of ADM to compete independently of Corn
Products. The essential national is that ``the decree will ensure
that there are at least five independent (sic) competitors in the
corn syrup and HFCS markets, and will preserve and encourage ongoing
competition between ADM and Corn Products.'' (Emphasis added.)
The government's implicit contention is that because the number
of legally distinct firms with separate marketing capacity will
remain the same, competition will not be harmed. But it was that
number of competitors that created the conditions for collusion. No
basis is given for the optimistic assessment that ADM will not
influence the competition of Tate & Lyle. Indeed, the statement
provides no clue as to incentives or economically rational
motivations that would bring about competition given the history of
these specific markets and ADM. Hence, some additional rational
should exist to justify continuing the present number of competitors
and increasing the HHI.\7\ In fact, it would seem that under the
Guidelines, this merger remains presumptively illegal. See,
Guidelines 1.51(C), supra. It is imaginable that the government's
lawyers have some logical and plausible explanation for allowing
this acquisition despite all these negative implications. But their
duty under the Tunney Act is to make a public statement of those
reasons so that the public and the court can determine whether those
claims are in fact plausible.
---------------------------------------------------------------------------
\7\ It deserves emphasis here that the antitrust authorities
moved to the use of the HHI index to measure market power because of
the conclusion the firms with larger market shares present greater
risks of anticompetitive conduct. Unlike simple concentration
ratios, the HHI is sensitive to the allocation of market share among
firms within a market.
---------------------------------------------------------------------------
On the other hand, given the 7th Circuit decision, it seems
possible to argue that the Corn Products--MCP agreement together
with ADM's stake in Tate & Lyle should have been the target of
antitrust enforcement together with barring the acquisition of MCP
by ADM. Such a strategy would have increased the number of separate
firms from 5 to 6 and ensured that each was economically independent
of all the others.
The discussion of alternative remedies in the Competitive Impact
Statement implies by its silence that the government did not
consider the foregoing alternative.\8\ This raises a separate but
very important issue in this case. It would seem to be a serious
failure in basic enforcement if the government elected to settle a
case involving markets with high concentration, serious risks of
anticompetitive conduct, and cross ownership of stock among major
competitors without considering whether a more comprehensive review
of the relationship among industry participants was necessary and
whether further separation of those ties would be appropriate.
---------------------------------------------------------------------------
\8\ Section 5(e) calls for the court in reviewing the proposed
decree to have the opportunity to consider `alternative remedies
actually considered'' by the government. In order to accomplish that
goal, the government in section VI of the Competitive Impact
Statement reported the only alternative that it actually
``considered'' consisted of taking this case to trial.
---------------------------------------------------------------------------
In sum, the Competitive Impact Statement is so flawed that it
does not provide the court or the public with a basis to determine
whether the increase in concentration resulting from this merger is
substantial (the MCP market shares must be given as must those of
Corn Products to allow any kind of evaluation of the structural
claims of the government) or why the acquisition will not increase
the already significant risk of anticompetitive collaboration within
the HFCS markets.\9\ Before the public can effectively comment on
the proposed decree, it is essential for the government to revise
the Competitive Impact Statement to make full disclosure of
necessary factual information and its reasoning. Similarly, it is
impossible for a court to determine, based on this submission,
whether or not the proposed judgment is in the public interest.
---------------------------------------------------------------------------
\9\ It is undoubtedly the case that the firms engaged in the
HFCS market have very good information about the market positions of
their competitors. Hence, this information is not competitively
sensitive nor is its disclosure going to threaten the business
strategy of any firm in this market. The only real effect of
concealing this information is to impose a significant handicap on
the public in commenting on the proposed settlement. It ought to be
axiomatic that the government must disclose the post-transaction HHI
shares of any merger or acquisition which it proposes a court
approve under the Tunney Act.
---------------------------------------------------------------------------
II. Ethanol
Neither the settlement nor the Competitive Impact Statement
address the apparently high and increased concentration in ethanol
production resulting from this combination. Even more troubling,
there is no analysis of the impact of this acquisition on the
marketing and distribution of ethanol. It is true, as the government
emphasizes in its filing, that the D.C. Court of Appeals in U.S. v.
Microsoft, 56 F3d 1448 (D.C. Cir. 1995), took the position that in
reviewing a consent decree under the Tunney Act, a district could
not consider alleged anticompetitive conduct not included in the
complaint. In that case,
[[Page 18681]]
the additional issues that the district court wanted considered were
not directly related to the specific competitive practices
challenged in that case.\10\ In the present case, in contrast, the
ethanol production and distribution capacity of both firms is
inextricably linked with their HFCS production capacity. Therefore,
approving this decree allowing the acquisition of MCP necessarily
affects directly this related market. Hence, in order to perform its
obligation to ``determine that the entry of such judgment is in the
public interest''. Section 5(e); 15 U.S.C. sec. 16(e), the court
must be informed about the other competitive effects of the merger.
This is necessary even if the court's ultimate standard may only be
whether the ``settlement is within the reaches of the public
interest.'' 56 F3d at 1460 (internal quatations omitted).
---------------------------------------------------------------------------
\10\ Subsequent history has in fact vindicated the district
court's concerns. U.S. v. Microsoft, 253 F3d 34 (DC Cir. 2001) cert.
den. --U.S.--, 122 S. Ct. 350.
---------------------------------------------------------------------------
Prior to the acquisition, ADM was, by a very large margin, the
leading producer of ethanol. Its share ranged from something over
30% to more than 50% depending on whether the base is capacity
including that under construction or actual production. MCP had
about 6% of current capacity. Thus the pre-merger HHI was at least
mildly concentrated around the 1600 level, and this merger will
increase that level by 350 to 600 points resulting in a post-merger
concentration of 2000 to as much as 2300. This falls well into the
highly concentrated level.\11\
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\11\ It has been suggested that ADM might actually control 55%
of existing production capacity. In that case, the level of
concentration would be significantly higher (a 55% share is an HHI
of 3025; and the post merger HHI would increase by 660 to 3685).
---------------------------------------------------------------------------
It appears that ethanol is a distinct product both because it
has distinct production technology and because it is an ingredient
in gasoline intended to reduce its pollution effects.\12\ There was
another product, methy tertiary butyl ether (MTBE), that has
recently been banned in California, one of the largest areas of
consumption, because of its polluting effects on ground water. Thus,
a firm able to control the production or marketing of all ethanol
would have significant power over price. The geographic market seems
to be national.
---------------------------------------------------------------------------
\12\ The following market analysis is based on interviews, web
materials and newspaper articles available to Professor Carstensen.
---------------------------------------------------------------------------
There are two methods of producing ethanol. The ``dry'' method
involves grinding corn into a mash and fermenting it to create
ethanol which must then be separated from the water and the residual
solids. The ethanol is concentrated to achieve 100% purity and then
``denatured'' by the addition of some gasoline making it unfit for
human consumption. The remaining solids are dried and sold as cattle
feed (this is a high protein feed that appears to have significant
commercial value). All new ethanol plants under construction
apparently use the dry process.
The ``wet'' process involves a similar production of mash which
is then treated to convert the carbohydrates to sugar from which
various products are produced: corn syrup, high fructose syrup, and
ethanol by subsequent fermentation of the sugar. Based on some
comments on a couple of web sites, it appears that there is
flexibility in the wet process to choose among the types of products
that will be extracted. Most of MDM's facilities and MCP's two
plants are wet.
In 2001, total American production of ethanol was about 1.77
billion gallons; it is expected to rise to 2 billion in 2002 and may
exceed 5 billion within a few years especially if the Senate version
of the energy bill is ultimately adopted because it strongly favors
ethanol. Although this section of the Senate bill was adopted in
conference, no final legislation emerged from Congress this session.
With respect to the production of ethanol, the barriers to new
entry seem to be low. An efficient, modern plant with a capacity of
40 million gallons costs about $55 million to build and construction
takes about a year and a half after regulatory and zoning approval.
It seems easy to expand to 80 million gallons, but after that there
can be serious input constraints caused by the need to buy very
large volumes of corn. Also, the market for the cattle feed solids
may be saturated in the immediate area. There are as many as ten or
more plants under construction; most of these have a capacity of 40
million gallons, and a significant additional number are in the
planning stage. This means that efficient entry can occur with a
capacity that represents about 2% of present total production and
less than 1% of expected production in the next few years. This
suggests that adding a new plant will not disrupt the market and so
entry should not be difficult. Hence, while ADM is and will remain
for the foreseeable future, by a very substantial margin, the
largest ethanol producer in the market, it does not appear that its
acquisition of MCP will significantly alter its market power in the
ethanol production market. Presumably this is the view of the
government as well.
However, this merger may create significant competitive issues
in the distribution and marketing of ethanol. Marketing involves
both specialized equipment and skills that are subject to economies
of scale and scope. Ethanol is shipped in railroad tanker cars,
barges and tanker trucks from various places of production in the
Midwest to California or the east coast, for example. Ethanol is
often added to gasoline at the point when a tanker truck is picking
up a load of gas for delivery to service stations. For this reason,
access to terminal tank farms is very important in the marketing
process. If a firm can not get space in the farm, the marketing of
ethanol in this context is more costly (separate location means two
stops and delay). A key issue can be getting such access. While the
costs of specialized equipment including a dedicated tank may not be
substantial, getting access in the first place may be difficult
given limited space and the potential that established ethanol
suppliers may have or obtain exclusionary rights in their contracts.
It appears, therefore, that there are significant economics of
scale and scope in the marketing process. The high volume marketer
can get discounts and preferred service from railroads. It can
afford to operate or lease barges, develop terminal storage
facilities to concentrate the quantity of product for its delivery
to refiners or gasoline terminal locations. Finally a major trader
can get access to terminal facilities when small dealers might be
excluded and/or get access on more favorable terms.
ADM is undoubtedly the largest marketer of ethanol. ADM has
volume, special equipment (barges and rail cars) as well as good
access to terminals and pipelines. There are two other major
integrated marketers: Cargill (number 4 in ethanol production) and
Williams Companies (number 3 in production) a major pipeline
operator and dealer in petroleum products. Cargill and Williams have
overall marketing resources comparable to ADM because of their
multiple lines of business and their substantial ethanol production
capacity. All three of these companies use marketing agreements to
obtain additional supplies of ethanol.\13\ Although presumable the
government's lawyers have examined these marketing agreements, they
are not available to the public. The impression is that they usually
entail exclusive dealing commitments involving a 5 year or longer
obligation (early termination terms unknown) which may provide
economically questionable compensation terms for the marketer in
that the contracts do not provide appropriate incentives for
effective and efficient marketing. Thus, such contracts are likely
to confer substantial control over the marketing of ethanol on a
limited group of firms.
---------------------------------------------------------------------------
\13\ Williams' web site claims that it markets for 14 production
facilities. Cargill's cite did not provide specific information, but
clearly it is seeking to act as a marketer.
---------------------------------------------------------------------------
There also appears to be a few unintegrated or less integrated
firms offering distribution services as well. One such firm is Murex
NA.\14\ Another trader--Ethanol Products--is associated with Broin
Engineering, an ethanol plant builder, that represents 10 production
facilities with 300 million gallons of capacity and claims another
115 million in development. There may be one or two additional
marketers, but no other web sites provided very much information.
---------------------------------------------------------------------------
\14\ The brief Web site description of this company (http://www.murexltd.com/Homel.htm
) suggests that it markets ethanol and
other products. Its Web site reports that the company provides
marketing, owns specialized railcars for transporting ethanol, and
has storage facilities in key locations to hold supplies until they
can be delivered. It claims to represent 60 million gallons of
capacity currently but to have contracts covering 200 million
gallons in place for production in 2003. This is about 10% of the
2002/3 national production capacity.
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There is a plausible basis for concern that the impact of this
merger in the marketing and distribution of ethanol is likely to be
anticompetitive: ADM has a record of conspiring to cartelize various
markets; \15\ Cargill the second or third largest marketer of
ethanol is also in the group of defendants in the HFCS litigation;
and the Williams Companies, the other large marketer of
[[Page 18682]]
ethanol has recently settled claims that it overcharged California
energy customers with a payment of more than $400 million and a
restructuring of its supply contracts that may save customers
another 1$1 billion.\16\ Thus, all three major marketers of ethanol
have recent histories of anticompetitive conduct and exploitation of
consumers. The acquisition of MCP will increase concentration of
control over distribution which will make both tacit collusion among
these leading marketers more likely and increase the potential for
unilateral anticompetitive conduct by ADM which remains the
overwhelming dominant marketer in this business.
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\15\ A.E. Staley in whose parent ADM holds a 25% stake is
another ethanol producer and coconspirator in the HFCS litigation.
\16\ See David Barboza, A big Victory by California in Energy
Case, New York Times, Nov. 12, 2002, at C1.
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To determine the seriousness of these risks, it is important to
have a good estimate of the volume needed to achieve minimum
efficient scale for marketing ethanol. Assuming Murex with a 200
million gallon share is an efficient competitor,\17\ then additional
entry into distribution may occur as the volume expands. Other
middle-sized petroleum marketing organizations might exist that have
substantial volumes of goods going to market through the same
networks. Entry into ethanol marketing may not be difficult for such
firms if they exist and can easily add ethanol sales to their
existing marketing efforts. Key here is the minimum size needed to
make effective use of dedicated facilities such as terminal tanks,
railcars, etc., that must be used in an ethanol specific way. Thus,
the question is what are the product specific economies of scale and
scope.
---------------------------------------------------------------------------
\17\ Murex markets other petroleum products and so in terms of
dealing with railroads, barges, terminals or pipeline has more
relevant volume than just its ethanol.
---------------------------------------------------------------------------
Given the foregoing market information, it would be possible to
determine whether ADM's control over the marketing of ethanol,
including its own production, that of MCP, and that under contract
to the resulting firm, together with the market shares of the other
two major, integrated marketers, would have an adverse effect on
entry or expansion by independents in the marketing arena. If it
takes 200 million gallons of volume for product-specific economies,
then the current set of 5 or 6 marketers may be all that can be
accommodated given ADM's dominance. Even with substantial growth in
the total volume,\18\ it may be difficult to make entry into
marketing because the increments of new plants--circa 40 to 80
million gallons--will be insufficient to warrant entry into
marketing unless the entrant can get additional clients. But from
the perspective of the owner of a new plant, the question will be
whether to select an established marketer or affiliate with a new
entrant that needs additional volume to be efficient.
---------------------------------------------------------------------------
\18\ 200 million gallons is 10% of current volume estimates but
only 4% of the projected 5 billion gallon volume of the future.
---------------------------------------------------------------------------
If economies of scale with ethanol marketing are significant,
entry is difficult, and a few firms control the majority of product
being marketed, it becomes possible to withhold some product as the
new energy requirements kick in and drive up price (compare Enron or
El Paso in California electric markets). In addition, because both
ADM and MCP use the wet process, it is possible to manipulate
ethanol supplies by shifting plant output to other products, e.g.,
HFCS. This means that as the dominant firm, ADM may be able to have
unilateral, anticompetitive effect in the marketing of ethanol by
manipulating supply. On the other hand, ethanol is a uniform product
with growing demand. Moreover, that demand is unlikely to be very
price elastic (10% of a gallon of gas is not going to effect the
price at the pump very much).\19\ So, assuming limits on effective
entry in the marketing level, existing marketers may engage in
interdependent price setting to the detriment of the competitive
market. The history of ADM's conduct in comparable markets and the
presence in ethanol of some of its co-conspirators from other
cartelistic efforts, strongly reinforces the proposition that there
is a risk of such conduct if it is economically feasible.
---------------------------------------------------------------------------
\19\ The price of corn which is largely a function of broader
demand considerations will influence the supply side of the market
significantly as will the market price for animal feed products that
ethanol production also yields.
---------------------------------------------------------------------------
The Merger Guidelines speak to these risks. ``Where products are
relatively undifferentiated and capacity primarily distinguishes
firms . . . the merger firm may find it profitable unilaterally to
raise price and suppress output. . . . Where the merging firms have
a combined market share of at least thirty-five percent, the merged
firms may find it profitable to raise price and reduce joint output.
. . .'' Guidelines 2.21. While this statement creates no
presumption, it identifies the unilateral effect that is a possible
consequence of this acquisition in addition to the potential for
collusive reductions in output based on control of the marketing-
distribution process. Recent news reports, after the filing of the
Competitive Impact Statement, indicate that traders believe that ADM
has the capacity and incentive to withhold supplies and drive up
prices.\20\ This is exactly the anticompetitive risk that this
market structure posses.
---------------------------------------------------------------------------
\20\ ``Ethanol prices have risen 20 percent in the past six
months. . . . Todd Kruggel, a broker . . . [said:] ``ADM and the
other big boys may be storing what they're making until California
demand gears up some more.'' Bloomberg News Service, Price of gas
additive ethanol keeps rising, Wisconsin State Journal (Madison,
Wisconsin), Nov. 12, 2002 at C9.
---------------------------------------------------------------------------
The Competitive Impact Statement filed by the government
explaining its analysis of the ADM-MCP merger does not even advert
to the fact of ADM's leading position in ethanol production and
marketing or MCP's substantial market share. As a result, it is not
possible to tell whether the government has examined both the
marketing and production aspects of ethanol. While it is probable
that the government lawyers have in fact investigated at least some
of the ethanol aspects of this merger, there is no public record of
what aspects they examined or what conclusions they reached. If the
government had simply sued the merger, the ethanol issues would have
been subsumed under the corn syrup and HFCS issues because of the
unitary nature of the production process. Once the government has
elected to settle the case by allowing the acquisition, the impact
of the acquisition in the related market where the parties have such
large market shares becomes a very important aspect of a public
interest analysis: ``the court may consider . . . any other
considerations bearing upon the adequacy of such judgment. . . .''
Clayton Act, sec. 5(e); 15 U.S.C. sec. 16(e).
The government's failure to report the conclusions of its
investigation of the ethanol market is, therefore, another serious
flaw in this case. Given ADM's market position and its history, the
government ought to have explained why it did not believe that there
was any serious anticompetitive risk in these markets given its
willingness to allow ADM to acquire the second largest producer of
ethanol.
It can be argued that disclosure concerning the ethanol market
is inconsistent with the confidentiality requirements imposed on
merger filings. As the DOJ's comments to the DOT in the Hawaiian
airlines case demonstrates, it is possible for the DOJ to report not
only its conclusions about competitive effects but also explain in
some detail its reasoning on the public record even when it has
``confidential'' information. See, PUBLIC COMMENTS OF THE DEPARTMENT
OF JUSTICE, Joint Application of ALOHA AIRLINES, INC. and HAWAIIAN
AIRLINES, INC., DOT Docket No. OST-2002-13002, filed Aug. 30, 2002.
Indeed, the FTC has recently demonstrated exactly such a responsible
approach in connection with the cruise line merger investigation.
See, Statement of the Federal Trade Commission, Concerning Royal
Caribbean Cruises, Ltd./P&O Princess Cruises plc, FTC File No. 021
0041, October 4, 2002; Dissenting Statement of Commissioners Sheila
F. Anthony and Mozelle W. Thompson, id.
The public information about the ethanol markets--both
production and marketing--does not demonstrate the kind of obvious
anticompetitive risks that are manifest in the case of HFCS and corn
syrup. Nevertheless, this acquisition will work a very substantial
change in those markets that will increase concentration and so will
necessarily tend to reinforce any anticompetitive potentials that
may exist. Thus, another serious deficiency in the present
Competitive Impact Statement is that it totally ignores the impact
of this acquisition on ethanol. If it were in fact that case the
government has completely failed to consider the competitive
implications of that aspect of this merger, then it would also be
clear that the government had failed in the most basic obligations
of its responsibility to analyze the competitive implications of the
transaction. It seems more likely that the government has examined
at least some of the ethanol related issues and satisfied itself
that this acquisition will not result in a significant risk of a
``substantial[ ] lessen[ing] of competition'' of the sort prohibited
by section 7 of the Clayton Act. But if that is so, it owes it to
the court and the public to explain what markets it considered (did
it review both the production and the marketing components of
ethanol?) and what its conclusions were on the
[[Page 18683]]
questions of entry, economies of scale and scope in distribution,
and the potential for either unilateral or collusive conduct in this
important, developing market.
This is not a situation where the government has conducted an
investigation and concluded that no action was required. Here it has
elected to object to the acquisition and highlighted, for purposes
of that litigation, the most troublesome aspects of the merger. But
its settlement, by failing to block the acquisition, necessarily has
an effect in other markets in which these firms compete. A complete
Competitive Impact Statement must advise the court and the public of
the implications of the settlement for competition in those other
markets. Without such disclosure, the record will not disclose ``the
competitive impact of such judgment'' nor its ``impact. . . upon the
pulic generally . . .'' Clayton Act, section 5(e)(1) and (2); 15
U.S.C. 16(e)(1) and (2). As result, the District Court can not
perform its obligation to ``determine that the entry of such
judgment is in the public interest.'' section 5(e); 15 U.S.C. 16(e).
Conclusion
In Philadelphia Bank, the Court stated that ``. . . if
concentration is already great, the importance of preventing even
slight increases in concentration and so preserving the possibility
of eventual deconcentration is correspondingly great.'' U.S. v.
Philadelphia National Bank, 374 US 321, 365, n. 42 (1963). The HFCS
markets are such markets, characterized by substantial risks of
anticompetitive conduct. The ethanol market as it presently exists
is also concentrated and the forces of deconcentration might well be
frustrated if the leading firm can retain a dominant position in
production and that reinforces and entrenches its dominance in
marketing. It would appear that blocking this merger and critically
reviewing the MCP-Corn Products marketing agreement in HFCS as well
as ADM's links to Tate & Lyle would have been a much more
appropriate enforcement strategy based on the observable facts.
The Antitrust Division may have more information that might
possibly negate the apparent anticompetitive risks in both the HFCS
and ethanol markets that this acquisition would seem to create. It
is the duty of the government to explain and justify its actions
under the Tunney Act. It has not done so. In the absence of such
information, the District Court should not approve this settlement
because it lacks the basis on which to make the essential public
interest determination that Congress has required.
Peter C. Carstensen,
Young-Bascom Professor of Law, University of Wisconsin Law School,
975 Bascom Mall, Madison, WI 53706.
Ph. (608) 263-7416.
December 27, 2002.
Background information concerning the supporters of this
information:
Organizations
The National Farmers Union
The National Farmers Union is Officially called the Farmers
Educational and cooperative Union of America. It was founded in 1902
and is a general farm organization with membership of nearly
3000,000 farm and ranch families throughout the United States.
The Organization for Competitive Markets
The Organization for Competitive Markets is a multidisciplinary
nonprofit group made up of farmers, ranchers, academics, attorneys,
political leaders and business people. OCM provides research,
information and advocacy towards a goal of increasing competition in
the agricultural marketplace and protecting those markets from
abuses of corporate power. OCM views the current consolidation of
agriculture as market failure resulting in misallocation of
resources and the destruction of rural economies and culture.
Scholars (faculty positions given for informational purposes only)
Peter C. Carstensen, Young Bascom Professor of Law, University of
Wisconsin Law School
Paul Brietzke, Professor of Law, Valparaiso University School of Law
John Connor, Professor of Agricultural Economics, Purdue University
Thomas Greaney, Professor of Law, St. Louis University School of Law
Neil E. Harl, Charles E. Curtiss Distinguished Professor of
Agriculture and Professor of Economics, Iowa State University
Delbert Robertson, Associate Professor of Law, Suffolk University
School of Law
Stephen Ross, Professor of Law, University of Illinois, College of
Law
Kyle Stiegert, Associate Professor of Agricultural and Applied
Economics and Director, Food System Research Group, College of
Agriculture, University of Wisconsin-Madison
The American Antitrust Institute
December 27, 2002.
Roger W. Fones, Chief,
Transportation, Energy & Agriculture Section Antitrust Division,
United States Department of Justice, 325 Seventh Street, NW., Suite
500, Washington, DC 20530.
Re: Tunney Act Comments re U.S. v.Archer-Daniels-Midland Co. and
Minnesota Com Processors, LLC. Civil Case No. 02-1768
Dear Mr. Fones: The American Antitrust Institute (``AAI'') is an
independent non-profit education, research and advocacy
organization, described in detail at www.antitrustinstitute.org. The
mission of the AAI is to support the laws and institutions of
antitrust. We write to endorse the thrust of the Tunney Act comments
submitted by Professor Peter C. Carstensen of the University of
Wisconsin Law School. Professor Carstensen, a member of the AAI
Advisory Board, has shared with us his analysis of the Archer-
Daniels-Midland (``ADM'') acquisition of Minnesota Com Processors
(``MCP'') and his concern that the Justice Department's Competitive
Impact Statement (``CIS'') does not provide an adequate explanation
of the consent decree.
A substantial purpose of the Antitrust Penalties and Procedures
Act, 15 U.S.C. section 16(b)-(h), commonly referred to as the Tunney
Act, is to facilitate public comments and thereby to assist the
Court in making its determination of whether a proposed decree is in
the public interest. The Tunney Act requires the Department to make
public a CIS, which, in this case is available at http://www.usdoj.gov/atr/cases/indx
358.htm. Section (b)(3) of the Act
requires that the CIS recite:
(1) The nature and purpose of the proceeding;
(2) A description of the practices or events giving rise to the
alleged violation of the antitrust laws;
(3) An explanation of the proposal for a consent judgment,
including an explanation of any unusual circumstances giving rise to
such proposal or any provision contained therein, relief to be
obtained thereby, and the anticipated effects on competition of such
relief; [and]
(6) A description and evaluation of alternatives to such
proposal actually considered by the United States.
We recognize that it is difficult, if not impossible, for a
member of the public to have the same facts before it that
influenced the Department's investigation and its negotiated
outcome. Professor Carstensen's efforts to learn about the ADM
merger have nonetheless succeeded in raising what appear to be
important questions about the possible competitive effects of the
merger that are not considered in the CIS. He writes,
The Competitive Impact Statement fails to disclose essential
facts about the impact of this acquisition on the directly affected
markets and ADM's status and role in those markets. Further, it does
not explain how the proposed decree, in light of those facts and an
apparent failure to consider relevant relief options as well as the
Antitrust Division's own Merger Guidelines, can successfully protect
the identified markets from increased risks of anticompetitive
conduct. Finally, the Competitive Impact Statement omits entirely
any discussion of the impact of allowing this combination in the
related ethanol markets in which ADM is by many orders of magnitude
the largest firm and MCP is the second largest.
Even when the Tunney Act is interpreted rather narrowly, it is
recognized that Congress intended to encourage public comment. As
Judge Kollar-Kotelly noted in the recent U.S. v. Microsoft Corp.,
Civ. Act. No. 98-1232, Memorandum Opinion at 20 (July 1, 2002):
The legislative history explains that the purpose of requiring
the United States to provide this information is to ``encourage[e],
and in some cases, solicit, additional information and public
comment that will assist the court in deciding whether the relief
should be granted.'' 119 Cong. Rec. at 24,600. The reports from both
houses of Congress agree that the purpose of this portion of the
Act, in conjunction with sections (c) and (d), is to encourage
comment and response by providing more adequate notice to the
public. S. Rep. 93-278, H.R. Rep. 93-298 at 5 (1973); H.R. Rept. 93-
1463 at 7 (1974), reprinted in 1974 U.S.C.C.A.N. at 6538. According
to the Senate Report on the bill, ``additional participation by
interested parties in the
[[Page 18684]]
approval of consent decrees'' serves as a public means to
counterbalance the ``great influence and economic power'' available
to antitrust violators. Sen. Rept. No. 93-298, at 5 (1973).
The House Report echoes this concern:
Given the high rate of settlement in public antitrust cases, it
is imperative that the integrity of and public confidence in
procedures relating to settlements via consent decree procedures be
assured. Your Committee agrees with S. Rept. No. 93-298, `The bill
seeks to encourage additional comment and response by providing more
adequate notice to the public,' (p. 5) but stresses that effective
and meaningful public comment is also a goal.'' H.R. Rept. No. 93-
1463, at 6-7.
It is not possible for the public to play the role envisioned by
the statute unless adequate information is presented in the CIS,
with the result that the Court cannot fulfill its own role of
determining whether the proposed decree will serve the public
interest. 15 U.S.C. 16(e). With respect to the corn syrup and HFCS
markets, the CIS fails to disclose essential facts necessary to an
understanding of either the competitive problem or the selected
remedy. With respect to the ethanol market, the CIS is totally
silent, despite the apparent fact that ADM is the leading producer
and MCP is the second leading producer. We recognize that the
Department may have been aware of all the relevant facts and may
have carried out a perfectly designed and perfectly executed
investigation, reaching a perfectly understandable compromise.
Nevertheless, neither the public nor the Court can evaluate whether
the proposed decree is in the public interest because there is too
little disclosure for an evaluation to be made.
The Department has traditionally been reluctant to say a great
deal in its CIS disclosures, presumably because it risks disclosure
of confidential information, adds to the staff's workload, and opens
up the door to additional inquiry. We urge the Department to look to
the example of the Federal Trade Commission in its handling of the
recent cruise case, in which it permitted two possible mergers to go
forward, without condition, but (without the requirements of a
Tunney Act hanging over its head) provided a detailed explanation of
its reasoning, accompanied by a minority statement.\1\ After the
Enron and related scandals, we operate in a new age where
transparency of government regulation is of even greater importance.
ADM is a company that has had more than its share of scandal and
illegal activity.\2\ In order to sustain the public's confidence in
the antitrust settlement process, we urge the Department and the
Court to give the Tunney Act the benefit of any doubt by revising
the CIS so as to meet Professor Carstensen's objections.
\1\ See http://www.ftc.gov/os/caselist/021004.htm. Also see
Warren Grimes, Norman Hawker, John Kwoka, Robert Lande, and Diana
Moss, ``The FTC's Cruise Lines Decisions: Three Cheers for
Transparency, http//www.antitrustinstitute.org/recent2/217.cfm.
\2\ See, e.g., James B. Lieber, Rats in the Grain, the Dirty
Tricks and Trials of Archer Daniels Midland (200) and Kurt
Eichenwald, The Informant (2000).
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Sincerely.
Albert A. Foer,
President.
433 Hager Drive, Gibson City, IL, 60936. (217) 784-4425.
Send by Express Mail.
Mr. Roger W. Fones,
Chief, Transportation, Energy & Agriculture, Division, Antitrust,
Justice Department, Suite 500, Washington, DC 20530.
Gentlemen (& women); I am thankful for this opportunity to offer
my brief comment to you on the proposed ADM-MCP purchase
transaction.
I will try not to duplicate the obvious facts and data that you
no doubt have indicating the anticompetitive effect this transaction
could have on:
(1) The market price the farmer receives (and growth of same)
(2) The ethanol and
(3) Sweetener industry market prices.
I will instead attempt to offer some of the not so obvious that
you may not have but are never the less, just as important.
I am hopeful that you can provide evidence that this public
comment opportunity does have meaning instead of [being `cut &
dried' or a `done deal' that ADM has under control], the well
grounded perception that most have expressed to me. This perception
plus (1) the extended corn harvest in SW MN, (2) most stakeholders
being unaware of this public comment forum and (3) many of us who
are (aware of), being poor writers and cramped for time means
relatively few comments from those who would otherwise do so, which
is unfortunate. So I hope you can bear with us and receive what we
(I) intended to convey on this very important issue. To provide all
of the important details is beyond the scope of this comment
writing, but please if u do want more detail, I'd be most honored to
respond with the full impact & detail that you need (if I know it
not redundant) to make your most important decisions and conveyance
of same!
I have personal knowledge that many of the new coops that have
formed & now producing ethanol did so with the knowledge that MCP
was a positive role model. This transaction not only erases that
positive role model but becomes a very negative factor. (MCP was the
largest by a factor of 5X, the oldest & relied on by others in many
respects) If you need I'd love to give details showing the
`chilling' net impact on new producer equity formation.
The superior third party acquisition proposal (p.pg 48) that was
in the MCP office on August 31, could have & indeed perhaps should
have been handled differently i.e., at least let the board or voting
members know of its existence. (The vote would've been different)
The implementation of that proposal offers to
(1) Retain the more competitive environment for corn markets,
ethanol, sweeteners, etc.
(2) Retain each members freedom to sell or not to sell.
(3) ``The new CP MCP development opportunity.
(4) The producer (corngrower) processor opportunity, that was
conceived in the mid '70's.
(5) Be less likely to be challenged, changed, delayed or
terminated on grounds posed by the Antitrust Division of the US
Justice Department (p, pg 43).
I'd sure love to give details on this if u need some.
Then I have many questions regarding how the information was A.
Presented to the members at the `information' meetings. In
consideration our limited time at this point & hoping most of these
questions have been submitted by others I'll bring up only one
question I had as follows:
I asked specific questions about the probability of regulatory
delays or indeed a Department of Justice complaint challenging the
merger. The answer I receive was--No way. ADM has that under
control. If the Department of Justice does anything it will be a
mere formality of no consequence! Vote for this transaction & you'll
have your money `very soon' after the vote on Sept. 5. Clarification
of `very soon' was given as before the end of the month (September).
Each of the questions (answers) were (superbly) handled in a similar
tone.
And B. How the vote was handled.
(i) Was it true that the company (MCP) wouldn't allow one of the
board members who voted No to look at the ballot talley?
Ref. Dean Buesing
(2) Was it true that one of the no votes cast early at the
Marshall office couldn't be found when the member asked for it back
before the final tally was to be tabulated?
Same referense.
Thanks,
C. LeRoy Deichman, CPAg.,
433 Hager Drive, Gibson City, IL 60936, (217) 784-4425.
P.S.
If every component of this transaction was legal (I'm not saying
it wasn't)--then I'd like to meet with the people who make the
laws.--To see that this injustice never happens again!
I wish my appraisal of the growth that could've occurred would
be asked for by the decision makers.
I repeat, since I don't know which of what else I had to say
would be redundant & other reasons listed herin I defer for now
pending your request for more. (Including any resume in this field)
I out of time!
Thanking you again for this opportunity.
[FR Doc. 03-9290 Filed 4-15-03; 8:45 am]
BILLING CODE 4410-11-M