Sugar companies say Justice Department doesn't understand market
United States Sugar Corp., a Florida, company that markets sugar cooperatively with Red River Valley sugarbeet growers through United Sugars, is seeking to purchase Imperial Sugar Co., including a major refinery in the Savannah, Georgia, area. The U.S. Department of Justice is suing to block the purchase.
WILMINGTON, Delaware — The sugar companies involved in a proposed merger say the Department of Justice, which is trying to stop the merger, doesn't understand the sugar market.
That argument is outlined in a 54-page court document filed Monday, Jan. 10, as the sugar companies argue that the U.S. Sugar should be allowed to buy Imperial Sugar. The court document was filed by both U.S. Sugar and Imperial, as well as United Sugars, a Minnesota-based sugar marketing partnership that includes U.S. Sugar as well as American Crystal Sugar Co., Minn-Dak Farmers Cooperative, and Wyoming Sugar Co.
The Department of Justice, in a lawsuit filed in Delaware last year to stop the merger, cited U.S. Sugar's participation in United Sugars as evidence of what it called a "cozy" relationship among sugar companies and said the merger would hurt competition and consumer options in the Southeast, where U.S. Sugar and Imperial operate.
But the sugar companies say that is wrong. " DOJ misunderstands the rationale for this deal, how refined sugar flows cost effectively across the United States, and the number of firms that compete aggressively to supply refined sugar to customers located in the Southeast and elsewhere in the country," the filing by sugar companies says.
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The sugar companies say the deal would create a more dependable supply of sugar, in part because U.S. Sugar, which harvests sugar cane on 200,000 acres in central Florida, would make improvements to Imperial's processing plant near Savannah, Georgia, and other operational efficiencies. Court documents also note that the U.S. Department of Agriculture "would have numerous tools to increase sugar supplies" if there was an attempt to raise prices or limit supply.
The documents notes the the Justice Department's complaint acknowledges that 40% or more of the sugar marketed in the Southeast comes from outside that area, including more than half of the refined sugar sold by United Sugars, which comes from beets grown and processed in the upper Midwest.
"DOJ bases its lawsuit on the bald assumption that third-party suppliers located in areas that already supply the Southeast would be unable to sufficiently increase sales to customers in that purported market if a price increase were attempted post-acquisition. That makes no sense," the court filing says.
The sugar companies also counter the Department of Justice claim that it is a “straightforward case.”
"The complex vertical relationships between U.S. Sugar and Imperial and between U.S. Sugar and United — all of which USDA oversees and regulates — take this case far outside of the typical horizontal merger analysis in which DOJ attempts to shoehorn it."
Under the Clayton Act, which give the Justice Department the authority to stop challenges within an industry, " the government usually sues only the merging parties," the documents says. But in this case, also included United Sugars as a defendant.
The Department of Justice filed its lawsuit challenging the merger in Delaware, where Louis Dreyfus Company, the Netherlands-based parent company of Imperial Sugar, is organized. United States Sugar Corporation also is incorporated in Delaware, but has its headquarters in Florida, where it runs a sugar refinery.
The sugar companies in December asked that the case be moved to a court in Georgia, but no ruling has yet been made on that request. Judge Maryellen Noreika did order in December that a trial should start by the week of April 11.