[Federal Register: November 9, 2004 (Volume 69, Number 216)]
[Notices]
[Page 64969-64977]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09no04-81]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF JUSTICE
Antitrust Division
Competitive Impact Statement, Proposed Final Judgment and
Complaint; United States v. Connors Bros. Income Fund and Bumble Bee
Seafoods, LLC
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,
Hold Separate Stipulation and Order, and Competitive Impact Statement
have been filed with the United States District Court for the District
of Columbia in United States v. Connors Bros. Income Fund and Bumble
Bee Seafoods, LLC, Civil Case No: 1:04 CV 01494. The proposed Final
Judgment is subject to approval by the Court after compliance with the
Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b)-(h), including
expiration of the statutory 60-day public comment period.
On August 31, 2004, the United States filed a Compliant alleging
that the acquisition by Connors Bros. Income Fund (``Connors'') of
Bumble Bee Seafoods LLC (``Bumble Bee'') would, as originally proposed,
violate Section 7 of the Clayton Act, 15 U.S.C. 18, by substantially
lessening competition for the sale of sardine snacks in the Untied
States. Connors' sardine snack brands account for approximately 63
percent of the sales in the market, while Bumble Bee's sardine snack
brand accounts for about 13 percent. The remaining share is comprised
of small independent fringe players or regional sellers of sardine
snacks unlikely to be able to expand to the level required to
compensate for the loss of a competitor of Bumble Bee's significance.
To preserve competition, the proposed Final Judgment, filed the
same time as the Complaint, requires Connors to divest its Port Clyde,
Commander, Possum, Bulldog, Admiral, and Neptune brands (but not
Neptune brand clam products) and related assets to an acquirer,
including, at the acquirer's option, no more than one of the following
Connors' processing assets: The Bath, Maine plant or the Grand Manan,
New Brunswick plant, to an acquirer acceptable to the United States in
its sole discretion. A Competitive Impact Statement, filed by the
United States, describes the Complaint, the proposed Final Judgment,
and the remedies available to private litigants. Copies of the
Complaint, proposed Final Judgment, and Competitive Impact Statement
are available for inspection at the Department of Justice in
Washington, DC in Room 215 North, 325 Seventh Street, NW., 20530
(telephone: 202/514-2692) and at the Office of the Clerk of the Untied
States District Court for the District of Columbia, 333 Constitution
Avenue, NW., Washington, DC 20001.
Public comment is invited within 60 days of the date of this
notice. Such comments, and responses thereto, will be published in the
Federal Register and filed with the Court. Comments should be directed
to Roger Fones, Chief, Transportation, Energy, and Agriculture Section,
Antitrust Division, U.S. Department of Justice, 325 7th Street, NW.,
Suite 500, Washington, DC 20530 (telephone 202/307-6351).
J. Robert Kramer, II,
Director of Operations, Antitrust Division.
United States of America, U.S. Department of Justice, Antitrust
Division, 325 7th Avenue, NW., Suite 500, Washington, DC 20530,
Plaintiff, v. Connors Bros. Income Fund, 669 Main Street, Blacks
Harbour, New Brunswick, Canada, E5h 1K1, and Bumble Bee Seafoods,
LLC, 9655 Granite Ridge Drive, San Diego, CA 92123-2674, Defendants;
Judge: John D. Baker.
Competitive Impact Statement
Plaintiff United States of America (``United States''), pursuant to
Section 2(b) of the Antitrust Procedures and Penalties Act (``APPA''
and ``Tunney Act''), 15 U.S.C. 16(b)-(h), files this Competitive Impact
Statement relating to the proposed Final Judgment submitted for entry
in this civil antitrust proceeding on August 31, 2004.
I. Nature and Purpose of the Proceeding
Defendant Connors Bros. Income Fund (``Connors''), an income trust
fund organized under Canadian law, entered into a Transaction
Agreement, dated February 10, 2004, in which it proposed to acquire
Bumble Bee Seafoods, LLC (``Bumble Bee'') from Centre Capital Investors
III, L.P. (The ``Transaction''). Connors partially financed its
acquisition through a subscription agreement, and those funds were held
in escrow pending final consummation of the Transaction. Under Canadian
law, the escrow agreement expired on April 30, 2004; the funds had to
be returned to subscribers if Connors had not consummated the
Transaction by that date.
On April 30, 2004, the United States and Defendants reached an
agreement by which: the United States agreed not to file suit at that
time to enjoin the Transaction; the Defendants signed a Hold Separate
Stipulation and Order and a proposed Final Judgment, which included
remedies that would restore the competition that the United States'
preliminary analysis indicated would be lost through the combination of
the Connors and Bumble Bee sardine businesses; and the United States
agreed to defer filing the executed Hold Separate and proposed Final
Judgment until it completed a thorough investigation into the likely
competitive effects of the Transaction. At the completion of this
investigation, the United States confirmed that it was likely that the
transaction as originally proposed would harm competition for the sale
of sardine snacks in the United States, but decided to narrow the scope
of the original Final Judgment to eliminate certain remedies that it
had subsequently determined were not needed to restore competition in
the relevant antitrust market.
Accordingly, on August 31, 2004, the United States filed a
Complaint alleging the likely effect of the Transaction, as originally
proposed, would be to lessen competition substantially for the sale of
sardine snacks throughout the United States in violation of Section 7
of the Clayton Act. This loss of competition would result in U.S.
consumers paying higher prices for sardine snacks. At the same time,
the United States also filed the Hold Separate Stipulation and Order
and a proposed Final Judgment, which are designed to eliminate the
anticompetitive effects of the acquisition.
The proposed Final Judgment, which is explained more fully below,
requires Connors to divest its Port Clyde brand, several smaller brands
(Commander, Possum, Bulldog, Admiral and Neptune), and related assets
that an acquirer of those brands might need in order to become a viable
and active competitor in the sale of sardine snacks throughout the
United States. Under the terms of the Hold Separate Stipulation and
Order, Connors must maintain the commercial value of the Port Clyde
brand until it is divested to an acquirer acceptable to the United
States.
The United States and the Defendants have stipulated that the
proposed Final Judgment may be entered after compliance with the APPA.
Entry of the proposed Final Judgment would terminate this action,
except that the Court would retain jurisdiction to
[[Page 64970]]
construe, modify, or enforce the provisions of the proposed Final
Judgment and to punish violations thereof.
II. Description of the Events Giving Rise to the Alleged Violation
A. The Defendants and the Proposed Transaction
Connors marketed the first, second and fourth largest selling
brands of sardine snacks in the United States (Brunswick, Beach Cliff,
and Port Clyde, respectively) before this Transaction. In 2003, Connors
brands accounted for approximately 63% of the sardine snack sales in
the United States; and it earned revenues of about $43 million from the
sale of these products.
Bumble Bee, a Delaware limited liability corporation with its
headquarters in San Diego, California, marketed the third largest
selling brand of sardine snacks in the United States before the
Transaction. In 2003, its Bumble Bee brand accounted for approximately
13% of U.S. sardine snack sales; and it earned about $9 million from
the sale of these products.
The Transaction, as initially proposed by Defendants, would lessen
competition substantially as a result of Connors' acquisition of Bumble
Bee's sardine snack business. This acquisition is the subject of the
Complaint and proposed Final Judgment filed by the United States on
August 31, 2004.
B. The Competitive Effects of the Transaction on Consumers of Sardine
Snacks
The Complaint alleges that the relevant product market is sardine
snacks, which is an ``overlap'' product, because Connors and Bumble Bee
sell competing sardine snack products in the United States. Several
characteristics distinguish sardine snacks (also called ``mainstream''
sardines in the industry) from other sardine products. Typically,
sardine snacks are made from herring and other varieties of small fish,
which are caught off the coasts of the United States (primarily Maine),
Canada, Poland, Morocco, South America and Thailand, processed in those
countries, and sold in the United States. Sardine snacks, as the name
implies, are sold primarily as snacks; and they are packed in snack-
size cans (primarily 3.75 ounce ``dingley'' cans or 4.4 ounce ``club''
cans). In the United States, the average retail price of sardine snacks
is about $.21 per ounce.
Evidence gathered in the course of the United States' investigation
indicated that a sardine product called ``premium'' sardines in the
industry is not in the same product market as sardine snacks. Premium
sardines typically consist of the brisling species of fish, which are
caught off the coasts of Norway and Scotland, processed in those
countries, and imported into the United States (and other countries).
In the United States, the average retail price of premium sardines is
about $.52 per ounce.
The evidence also showed that a sardine product called ``ethnic''
sardines in the industry is not in the same product market as sardine
snacks. Typically, these sardines are marketed to specific ethnic
groups, consumed as main courses rather than as snacks, and packed in
meal-size cans (primarily 15 ounce ``oval'' cans). They typically
consist of larger herring and other species that are perceived to be of
a lower quality than the herring used for sardine snacks, and sell for
an average of about $.08 per ounce (or about 40% of the price of
sardine snacks). In addition, grocery stores often display these
sardines exclusively in the ethnic section of their stores, rather than
the canned seafood section (e.g., Perla Pacifica might be displayed
next to other Hispanic food products, several aisles away from Connors
and Bumble Bee sardine snacks).
Connors and Bumble Bee sell sardine snacks throughout the United
States. A small, but significant, increase in the price of sardine
snacks would not cause a sufficient number of purchasers to switch to
sardine snack brands not presently marketed in the United States to
make the increase unprofitable. The United States, therefore, concluded
that the appropriate geographic market for the purpose of analyzing the
competitive effects of the Transaction is no larger than the United
States, and that the United States is the relevant geographic market
within the meaning of Section 7 of the Clayton Act.
Even before Connors acquired Bumble Bee, the U.S. sardine snack
market was highly concentrated. Connors brands accounted for
approximately 63% of the sales in this market, while Bumble Bee's
sardine brand held about a 13% share. The remaining share is accounted
for by brands with small individual market shares that can be described
as ``fringe'' players. Using a measure of concentration called the
Herfindahl-Hirschman Index (``HHI''), which is defined and explained in
Exhibit A to the Complaint, the pre-transaction HHI was about 4200--
well in excess of the 1800 point level for characterizing markets as
highly concentrated.
The Transaction resulted in Connors' main rival exiting the sardine
snack market and a substantial increase in concentration in an already
concentrated market. Post-transaction, the combined Connors/Bumble Bee
firm would account for over 75% of the market; and none of its
remaining competitors would have as much as a 5% share of the remaining
sales. The Transaction would increase the HHI by about 1600 points--
well in excess of levels that raise significant antitrust concerns.
In fact, as the Complaint alleges, it is likely that the
elimination of Bumble Bee as an independent competitor would give the
combined Connors/Bumble Bee firm unilateral power to profitably raise
prices, whether or not the remaining fringe players responded by
raising their prices. For example, the combined firm could raise the
price of the Bumble Bee brand of sardine snacks with little concern
that it would lose sufficient sales to make the Bumble Bee price
increase unprofitable.
The evidence gathered during the investigation also indicated that
entry into the sale of sardine snacks in the United States would not be
timely, likely, or sufficient to deter any exercise of market power by
the combined Connors/Bumble Bee entity. Brand recognition is an
important factor in the marketing and sale of sardine snacks in the
United States, and consumers of sardine snacks generally restrict their
purchases to brands they know and trust. New entry would require years
of effort and the investment of substantial sunk costs, including
promotion expenditures and slotting allowances (in many grocery
chains), to create brand awareness among consumers. Likewise, the
investigation showed that these same barriers would make it difficult
for existing fringe players or regional sellers of sardine snacks to
expand to the level required to make up for the loss of a competitor of
Bumble Bee's significance.
III. Explanation of the Proposed Final Judgment
The devestiture required by the proposed Final Judgment will
eliminate the anticompetitive effects of the acquisition in sardine
snack products by establishing a new, independent, and economically
viable competitor with several recognized brand names in the sardine
snack market. The purchaser will acquire several sardine snack brands.
Moreover, the acquirer may sell other canned seafood products under its
brand names (as do Connors, Bumble Bee and other sellers of sardine
snacks)--as Connors will transfer all of its rights to produce,
distribute and sell seafood products under the divested brands (with
the limited exception of
[[Page 64971]]
clam products, which Connors may continue to sell under the Neptune
brand.) For example, the acquirer will obtain the right to sell
kippered herring snacks, which a firm with a sardine snack processing
plant can easily produce at its plant, in addition to sardine stacks.
The divestiture also includes a packing plant, inventories, and the
other tangible and intengible assets that an acquirer might need to
produce, distribute and sell sardine snacks under the divested brand
names in the United States.
Port Clyde is the fourth largest brand of sardine snacks, and
Commander is in the top ten. The remaining brands to be divested
(Possum, Bulldog, Admiral and Neptune) have relatively small national
market shares, but each is a significant seller in one or more regions.
In the aggregate, the divested Connors brands accounted for
approximately 14% of U.S. sardine snack sales in the United States in
2003, as compared to about a 13% market share for the Bumble Bee brand.
The proposed divesture, therefore, will re-establish the
competitive constraint that the Transaction would have removed from the
U.S. sardine snack market. Within one hundred and twenty calendar days
after the filing of the Complaint, or five days after notice of the
entry of the Final Judgment by the Court, whichever is later, Connors
must transfer the divested brands, and related assets, in a way that
satisfies the United States, in its sole discretion, that the
operations can and will be operated by the purchaser as a viable,
ongoing and competitive business. In exercising its discretion, the
United States will ensure that the assets are transferred to an
acquirer who has the incentive and opportunity to compete as
effectively in the sardine snack business as did Bumble Bee.
Defendants must take all reasonable steps necessary to accomplish
the divestiture quickly and shall cooperate with prospective
purchasers. In the event that Defendants do not accomplish the
divestiture within the periods prescribed in the proposed Final
Judgment, the Final Judgment provides that the Court will appoint a
trustee selected by the United States to effect the divestiture, and
the defendants will pay all costs and expenses of the trustee. The
trustee's commission will be structured so as to provide an incentive
for the trustee based on the price obtained and the speed with which
the divestiture is accomplished. After his or her appointment becomes
effective; the trustee will file monthly reports with the Court and the
United States setting forth his or her efforts to accomplish the
divestiture.
At the end of three months after the trustee's appointment, if the
divestiture has not been accomplished, the trustee and the United
States will make recommendations to the Court, which shall enter such
orders as appropriate, in order to carry out the purpose of the trust,
including extending the trust or the term of the trustee's appointment.
IV. Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act (15 U.S.C. 15) provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
attorneys' fees. Entry of the proposed Final Judgment will neither
impair nor assist the bringing of any private antitrust damage action.
Under the provisions of Section 5(a) of the Clayton Act (15 U.S.C.
16(a)), the proposed Final Judgment has no prima facie effect it any
subsequent private lawsuit that may be brought against the Defendants.
V. Procedures Available for Modification of the Proposed Final Judgment
The United States and Defendants have stipulated that the proposed
Final Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that the United States has not
withdrawn its consent. The APPA conditions entry upon the Court's
determination that the proposed Final Judgment is in the public
interest.
The APPA provides a period of at least sixty days preceding the
effective date of the proposed Final Judgment within which any person
may submit to the United States written comments regarding the proposed
Final Judgment. Any person who wishes to comment should do so within
sixty days of the date of publication of this Competitive Impact
Statement in the Federal Register. All comments received during this
period will be considered by the Department of Justice, which remains
free to withdraw its consent to the proposed Final Judgment at any time
prior to the Court's entry of judgment. The comments and the response
of the United States will be filed with the Court and published in the
Federal Register.
Written comments should be submitted to: Roger W. Fones, Chief,
Transportation, Energy, & Agriculture Section, Antitrust Division,
United States Department of Justice, 325 7th Street, NW.; Suite 500,
Washington, DC 20530.
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and the parties may apply to the Court
for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
VI. Alternatives to the Proposed Final Judgment
The United States considered, as an alternative to the proposed
Final Judgment, a full trial on the merits against the Defendants. The
United States could have entered into litigation and sought an
injunction against the combination of Connors and Bumble Bee's sardine
snack business. The United States is satisfied, however, that the
divestiture of assets described in the proposed Final Judgment will
preserve competition for the provision of sardine snacks in the United
States.
The United States also considered requiring the Defendants to grant
a long-term, but finite, license allowing an acquirer to use the Bumble
Bee brand name for sardine snacks while it transitioned the product to
its own brand name, but rejected this in favor of a clean structural
remedy.
VII. Standard of Review Under the APPA for the Proposed Final Judgment
The APPA requires that proposed consent judgments in antitrust
cases brought by the United States be subject to a sixty-day comment
period, after which the Court shall determine whether entry of the
proposed Final Judgment ``is in the public interest.'' 15 U.S.C.
16(e)(1). In making that determination, the Court shall consider:
(A) The competitive impact of such judgment, including
termination of alleged violations, provisions for enforcement and
modification, duration or relief sought, anticipated effects of
alternative remedies actually considered, whether its terms are
ambiguous, and any other competitive considerations bearing upon the
adequacy of such judgment that the court deems necessary to a
determination of whether the consent judgment is in the public
interest; and
(B) The impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and
individuals alleging specific injury from the violations set forth
in the complaint including consideration of the public benefit, if
any, to be derived from a determination of the issues at trial.
15 U.S.C. 16(e)(1)(A) & (B). As the United States Court of Appeals for
the District of Columbia Circuit has held, the APPA permits a court to
consider, among other things, the relationship
[[Page 64972]]
between the remedy secured and the specific allegations set forth in
the government's complaint, whether the decree is sufficiently clear,
whether enforcement mechanisms are sufficient, and whether the decree
may positively harm third parties. See United States v. Microsoft
Corp., 56 F.3d 1448, 1458-62 (D.C. Cir. 1995).
``Nothing in this section shall be construed to require the court
to conduct an evidentiary hearing or to require the court to permit
anyone to intervene.'' 15 U.S.C. 16(e)(2). Thus, in conducting this
inquiry, ``[t]he court is nowhere compelled to go to trial or to engage
in extended proceedings which might have the effect of vitiating the
benefits of prompt and less costly settlement through the consent
decree process.'' 119 Cong. Rec. 24, 598 (1973) (statement of Senator
Tunney).\1\ Rather:
---------------------------------------------------------------------------
\1\ See United States v. Gillette Co., 406 F. Supp. 713, 716 (D.
Mass. 1975) (recognizing it was not the court's duty to settle;
rather, the court must only answer ``whether the settlement achieved
[was] within the reaches of the public interest''). A ``public
interest'' determination can be made properly on the basis of the
Competitive Impact Statement and Response to Comments filed by the
Department of Justice pursuant to the APPA. Although the APPA
authorizes the use of additional procedures, 15 U.S.C. 16(f), those
procedures are discretionary. A court need not invoke any of them
unless it believes that the comments have raised significant issues
and that further proceedings would aid the court in resolving those
issues. See H.R. Rep. No. 93-1463, 93rd Cong., 2d Sess. 8-9 (1974),
reprinted in 1974 U.S.C.C.A.N. 6535, 6538.
[a]bsent a showing of corrupt failure of the government to discharge
its duty, the Court, in making its public interest finding, should *
* * carefully consider the explanations of the government in the
competitive impact statement and its responses to comments in order
to determine whether those explanations are reasonable under the
---------------------------------------------------------------------------
circumstances.
United States v. Mid-America Dairymen, Inc., 1977-1 Trade Cas. (CCH) ]
61,508, at 71,980 (W.D. Mo. 1977).
Accordingly, with respect to the adequacy of the relief secured by
the decree, a court may not ``engage in an unrestricted evaluation of
what relief would best serve the public.'' United States v. BNS, Inc.,
858 F.2d 456, 462 (9th Cir. 1988) (citing United States v. Bechtel
Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see also Microsoft, 56 F.3d
at 1460-62. Courts have held that:
[t]he balancing of competing social and political interests affected
by a proposed antitrust consent decree must be left, in the first
instance, to the discretion of the Attorney General. The court's
role in protecting the public interest is one of insuring that the
government has not breached its duty to the public in consenting to
the decree. The court is required to determine not whether a
particular decree is the one that would best serve society, but
whether the settlements is ``within the reaches of the public
interest.'' More elaborate requirements might undermine the
effectiveness of antitrust enforcement by consent decree.
Bechtel, 648 F.2d at 666 (emphasis added)(citations omitted).\2\
---------------------------------------------------------------------------
\2\ Cf. BNS, 858 F.2d at 463 (holding that the court's
``ultimate authority under the [APPA] is limited to approving or
disapproving the consent decree''); Gillette, 406 F. Supp. at 716
(noting that, in this way, the court is constrained to ``look at the
overall picture not hypercritically, nor with a microscope, but with
an artist's reducing glass''). See generally Microsoft, 56 F.3d at
1461 (discussing whether ``the remedies [obtained in the decree are]
so inconsonant with the allegations charged as to fall outside of
the `reaches of the public interest' '').
---------------------------------------------------------------------------
The proposed Final Judgment, therefore, should not be reviewed
under a standard of whether it is certain to eliminate every
anticompetitive effect of a particular practice or whether it mandates
certainty of free competition in the future. Court approval of a final
judgment requires a standard more flexible and less strict than the
standard required for a finding of liability. ``[A]'' proposed decree
must be approved even if it falls short of the remedy the court would
impose on its own, as long as it falls within the range of
acceptability or is `within the reaches of public interest.''' United
States v. AT&T, 552 F. Supp. 131, 151 (D.D.C. 1982) (citations
omitted)(quoting Gillette, 406 F. Supp. at 716), aff'd sub nom.
Maryland v. United States, 460 U.S. 1001 (1983); see also United States
v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 1985)(approving
the consent decree even though the court would have imposed a greater
remedy).
Moreover, the Court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its Complaint, and does not authorize the Court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459. Because the ``court's
authority to review the decree depends entirely on the government's
exercising its prosecutorial discretion by brining a case in the first
place,'' it follows that ``the court is only authorized to review the
decree itself,'' and not to ``effectively redraft the complaint'' to
inquire into other matters that the United States did not pursue. Id.
at 1459-60.
VIII. Determinative Documents
There are no determinative materials or documents within the
meaning of the APPA that were considered by the United States in
formulating the proposed Final Judgment.
Dated: October 19, 2004.
Respectfully submitted,
Robert L. McGeorge, DC Bar 91900.
U.S. Department of Justice, Antitrust Division, Transportation,
Energy & Agriculture Section, 325 7th Street, NW; Suite 500,
Washington, DC 20530.
Certificate of Service
I hereby certify that on October 19, 2004, I have caused a copy of
the foregoing Competitive Impact Statement to be served on counsel for
defendants by electronic mail and first class mail, postage prepaid:
Counsel for Defendants Connors Bros. Income Fund and Bumble Bee
Seafoods, LLC:
David Beddows, Esq.,
Richard G. Parker, Esq.
O'Melveny & Myers LLP, 1625 Eye Street, NW., Washington, DC 2006.
Michelle Livingston, Member of the DC Bar, 461268.
U.S. Department of Justice, Antitrust Division, 325 Seventh Street,
NW., Suite 500, Washington, DC 20530; (202) 353-7328, (202) 307-2784
(Fax).
Final Judgment
Whereas, plaintiff, United States of America, and defendants,
Connors Bros. Income Fund and Bumble Bee Seafoods, LLC, by their
respective attorneys, have consented to the entry of this Final
Judgment without trial or adjudication of any issue of fact or law, and
without this Final Judgment constituting any evidence against or
admission by any party regarding any issue of fact or law;
And whereas, defendants agree that venue and jurisdiction are
proper in this Court;
And Whereas, defendants agree to be bound by the provisions of this
Final Judgment pending its approval by the Court;
And Whereas, the essence of this Final Judgment is the prompt and
certain divestiture of the Divestiture Assets by defendants to assure
that competition is not substantially lessened;
And Whereas, plaintiff requires defendants to make certain
divestitures for the purpose of remedying the loss of competition
alleged in the Complaint;
And Whereas, defendants have represented to the United States that
the divestitures required below can and will be made and that
defendants will later raise no claim of hardship or difficulty as
grounds for asking the Court to modify any of the divestiture
provisions contained below;
Now Therefore, before any testimony is taken, without trial or
adjudication of any issue of fact or law, and upon consent of the
parties, it is Ordered, Adjudged and Decreed:
[[Page 64973]]
I. Jurisdiction
This Court has jurisdiction over the subject matter of and each of
the parties to this action. The Complaint states a claim upon which
relief may be granted against defendants under Section 7 of the Clayton
Act, as amended (15 U.S.C. 18).
II. Definitions
As used in this Final Judgment:
A. ``Acquirer'' menas the entity to whom defendants or the trustee
divest the Divestiture Assets.
B. ``Bumble Bee'' means defendant Bumble Bee Seafoods, LLC, a
Delaware limited liability corporation with its headquarters in San
Diego, California, its successors and assigns, and its subsidiaries,
divisions groups, partnerships and joint ventures, and their directors,
officers, mangers, agents, and employees.
C. ``Connors'' means defendant Connors Bros. Income Fund, a
Canadian income trust with its headquarters in Blacks Harbour, New
Brunswick, Canada, its successors and assigns, and its subsidiaries,
divisions, groups, partnerships and joint ventures, and their
directors, officers, mangers, agents, and employees.
D. ``Label'' means all legal rights owned or possessed by the
defendants pertaining to a brand's trademarks, trade names, service
names, service marks, copyrights, designs, and trade dress associated
with the goods and services sold under a brand name.
E. ``Divestiture Assets'' include:
1. The Port Clyde, Commander, Bulldog, Neptune, Admiral, and Possum
Labels, except the Neptune Label for clam products;
2. All existing inventories of sardines, kippered herring snacks,
and other canned seafood products sold under the Port Clyde, Commander,
Bulldog, Neptune, Admiral, and Possum Labels;
3. All existing inventories of cans and wrappings for sardines,
kippered herring snacks, and other canned seafood products that are
marked with Port Clyde, Commander, Bulldog, Neptune, Admiral, and
Possum Labels;
4. At the Acquirer's option, no more than one of the following
Connors processing assets:
a. The Bath plant located at 101 Bowery Street, Bath, Maine 04530;
including all rights, titles and interests in any tangible assets (e.g.
land, buildings, docking and unloading facilities, warehouses, other
real property and improvements, fixtures, machinery, equipment,
tooling, fixed assets, personal property, and office furniture),
relating to Connors canned seafood business, including all fee and
leasehold and renewal rights in such assets or any options to purchase
any adjoining property; or
b. The Grand Manan plant located in New Brunswick, Canada at Seal
Cove, Grand Manan, New Brunswick EOG 3BO; including all rights, titles
and interests in any tangible assets (e.g., land, buildings, docking
and unloading facilities, warehouses, other real property and
improvements, fixtures, machinery, equipment, tooling, fixed assets,
personal property, and office furniture), relating to Connors canned
seafood business, including all fee and leasehold and renewal rights in
such assets or any options to purchase any adjoining property;
5. All additional tangible and intangible assets that are used in
manufacturing, distributing, marketing and selling sardines, kippered
herring snacks, and other canned seafood products sold under the Port
Clyde, Commander, Bulldog, Neptune, Admiral, and Possum Labels,
including research and development activities and equipment; all
licenses, permits and authorizations issued by any governmental
organization; all contracts, teaming arrangements, agreements, leases,
commitments, certifications, and understandings; marketing studies,
promotion plans, advertising materials; packaging, marketing and
distribution know-how and documentation, such as route maps; inventory,
delivery and storage vehicles, storage and warehouse facilities and
agreements; customer lists, contracts accounts, credit records, and
agreements; supplier lists and agreements; repair and performance
records, and all other records; and
6. All additional intangible assets that are used in manufacturing,
distributing, marketing, and selling sardines, kippered herring snacks,
and other canned seafood products sold under the Port Clyde, Commander,
Bulldog, Neptune, Admiral, and Possum labels, including those used in
developing, producing, and servicing such products, including, but not
limited to all patents, licenses, and sublicenses, intellectual
property, copyrights; grand technical information and production know-
how, including but not limited to, recipes and formulas and any
improvements to, or line extensions thereof; and computer software and
related documentation; know-how, trade secrets, drawings, blueprints,
designs, design protocols, specifications for materials, specifications
for parts and devices; safety procedures for the handling of materials
and substances; all research data concerning historic and current
research and development; quality assurance and control procedures;
design tools and simulation capability; all manuals and technical
information defendants provide to their own employees, customers,
suppliers, agents or licensees; and all research data concerning
historic and current research and development efforts, including, but
not limited to designs of experiments, and the results of successful
and unsuccessful designs and experiments.
III. Applicability
A. This Final Judgment applies to defendants Connors and Bumble
Bee, as defined above, and all other persons in active concert or
participation with any of them who receive actual notice of this Final
Jugment by personal service or otherwise.
B. If the defendants sell or otherwise dispose of all of their
assets, or lesser business units that include the Divestiture Assets,
they shall require that the purchaser agrees to be bound by the
provisions of this Final Judgment, provided, however, that defendands
need not obtain such an agreement from the Acquirer.
IV. Divestitures
A. Defendants are ordered and directed, within one hundred and
twenty (120) calendar days after the filing of the Complaint in this
matter, or five (5) days after notice of the entry of this Final
Judgment by the Court, whichever is later, to divest the Divestiture
Assets in a manner consistent with this Final Judgment to an Acquirer
acceptable to the United States in its sole discretion. The United
States, in its sole discretion, may agree to one or more extensions of
this time period, which collectively shall not exceed sixty (60) days
in total, and shall notify the Court in such circumstances. Defendants
shall use their best efforts to divest the Divestiture Assets as
expeditiously as possible.
B. In accomplishing the divestiture ordered by this Final Judgment,
defendants promptly shall make known, by usual and customary means, the
availability of the Divestiture Assets. Defendants shall inform any
person making inquiry regarding a possible purchase of the Divestiture
Assets that they are being divested to this Final Judgment and provide
that person with a copy of this Final Judgment. Defendants shall offer
to furnish to all prospective Acquirers, subject to customary
confidentiality assurances, all information and documents relating to
the Divestiture Assets customarily provided in a due diligence process
except such information or documents
[[Page 64974]]
subject to the attorney-client or work-product privileges. Defendants
shall make available such information to the United States at the same
time that such information is made available to any other person.
C. Defendants shall provide the prospective Acquirers and the
United States information relating to the personnel involved in the
operation and management of the Divestiture Assets to enable the
Acquirer to make offers of employment. Defendants will not interfere
with any negotiations by the Acquirer to employ any defendant's
employee whose primary responsibility is the operation and management
of the Divestiture Assets.
D. Defendants shall permit prospective Acquirers to have reasonable
access to personnel and to make inspections of the physical facilities
of the Divestiture Assets, access to any and all environmental, zoning,
and other permit documents and information relating to the Divestiture
Assets, and access to any and all financial, operational, strategic or
other documents and information relating to the Divestiture Assets
customarily provided as part of a due diligence process.
E. Defendants shall warrant to all prospective Acquirers that each
asset will be operational on the date of sale.
F. Defendants shall not take any action that will impede in any way
the permitting, operation, or divestiture of the Divestiture Assets.
G. Defendants will not introduce or sell any canned seafood
products under the Labels contained in the Divestiture Assets; however,
defendants may continue to introduce and sell clam products under the
Neptune Label.
H. Defendants shall warrant to the Acquirer of the Divestiture
Assets that there are no material defects in the environmental, zoning
or other permits pertaining to the operation of each asset, and that
following the sale of the Divestiture Assets, defendants will not
undertake, directly or indirectly, any challenges to the environmental,
zoning, or other permits relating to the operation of the Divestiture
Assets.
I. Unless the United States otherwise consents in writing, the
divestiture pursuant to Section IV, or by trustee appointed pursuant to
Section V, of this Final Judgment, shall include the entire Divestiture
Assets, shall be sold to a single Acquirer, and shall be accomplished
in such a way as to satisfy the Untied States, in its sole discretion,
that the Divestiture Assets can and will be used by the Acquirer as
part of a viable, ongoing business of the sale of canned sardines.
J. The divestitures, whether pursuant to Section IV or Section VI
of this Final Judgment,
1. Shall be made to an Acquirer that, in the United States's sole
judgment, has the intent and capability (including the necessary
managerial, operational, technical and financial capability) of
competing effectively in the business of packing and producing (unless
otherwise acquired), marketing, distributing, and selling canned
sardine products; and
2. Shall be accomplished so as to satisfy the United States, in its
sole discretion, that none of the terms of any agreement between an
Acquirer and defendants give defendants the ability unreasonably to
raise the Acquirer's costs, to lower the Acquirer's efficiency, or
otherwise to interfere in the ability of the Acquirer to compete
effectively.
V. Appointment of Trustee
A. If defendants have not divested the Divestiture Assets within
the time period specified in Section IV(A), defendants shall notify the
United States of that fact in writing. Upon application of the United
States, the Court shall appoint a trustee selected by the United States
and approved by the Court to effect the divestiture of the Divestiture
Assets.
B. After the appointment of a trustee becomes effective, only the
trustee shall have the right to sell the Divestiture Assets. The
trustee shall have the power and authority to accomplish the
divestiture to an Acquirer acceptable to the United States at such
price and on such terms as are then obtainable upon reasonable effort
by the trustee, subject to the provisions of Sections IV, V, and VI of
this Final Judgment, and shall have other powers as this Court deems
appropriate. Subject to Section V(D) of this Final Judgment, the
trustee may hire at the cost and expense of defendants any investment
bankers, attorneys, or other agents, who shall be solely accountable to
the trustee, reasonably necessary in the trustee's judgment to assist
in the divestiture.
C. Defendants shall not object to a sale by the trustee on any
ground other than the trustee's malfeasance. Any such objections by
defendants must be conveyed in writing to the United States and the
trustee within ten (10) calendar days after the trustee has provided
the notice required under Section VI.
D. The trustee shall serve at the cost and expense of defendants,
on such terms and conditions as the plaintiff approves, and shall
account for all monies derived from the sale of the assets sold by the
trustee and all costs and expenses so incurred. After approval by the
Court of the trustee's accounting, including fees for its services and
those of any professionals and agents retained by the trustee, all
remaining money shall be paid to defendants and the trust shall then be
terminated. The compensation of the trustee and any professionals and
agents retained by the trustee shall be reasonable in light of the
value of the Divestiture Assets and based on a fee arrangement
providing the trustee with an incentive based on the price and terms of
the divestiture and the speed with which it is accomplished, but
timeliness is paramount.
E. Defendants shall use their best efforts to assist the trustee in
accomplishing the required divestiture. The trustee and any
consultants, accountants, attorneys, and other persons retained by the
trustee shall have full and complete access to the personnel, books,
records, and facilities of the business to be divested, and defendants
shall develop financial and other information relevant to such business
as the trustee may reasonably request, subject to reasonable protection
for trade secret or other confidential research, development, or
commercial information. Defendants shall take no action to interfere
with or to impede the trustee's accomplishment of the divestiture.
F. After its appointment, the trustee shall file monthly reports
with the United States and the Court setting forth the trustee's
efforts to accomplish the divestiture ordered under this Final
Judgment. To the extent such reports contain information that the
trustee deems confidential, such reports shall not be filed in the
public docket of the Court. Such reports shall include the name,
address, and telephone number of each person who, during the preceding
month, made an offer to acquire, expressed an interest in acquiring,
entered into negotiations to acquire, or was contacted or made an
inquiry about acquiring any interest in the Divestiture Assets, and
shall describe in detail each contact with any such person. The trustee
shall maintain full records of all efforts made to divest the
Divestiture Assets.
G. If the trustee has not accomplished such divestiture within
three (3) months after its appointment, the trustee shall promptly file
with the Court a report setting forth (1) the trustee's efforts to
accomplish the required divestiture, (2) the reasons, in the trustee's
judgment, why the required divestiture has not been accomplished, and
(3) the trustee's recommendations. To the extent such reports contain
information that the trustee deems confidential, such reports
[[Page 64975]]
shall not be filed in the public docket of the Court. The trustee shall
at the same time furnish such report to the plaintiff who shall have
the right to make additional recommendations consistent with the
purpose of the trust. The Court thereafter shall enter such orders as
it shall deem appropriate to carry out the purpose of the Final
Judgment, which may, if necessary, include extending the trust and the
term of the trustee's appointment by a period requested by the United
States.
VI. Notice of Proposed Divestiture
A. Within two (2) business days following execution of a definitive
divestiture required herein, shall notify the United States of any
proposed divestiture required by Section IV or V of this Final
Judgment. If the trustee is responsible, it shall similarly notify
defendants. The notice shall set forth the details of the proposed
divestiture and list the name, address, and telephone number of each
person not previously identified who offered or expressed an interest
in or desire to acquire any ownership interest in the Divestiture
Assets, together with full details of the same.
B. Within fifteen (15) calendar days of receipt by the United
States of such notice, the United States may request from defendants,
the proposed Acquirer, any other third party, or the trustee if
applicable, additional information concerning the proposed divestiture,
the proposed Acquirer, and any other potential Acquirer. Defendants and
the trustee shall furnish any additional information requested within
(15) calendar days of the receipt of the request, unless the parties
otherwise agree.
C. Within thirty (30) calendar days after receipt of the notice or
within twenty (20) calendar days after the United States has been
provided the additional information requested from defendants, the
proposed Acquirer, any third party, and the trustee, whichever is
later, the United States shall provide written notice to defendants and
the trustee, if there is one, stating whether or not it objects to the
proposed divestiture. If the United States provides written notice that
it does not object, the divestiture may be consummated, subject only to
defendants' limited right to object to the sale under Section V(C) of
this Final Judgment. Absent written notice that the United States does
not object to the proposed Acquirer or upon objection by the United
States, a divestiture proposed under Section IV or Section V shall not
be consummated. Upon objection by defendants under Section V(C), a
divestiture proposed under Section V shall not be consummated unless
approved by the Court.
VII. Financing
Defendants shall not finance all or any part of any purchase made
pursuant to Section IV or Section V of this Final Judgment.
VIII. Hold Separate
Until the divestiture required by this Final Judgment has been
accomplished defendants shall take all steps necessary to comply with
the Hold Separate Stipulation and Order entered by this Court.
Defendants shall take no action that would jeopardize the divestiture
ordered by this Court.
IX. Affidavits
A. Within twenty (20) calendar days of the filing of the Complaint
in this matter, and every thirty (30) calendar days thereafter until
the divestiture has been completed under Section IV or Section V,
defendants shall deliver to the United States an affidavit as to the
fact and manner of its compliance with Section IV or Section V of this
Final Judgment. Each such affidavit shall include the name, address,
and telephone number of each person who, during the preceding thirty
(30) days, made an offer to acquire, expressed an interest in
acquiring, entered into negotiations to acquire, or was contacted or
made an inquiry about acquiring, any interest in the Divestiture
Assets, shall describe in detail each contact with any such person
during that period, and shall describe in detail which of the
Divestiture Assets each such person made an offer to acquire, expressed
an interest in acquiring, entered into negotiations to acquire, or was
contacted or made an inquiry about acquiring. Each such affidavit shall
also include a description of the efforts defendants have taken to
solicit buyers for the Divestiture Assets, and to provide required
information to prospective purchasers, including the limitations, if
any, on such information. Assuming the information set forth in the
affidavit is true and complete, any objection by the United States to
information provided by defendants, including limitation on
information, shall be made within fourteen (14) days of receipt of such
affidavit.
B. Within twenty (20) calendar days of the filing of the Complaint
in this matter, defendants shall deliver to the United States an
affidavit that describes in reasonable detail all actions defendants
have taken and all steps defendants have implemented on an ongoing
basis to comply with Section VIII of this Final Judgment. Defendants
shall deliver to the United States an affidavit describing any changes
to the efforts and actions outlined in defendants' earlier affidavits
filed pursuant to this section within fifteen (15) calendar days after
the change is implemented.
C. Defendants shall keep all records of all efforts made to
preserve and divest the Divestiture Assets until one year after such
divestiture has been completed.
X. Compliance Inspection
A. For purposes of determining or securing compliance with this
Final Judgment, or of determining whether the Final Judgment should be
modified or vacated, and subject to any legally recognized privilege,
from time to time duly authorized representatives of the United States
Department of Justice, including consultants and other persons retained
by the United States, shall, upon written request of a duly authorized
representative of the Assistant Attorney General in charge of the
antitrust Division, and on reasonable notice to defendants, be
permitted:
1. Access during defendants' office hours to inspect and copy,
or at the United States' option, to require defendants to provide
copies of, all books, ledgers, accounts, records, and documents in
the possession, custody, or control of defendants, relating to any
matters contained in this Final Judgment; and
2. To interview, either informally or on the record, defendants'
officers, employees, or agents, who may have their individual
counsel present, regarding such matters. The interviews shall be
subject to the reasonable convenience of the interviewee and without
restraint or interference by defendants.
B. Upon the written request of a duly authorized representative of
the Assistant Attorney General in charge of the antitrust Division,
defendants shall submit written reports or interrogatory responses,
under oath if requested, relating to any of the matters contained in
this Final Judgment as may be requested.
C. No information or documents obtained by the means provided in
this section shall be divulged by the United States to any person other
than an authorized representative of the executive branch of the United
States, except in the course of legal proceedings to which the United
States is a party (including grand jury proceedings), or for the
purpose of securing compliance with this Final Judgment, or as
otherwise required by law.
D. If at the time information or documents are furnished by
defendants to the United States, defendants
[[Page 64976]]
represent and identify in writing the material in any such information
or documents to which a claim of protection may be asserted under Rule
26(c)(7) of the Federal Rules of Civil Procedures, and defendants mark
each pertinent page of such material, ``Subject to claim of protection
under Rule 26(c)(7) of the Federal Rules of Civil Procedure, then the
United States shall give defendants ten (10) calendar days notice prior
to divulging such material in any legal proceeding (other than a grand
jury proceeding).
XI. No Reacquisition
Defendants may not reacquire any part of the Divestiture Assets
from the Acquirer, or their successors, during the term of this Final
Judgment.
XII. Retention of Jurisdiction
This Court retains jurisdiction to enable any party to this Final
Judgment to apply to this Court at any time for further orders and
directions as may be necessary or appropriate to carry out or construe
this Final Judgment, to modify any of its provisions, to enforce
compliance, and to punish violations of its provisions.
XIII. Expiration of Final Judgment
Unless this Court grants an extension, this Final Judgment shall
expire ten (10) years from the date of its entry.
XIV. Public Interest Determination
Entry of this Final Judgment is in the public interest.
Date:------------------------------------------------------------------
Court approval subject to procedures of Antitrust Procedures and
Penalties Act, 15 U.S.C. 16
-----------------------------------------------------------------------
United States District Judge
Complaint
The United States of America, acting under the direction of the
Attorney General of the United States, brings this civil action to
obtain equitable relief against defendants Connors Bros. Income Fund
(``Connors'') and Bumble Bee Seafoods, LLC (``Bumble Bee''), and
complains and alleges as follows:
1. The United States brings this suit to prevent Connors from
retaining a newly acquired near monopoly in sardine snack foods. On
April 30, 2004, Connors consummated its acquisition of Bumble Bee. At
the time of the transaction, Connors and Bumble Bee were the only two
significant sellers of sardine snacks in the United States.
2. Unless remedied, the acquisition will eliminate substantial
head-to-head rivalry between Connors and Bumble Bee. Consequently, the
elimination of Bumble Bee as an independent significant competitor will
substantially lessen competition for the sale of sardine snacks and
result in higher prices to United States consumers. The acquisition,
therefore, violates Section 7 of the Clayton Act, as amended, 15 U.S.C.
18.
I. Jurisdiction and Venue
3. This Complaint is filed and this action is instituted under
Section 15 of the Clayton Act, as amended, 15 U.S.C. 25, in order to
prevent and restrain defendants from violating Section 7 of the Clayton
Act, as amended, 15 U.S.C. 18.
4. Connors and Bumble Bee sell sardine snacks in the flow of U.S.
interstate commerce. Defendant's activities in producing and marketing
that product also substantially affect interstate commerce. The Court
has subject matter jurisdiction over this action, 28 U.S.C. 1331,
1337(a) and 1345.
5. The defendants have consented to personal jurisdiction and venue
in this judicial district.
II. The Defendants
6. Connors Bros. Income Fund is a Canadian income trust with its
headquarters in Blacks Harbour, New Brunswick, Canada.
7. Even before its acquisition of Bumble Bee, Connors was the
largest canned sardine company in the United States. It also sold other
canned seafood products such as kippered herring snacks, fish steaks,
shrimp, anchovies and oysters, as well as fish meal and fish oil.
Connors operates four canning and processing facilities, two in Maine
and two in New Brunswick, Canada. It sells three of the top four
sardine snack brands in the United States--Beach Cliff, Brunswick, and
Port Clyde; and its total sales of sardine snacks exceed $43 million in
2003.
8. Bumble Bee Seafoods, LLC, is a Delaware limited liability
corporation with its headquarters in San Diego, California. Bumble Bee
became a wholly owned corporate subsidiary of Connors after Connors
acquired it on April 30, 2004. Prior to its acquisition by Connors,
Bumble Bee was a leading seller of canned seafood products. The Bumble
Bee brand of sardine snacks was the third largest selling brand in the
United States. In addition, Bumble Bee is one of the three largest
sellers of tuna in the United States, and is a leading seller of other
canned seafood products, such as premium sardines, salmon, mackerel and
scallops. Bumble Bee reported U.S. sardine snack sales of approximately
$9 million in 2003.
III. Background
9. Canned sardines are a processed fish product ready for immediate
consumption by consumers. Sardine companies sell an array of canned
sardine products, varying the fish, packaging, prices, and marketing.
10. Sardine snacks, sometimes referred to as ``mainstream''
sardines in the industry, are the principal sardine product in the
United States, with revenue and unit volumes far in excess of any other
sardine product. They typically consist of herring and other small
varieties of fish that are caught off the coasts of the United States
(primarily Maine), Canada, Poland, Morocco, Thailand and South America,
and processed in those countries. They are consumed primarily as snacks
and packed in snack-size 3.75 ounce and 4.4 ounce cans.
11. Other sardine products include premium and ethic sardines.
Premium sardines typically consist of brislings that are caught off the
costs of Norway and Scotland, and processed in those countries. They
sell for about two and a half times as much as sardine snacks. Ethnic
sardines typically consist of pilchards and lower quality herring. They
are generally consumed as main courses, packed in 15 ounce cans, sell
for less than half the price of sardine snacks, are marketed primarily
to members of specific ethnic groups, and are often displayed
exclusively in ethnic sections of grocery stores.
12. Brand recognition is an important factor in the marketing and
sales of sardine snacks in the United States. Brands are generally used
to distinguish different sardine products (i.e., sardine snacks,
premium sardines and ethnic sardines), and to distinguish the different
sellers who compete to sell each of those products. Consumers of
sardine snacks generally will restrict their purchases to brands that
they know and trust.
IV. Trade and Commerce
A. Relevant Product and Geographic Market
13. A small but significant increase in the price of sardine snacks
would not cause enough consumers to switch to other products (including
premium and ethnic sardines) to make such a price increase
unprofitable. Accordingly, the sale of sardine snacks is a line of
commerce and a relevant product market within the meaning of Section 7
of the Clayton Act.
14. Both Connors and Bumble Bee sell sardine snacks throughout the
United States. A small but significant price increase in sardine snacks
would not
[[Page 64977]]
cause a sufficient number of purchasers to switch to sardine snack
brands not presently marketed in the United States to make the increase
unprofitable. The relevant geographic market, therefore, within the
meaning of Section 7 of the Clayton Act is no larger than the United
States.
B. Anticompetitive Effects
15. The sardine snack market is highly concentrated, and the
defendants are, by far, the largest sellers of those products in the
United States. Connors and Bumble Bee both sell well established
sardine brands. Brand recognition is important to consumers of
sardines, and the transaction has combined the two owners of the four
most successful sardine snack brands in the United States (Connors'
Brunswick, Beach Cliff and Port Clyde brands, and Bumble Bee). Connors
accounts for an approximately 63 percent market share and Bumble Bee's
share is approximately 13 percent. Together, the two firms account for
more than 75 percent of United States sales of sardine snacks, and the
remaining sales are widely dispersed among numerous firms with small
individual market shares.
16. The acquisition of Bumble Bee by Connors would substantially
increase concentration and lessen competition in the United States
sardine snack market. Using a measure of concentration called the
Herfindahl-Hirschman Index (``HHI''), defined and explained in Exhibit
A, combining Connors and Bumble Bee would substantially increase the
already high concentration in the market. The combination would
increase the HHI from about 4200 to more than 5800, well in excess of
levels that raise significant antitrust concerns.
17. The acquisition of Bumble Bee by Connors gives Connors the
power profitably to increase prices unilaterally for one or more of its
brands of sardine snacks, to the detriment of consumers.
C. Entry and Expansion
18. It is difficult to enter into the sale of sardine snacks in the
United States, or to significantly expand sales of smaller brands. New
entry or expansion requires years of effort and the investment of
substantial sunk costs, including promotional expenditures and slotting
allowances (for sales through grocery stores) to create brand awareness
among consumers. Therefore, new entry or expansion would not be timely,
likely or sufficient to thwart the anticompetitive effects of the
acquisition.
V. Violation Alleged
19. The effect of Connors' acquisition of Bumble Bee may be to
substantially lessen competitive and tend to create a monopoly in
interstate trade and commerce in violation of Section 7 of the Clayton
Act.
20 The combination will likely have the following effects, among
others:
a. Competition generally in the sale of sardine snacks in the
United States would be substantially lessened;
b. Actual and potential competition between Connors and Bumble Bee
in the sale of sardine snacks in the United States would be eliminated;
and
c. Prices for sardine snacks sold in the United States likely would
increase.
21. Unless restrained, the acquisition will violate Section 7 of
the Clayton Act, as amended, 15 U.S.C. 18.
VI. Requested Relief
Plaintiff requests:
1. That Connors' acquisition of Bumble Bee be adjudged and decreed
to be unlawful and in violation of Section 7 of the Clayton Act, as
amended, 15 U.S.C. 18;
2. That Connors be ordered to divest Bumble Bee, and defendants and
all persons acting on their behalf be permanently enjoined and
restrained from carrying out any agreement, understanding, or plan, the
effect of which would be to combine the businesses or assets of the
defendants;
3. That plaintiff be awarded its costs of this action; and
4. That plaintiff receive such other and further relief as the case
requires and the Court deems proper.
Dated: August 31, 2004.
Respectfully submitted,
R. Hewitt Pate, D.C. Bar 473598;
Assistant Attorney General.
J. Bruce McDonald
Deputy Assistant Attorney General.
J. Robert Kramer, II, Pa. Bar 23963,
Director of Operations and Civil Enforcement.
Roger W. Fones, DC Bar 303255,
Chief, Transportation, Energy and Agriculture Section.
Donna Kooperstein,
Assistant Chief, Transportation, Energy and Agriculture Section.
Robert L. McGeorge, DC Bar 91900.
Michelle J. Livingston.
Hillary L. Snyder,
Trial Attorneys, United States Department of Justice, Antitrust
Division, Transportation, Energy and Agriculture Section, 325 7th
Street, NW.; Suite 500, Washington, DC 20530. Telephone: (202) 307-
6351. Facsimile (202) 307-2784.
Exhibit A--Definition of ``HHI''
The term ``HHI'' means the Herfindahl-Hirschman Index, a commonly
accepted measure of market concentration. The HHI is calculated by
squaring the market share of each firm competing in the market and then
summing the resulting numbers. For example, for a market consisting of
four firms with shares of 30, 30, 20, and 20 percent, the HHI is 2,600
(30\2\ + 30\2\ + 20\2\ + 20\2\ = 2,600). The HHI takes into account the
relative size and distribution of the firms in a market. It approaches
zero when a market is occupied by a large number of firms of relatively
equal size and reaches its maximum of 10,000 when a market is
controlled by a single firm. The HHI increases both as the number of
firms in the market decreases and as the disparity in size between
those firms increases.
Markets in which the HHI is between 1000 and 1800 are considered to
be moderately concentrated, and markets in which the HHI is in excess
of 1800 points are considered to be highly concentrated. Transactions
that increase the HHI by more than 100 points in highly concentrated
markets presumptively raise significant antitrust concerns under the
Department of Justice and Federal Trade Commission 1992 Horizontal
Merger Guidelines.
[FR Doc. 04-24902 Filed 11-8-04; 8:45 am]
BILLING CODE 4410-11-M