[Federal Register: February 10, 2005 (Volume 70, Number 27)]
[Notices]
[Page 7120-7127]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10fe05-92]
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DEPARTMENT OF JUSTICE
Antitrust Division
Proposed Final Judgment and Competitive Impact Statement; United
States v. Eastern Mushroom Marketing Cooperative, Inc.
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a Complaint, proposed Final
Judgment, Stipulation, and Competitive Impact Statement have been filed
with the United States District Court for the Eastern District of
Pennsylvania in United States v. Eastern Mushroom Marketing
Cooperative, Inc., Civil Case No. 04 CV 5829. 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 December 16, 2004, The United States filed a Complaint alleging
that the Eastern Mushroom Marketing Cooperative, Inc., in order to
support its price increases, acquired certain mushroom farms, then
filed deed restrictions on the properties as part of an agreement among
the cooperative members to restrict, forestall, and exclude competition
from nonmember farmers in an unreasonable restraint of trade in
violation of Section 1 of the Sherman Act. The Eastern Mushroom
Marketing Cooperative, whose members grow, sell, and ship mushrooms to
retail and food service outlets, is the largest mushroom cooperative in
the United States. During the 2001-2002 growing season, the cooperative
had approximately 19 members with control of more than 500 million
pounds of mushrooms valued in excess of $425 million. The cooperative
controlled over 60 percent of all agaricus mushrooms grown in the
United States during the 2001-2002 growing season and approximately 90
percent of all agaricus mushrooms grown in the eastern United States
during the same growing season.
To restore competition, the proposed Final Judgment filed with the
Complaint will require the cooperative to remove the deed restrictions
already filed and will enjoin and restrain the cooperative from
creating, filing, or enforcing any mushroom deed restrictions with
respect to any real property in which the cooperative has an ownership
or leasehold interest of any kind. A Competitive Impact Statement,
filed by the United States, describes the Complaint, the proposed Final
Judgment, and the remedies available to
[[Page 7121]]
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, 325 Seventh
Street, NW. 20530 (telephone: 202-514-2692) and at the Office of the
Clerk of the United States District Court for the Eastern District of
Pennsylvania, 601 Market Street, Room 2609, Philadelphia, Pennsylvania
19106-1797.
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).
Dorothy B. Fountain,
Deputy Director of Operations, Antitrust Division.
United States District Court for the Eastern District of Pennsylvania
United States of America, Plaintiff, v. Eastern Mushroom Marketing
Cooperative, Inc., Defendant; Competitive Impact Statement
Civil Case No.: 2:04-CV-5829.
Judge: Thomas N. O'Neill, Jr.
Date Stamp: 12/16/2004.
The United States of America, pursuant to section 2(b) of the
Antitrust Procedures and Penalties Act, (``APPA''), 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.
I. Nature and Purpose of the Proceeding
On December 16, 2004, the United States filed a civil antitrust
Complaint alleging that the Eastern Mushroom Marketing Cooperative,
Inc. (``EMMC'') had violated section 1 of the Sherman Act, 15 U.S.C. 1.
The EMMC is made up of entities that grow, buy, package, and ship
mushrooms to retail and food service outlets across the United States.
EMMC began operations in January 2001 and presently has 15 members.
EMMC sets the minimum prices at which its members sell their mushrooms
to customers in various geographic regions throughout the United States
and publishes those prices regularly.
The Complaint alleges that, in order to support its price
increases, the EMMC collectively purchased or entered lease options on
mushroom farms and thereafter shut them down, adding deed restrictions
that permanently removed significant production capacity from the
market. With the Complaint, the United States and the EMMC filed an
agreed-upon proposed Final Judgment that requires the EMMC to eliminate
the deed restrictions from all the properties it shut down.
Under the proposed Final Judgment, the EMMC is required to file
nullifying documents in each jurisdiction where it has filed any
``Mushroom Deed Restrictions,'' as defined in the Final Judgment and
discussed below in section III(A). The EMMC is also prohibited from
creating, filing, or enforcing any Mushroom Deed Restrictions with
respect to any real property in which the cooperative has an ownership
or leasehold interest of any kind.
The United States and the EMMC have agreed that the proposed Final
Judgment may be entered after compliance with the APPA, provided that
the United States has not withdrawn its consent. Entry of the Final
Judgment would terminate the action, except that the Court would retain
jurisdiction to construe, modify, or enforce the Final Judgment's
provisions and to punish violations thereof.
II. Description of Practices Giving Rise to the Alleged Violations of
the Antitrust Laws
A. Description of the Defendant and its Activities
The EMMC is organized pursuant to the Capper-Volstead Act, 7 U.S.C.
291 et seq., which gives its members a limited immunity under the
antitrust laws to act together voluntarily in ``collectively
processing, preparing for market, handling, and marketing'' their
products, and allows them to ``make the necessary contracts and
agreements to effect such purposes.'' The Capper-Volstead Act does not
give farmers the right to engage in exclusionary practices, monopolize
trade, or suppress competition with the cooperative. The Supreme Court
has stated that the legislative history of the Act shows a
congressional intent:
* * * to make it possible for farmer-producers to organize together,
set association policy, fix prices at which their cooperative will
sell their produce * * *. It does not suggest a congressional desire
to vest cooperatives with unrestricted power to restrain trade or to
achieve monopoly by preying on independent producers * * * or
dealers intent on carrying on their own businesses in their own
legitimate way.\1\
\1\ Maryland and Va. Milk Producers Assn. v. United States, 362
U.S. 458, 466-467 (1960).
The EMMC, headquartered in Kennett Square, Pennsylvania, began
operations in January 2001 and now is the largest mushroom cooperative
in the United States. With control over combined production of more
than 500 million pounds of mushrooms, the EMMC accounted for over 60
percent of agaricus mushroom sales during 2001-2002. EMMC also sets the
minimum prices at which its members can sell their mushrooms to
customers in various geographic regions and publishes those prices
regularly.
B. Effects of the Cooperative's Activities
One of the first acts of EMMC members after forming the cooperative
was to agree to increase prices in each of the geographic regions where
its members sell mushrooms. The agreed-upon price increases averaged
about 8 percent nationwide.
Less than four months after instituting the price increases, the
EMMC began acquiring mushroom farms through a ``Supply Control''
campaign. Through membership dues and a so-called ``Supply Control
Assessment,'' the EMMC collected approximately six million dollars from
its members between 2001 and 2003. Approximately four million dollars
of that money was used in its plan to control the supply of mushrooms
grown by nonmembers of the cooperative. Between May 2001 and March
2002, the EMMC acquired one mushroom farm in Dublin, Georgia, and three
in Pennsylvania. All four farms had mushroom-growing equipment and
together had the capacity to grow approximately 29 million pounds of
fresh mushrooms annually in competition with EMMC members' farms. The
EMMC sold these properties, all at a loss, almost immediately after
purchasing them. The net loss for the four properties combined was more
than $1.2 million. The EMMC placed the deed restrictions prohibiting
the conduct of any business related to mushroom growing on all the
properties at the time of each resale. For example, one of the deed
restrictions reads:
This property shall never be used for the cultivation, growing,
marketing, sale or distribution of fresh mushrooms, canned and/or
processed mushrooms or related endeavors.
In addition to the farm purchases and sales, the EMMC entered into
lease option agreements during 2002 for two more mushroom farms, one in
Ohio and the other in Pennsylvania, at a total cost of another $1.2
million. The EMMC never actually entered into leases for these
properties, but the agreements gave it the right to file deed
restrictions
[[Page 7122]]
prohibiting the production of mushrooms on the properties for ten
years, and the EMMC exercised that right.
The purpose of these real estate transactions was to prevent
nonmember mushroom farmers from competing with EMMC and its members.
As a result of the deed restrictions filed by the EMMC upon the
resale or lease of these mushroom growing properties in the eastern
United States, the EMMC was able to boast to its members that it had
``[a]nnually taken over 50 million pounds out of production from
facilities which could have easily been purchased and remained in
production.'' EMMC's actions artificially reduced the acreage and
facilities available to produce mushrooms for American consumers, and
consumers were deprived of the benefits of competition.
III. Explanation of the Proposed Final Judgment
A. Prohibited Conduct
Pursuant to the Final Judgment, EMMC will be enjoined and
restrained from creating, filing, or enforcing any Mushroom Deed
Restrictions with respect to any real property in which the cooperative
has an ownership or leasehold interest of any kind. As defined in the
proposed Final Judgment, Mushroom Deed Restrictions means any
restriction or limitation contained in any document filed in the land
records of any jurisdiction that, with respect to any real property,
limits the (1) commercial growing or cultivation of any types,
varieties or species of mushrooms, mushroom spawn or other fungi; (2)
packaging, processing, freezing, storing, handling, selling, or
marketing of any types, varieties or species of mushrooms, mushrooms
spawn or other fungi; (3) production of Phase I, Phase II or Phase III
mushroom compost for on-site or off-site use; or (4) any other activity
related to the production, processing or sale of mushrooms, mushroom
spawn or other fungi, whether such production, processing or sales
shall occur on or off such real property.
B. Effect of the Final Judgment
The EMMC is required, within thirty (30) calendar days after the
filing of the Complaint in this matter or five (5) days after notice of
the entry of the Final Judgment by the Court, whichever is later, to
file Nullifying Documents in each jurisdiction where the Defendant has
filed any Mushroom Deed Restrictions. Nullifying Documents are defined
in the proposed Final Judgment as documents that are necessary to
nullify the legal effect of any Mushroom Deed Restrictions filed by the
EMMC previously on (1) the properties the Defendant purchased in the
name of the EMMC and thereafter resold; or (2) properties in which the
EMMC purchased a leasehold interest. The Final Judgment requires the
Defendant to use its best efforts to file the required Nullifying
Documents as expeditiously as possible. Accordingly, the restrictions
on competition caused by the deed restrictions will be eliminated.
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 in Federal court to recover three times the
damages suffered, as well as costs and reasonable attorneys' fees.
Entry of the proposed Final Judgment will neither impair nor assist the
bringing of such actions. Under the provisions of section 5(a) of the
Clayton Act, 15 U.S.C. 16(a), the Final Judgment has no prima facie
effect in any subsequent lawsuits that may be brought against the
Defendant.
V. Procedures Available for Modifications of the Proposed Final
Judgment
The United States and the Defendant 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 60
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 Defendant. The
United States could have entered into litigation and sought an
injunction forcing the Defendant to void the deed restrictions. The
United States is satisfied, however, that the Defendant's agreement to
void the restrictions described in the proposed Final Judgment will
preserve competition for the growth of agaricus mushrooms in the United
States.
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 60-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) and (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 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.
[[Page 7123]]
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).\2\ Rather:
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\2\ 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
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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 ensuring that the
government has not breached its duty to the public in consenting to
the decree. The court is required to determine not whether a
particular decree is the one that will best serve society, but
whether the settlement is ``within the reaches of the public
interest.'' More elaborate requirements might undermine the
effectiveness of antitrust enforcement by consent decree.
Bechtel, 648 F.2d at 666 (emphasis added) (citation omitted).\3\
\3\ Cf. BNS, 858 F.2d at 464 (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' '').
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The proposed Final Judgment, therefore, should not be reviewed
under a standard of whether it is certain to eliminate every
anticompetitive effect of a particular practice or whether it mandates
certainty of free competition in the future. Court approval of a final
judgment requires a standard more flexible and less strict than the
standard required for a finding of liability. ``[A] proposed decree
must be approved even if it falls short of the remedy the court would
impose on its own, as long as it falls within the range of
acceptability or is `within the reaches of public interest.' '' 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; the APPA 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 bringing a case in the first
place,'' it follows that ``the court is only authorized to review the
decree itself,'' and not to ``effectively redraft the complaint'' to
inquire into other matters that the United States 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: December 16, 2004.
Respectfully submitted,
C. Alexander Hewes, Tracey D. Chambers, David McDowell,
Trial Attorneys, U.S. Department of Justice, Antitrust Division,
Transportation, Energy & Agriculture Section.
325 7th Street, NW., Suite 500, Washington, DC 20530, Telephone:
(202) 305-8519.
Laura Heiser, Anne Spiegelman,
Trial Attorneys, Antitrust Division, Philadelphia Field Office.
United States District Court for the Eastern District of Pennsylvania
United States of America, Plaintiff, v. Eastern Mushroom Marketing
Cooperative, Inc., Defendant; Final Judgment
Civil Case No.: 2:04-CV-5829.
Judge: Thomas N. O'Neill, Jr.
Date Stamp: 12/16/2004.
Whereas, Plaintiff, United States of America, filed its Complaint
on December 16, 2004, the Plaintiff and the Defendant, by their
respective attorneys, have consented to the entry of this Final
Judgment without trail 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, the Defendant agrees 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 nullification of certain deed restrictions that limit mushroom
production;
And Whereas, Plaintiff requires the Defendant to nullify the deed
restrictions for the purpose of remedying the loss of competition
alleged in the Complaint;
And Whereas, the Defendant has represented to the United States
that it will file expeditiously the documents necessary to nullify the
legal effect of the deed restrictions in each jurisdiction where the
Defendant has filed any such deed restrictions previously and that the
Defendant will later raise no claim of hardship or difficulty as
grounds for asking the Court to modify any of the requirements set
forth 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:
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 the Defendant under section 1 of the
Sherman Act, as amended (15 U.S.C. 1).
II. Definitions
As used in this Final Judgment:
A ``EMMC'' means the Eastern Mushroom Marketing Cooperative, Inc.,
[[Page 7124]]
the Defendant in this case, a Pennsylvania corporation with its
headquarters in Kennett Square, Pennsylvania, its successors and
assigns, and its subsidiaries, affiliates, members, divisions, groups,
partnerships and joint ventures, and their directors, officers,
managers, agents, and employees.
B. ``Mushroom Deed Restrictions'' means any restriction or
limitation contained in any document filed in the land records of any
jurisdiction that, with respect to any real property, limits the (1)
commercial growing or cultivation of any types, varieties or species of
mushrooms, mushroom spawn or other fungi; (2) packaging, processing,
freezing, storing, handling, selling, or marketing of any types,
varieties or species of mushrooms, mushroom spawn or other fungi; (3)
production of Phase I, Phase II or Phase III mushroom compost for on-
site or off-site, use; or (4) any other activity related to the
production, processing or sale of mushrooms, mushroom spawn or other
fungi, whether such production, processing or sales shall occur on or
off such real property.
C. ``Nullifying Documents'' means such documents as are necessary
to nullify the legal effect of any Mushroom Deed Restrictions filed by
the EMMC previously on (1) the properties the Defendant purchased in
the name of the EMMC and thereafter resold; or (2) properties in which
the EMMC purchased a leasehold interest.
III. Applicability
This Final Judgment applies to the EMMC, as defined above, and all
other persons in active concert or participation with the EMMC who
receive actual notice of this Final Judgment by personal service or
otherwise.
IV. Nullification of Mushroom Deed Restrictions
A. The Defendant is ordered and directed, within thirty (30)
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 file Nullifying Documents in each jurisdiction
where the Defendant has filed any Mushroom Deed Restrictions. The
Defendant shall use its best efforts to file the required Nullifying
Documents as expeditiously as possible.
V. Prohibited Activity
The Defendant is enjoined and restrained from creating, filing, or
enforcing any Mushroom Deed Restrictions with respect to any real
property in which the Defendant has an ownership or leasehold interest
of any kind.
VI. Affidavit and Copies
A. Within ten (10) calendar days of the filing of all Nullifying
Documents required by this Final Judgment, the Defendant shall provide
to the United States and the Court, an Affidavit providing affirmative
notice that all the required Nullifying Documents have been filed in
all required jurisdictions in full compliance with the terms of this
Final Judgment.
B. Within ten (10) calendar days after any Nullifying Documents
have been filed in each jurisdiction, the Defendant shall provide to
the United States a copy of all Nullifying Documents filed in such
jurisdiction.
VII. 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 the Defendant, be
permitted:
1. Access during the defendant's office hours to inspect and copy,
or at the United States' option, to require the Defendant to provide
copies of all books, ledgers, accounts, records, and documents in the
possession, custody, or control of the Defendant, relating to any
matters contained in this Final Judgment; and
2. To interview, either informally or on the record, the
Defendant's 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 the Defendant.
B. Upon written request of a duly authorized representative of the
Assistant Attorney General in charge of the Antitrust Division, the
Defendant 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 the
Defendant to the United States, the Defendant represents and identifies
in writing the material in any such information nor documents to which
a claim of protection may be asserted under Rule 26(c)(7) of the
Federal Rules of Civil Procedure, and the Defendant marks each
pertinent page of such material, ``Subject to claim of protection under
Rule 26(c)(7) of the Federal Rules of Civil Procedure,'' then the
United States shall give the Defendant ten (10 calendar days notice
prior to divulging such material in any legal proceeding (other than a
grand jury proceeding).
VIII. 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.
IX. Public Interest Determination
Entry of this Final Judgment is in the public interest.
This Final Judgment shall expire ten years from the date of its
entry.
Dated:----------------------------------------------------------------
Court approval subject to procedures of Antitrust Procedures and
Penalties Act, 15 U.S.C. 16.
-----------------------------------------------------------------------
United States District Judge.
United States District Court for the Eastern District of Pennsylvania
United States of America, Department of Justice, Antitrust Division,
325 7th Street, NW., Washington, DC 20530, Plaintiff, v. Eastern
Mushroom Marketing Cooperative, Inc., 649 West South Street, Kennett
Square, Pennsylvania 19348, Defendant; Complaint
Civil Case No.: 2:04-CV-5829.
Judge: Thomas N. O'Neill, Jr.
Date Stamp: 12/16/2004.
The United States of America, acting under the direction of the
Attorney General, brings this antitrust action against Eastern Mushroom
Marketing Cooperative, Inc. (``EMMC''), the
[[Page 7125]]
nation's largest mushroom cooperative, to enjoin it and its members
from purchasing or leasing mushroom farms and shutting them down.
I. Summary of Claims
1. Each year, American consumers spend over $800 million on
mushrooms. EMMC members accounted for over 60 percent of those sales
during the 2001-2002 growing season.
2. The EMMC is organized pursuant to the Capper-Volstead Act
(``Capper-Volstead''), 7 U.S.C. 29] et seq. Under Capper-Volstead,
farmers have a limited immunity from the antitrust laws to act together
voluntarily in ``collectively processing, preparing for market,
handling, and marketing'' their products, and ``may make the necessary
contracts and agreements to effect such purposes.'' Capper-Volstead
provides no immunity, however, for cooperative members to conspire to
prevent independent, nonmember farmers from competing with the
cooperative or its members.
3. Between May 2001 and August 2002, the EMMC conducted a ``Supply
Control'' campaign to prevent nonmember farmers from buying or leasing
certain of the very few available mushroom farms. The purpose of this
campaign was to prevent nonmember farmers from competing with EMMC and
its members.
4. Staring in May 2001, the EMMC bought four mushroom farms in the
eastern United States with annual combined growing capacity of
approximately 29 million pounds. The EMMC then resold the four
properties at a combined total loss of over $1.2 million and placed
permanent deed restrictions on the properties at the time of each
resale. The deed restrictions all prohibited the conduct of any
business related to the growing of mushrooms. For example, one deed
restriction reads:
This property shall never be used for the cultivation, growing,
marketing, sale or distribution of fresh mushrooms, canned and/or
processed mushrooms or related endeavors.
No mushrooms have been grown on these properties since they were resold
by the EMMC.
5. In February and August 2002, the EMMC purchased lease options,
at a cost of over one million dollars, on two additional mushroom farms
with a combined annual growing capacity of approximately 14 million
pounds. The lease options allowed the EMMC to file deed restrictions on
the two properties prohibiting the use of the properties for any
business related to growing mushrooms for a period of ten years. The
EMMC never entered into leases on these farms, but did file the deed
restrictions. No mushrooms have been grown on these properties since
the deed restrictions were filed by the EMMC.
6. The EMMC touted the success of the Supply Control campaign to
its membership, claiming it had ``[a]nnually taken over 50 million
pounds out of production from facilities which could have easily been
purchased and remained in production.''
7. The agreement among the EMMC members to restrict, forestall, and
exclude competition from nonmember farmers is an unreasonable restraint
of trade in violation of section 1 of the Sherman Act. As a result of
the EMMC's violations, the acreage and facilities available to produce
mushrooms for American consumers was artificially reduced, and
consumers were deprived of the benefits of competition.
II. Jurisdiction and Venue
8. This Complaint is filed and this action is instituted under
section 15 of the Clayton Act, 15 U.S.C. 25, in order to prevent and
restrain the defendant from violating section 1 of the Sherman Act, 15
U.S.C. 1.
9. The Defendant is an agricultural cooperative whose members are
engaged in the production and sale of fresh market mushrooms in
interstate commerce. The Defendant's members' activities in the
production and sale of mushrooms substantially affect interstate
commerce. The Court has subject matter jurisdiction over this action
pursuant to 28 U.S.C. 1331, 1337(a) and 1345.
10. The Defendant has consented to personal jurisdiction and venue
in this judicial district.
III. The Defendant
11. The EMMC began operations in January 2001, and is the largest
mushroom cooperative in the United States. The EMMC is incorporated in
the Commonwealth of Pennsylvania and is headquarters in Kennett Square,
Pennsylvania. The members of the EMMC grow, sell, and ship mushrooms to
retail and food service outlets across the United States. During the
2001-2002 growing season, the EMMC had approximately 19 members with
control of more than 500 million pounds of mushrooms valued in excess
of $425 million.
IV. Trade and Commerce
12. Agaricus mushrooms are the common table variety, accounting for
the vast majority of mushrooms grown and sold in the United States. In
2002, domestic sales of all mushrooms were over $800 million.
13. Mushrooms are grown on farms, usually in one-story windowless
cinder block buildings called ``doubles.'' Doubles are kept cool and
dark at an optimum ground temperature of 64 degrees year round.
Mushrooms are grown in stacks of beds, usually six beds to a stack and
24 beds to a double. The growing process takes approximately eight
weeks to harvest from the introduction of mushroom seed, or ``spawn''
into the growing medium, usually compost. Once harvested, mushrooms are
usually kept in refrigerated storage on the farms until packaged and
shipped in refrigerated trucks to customers.
14. Agaricus mushrooms of better quality are sold to fresh market
retailers such as grocery store chains and food distributors. Lesser
quality agaricus mushrooms are often sold to canneries. The majority of
the agaricus mushrooms grown by EMMC members are sold to the fresh
market.
15. According to the U.S. Department of Agriculture, approximately
66 percent of the domestic agaricus mushrooms grown in the United
States are grown in the eastern United States, with 55 percent grown in
Pennsylvania. Fresh market mushroom prices historically have been
lowest in the east, and some fresh mushrooms grown in the eastern
United States are shipped west.
V. Anticompetitive Effects
16. In January 2001, shortly after its formation, the EMMC and its
members agreed to set increased minimum prices at which they would sell
fresh mushrooms in six different geographic regions, covering the
entire continental United States. The minimum prices they agreed to
were higher, on average, than the prices prevailing in those regions
prior to the EMMC's formation. The price increases averaged about 8
percent nationwide.
17. The EMMC controlled over 60 percent of all agaricus mushrooms
grown in the United States during the 2001-2002 growing season and
approximately 90 percent of all agaricus mushrooms grown in the eastern
United States during the same growing season.
18. Within three months of instituting its price increases, the
EMMC launched a campaign to control the mushroom supply by acquiring
and subsequently dismantling non-EEMC mushroom growing operations in
the eastern United States. The campaign was planned to include the
purchase of mushroom farms in other regions of the country as well. The
EMMC's objective
[[Page 7126]]
was to reduce overall mushroom supply as a means to support its price
increases of early 2001.
19. Through membership dues and a ``Supply Control Assessment'' the
EMMC collected approximately six million dollars from its members
during 2001-2002. EMMC then spent approximately three million dollars
to purchase four mushroom farms and to acquire lease options on two
additional mushroom farms in the eastern United States for the purpose
of shutting them down and reducing the mushroom production capacity
available for nonmembers to grow mushrooms in competition with the
EMMC.
20. In May 2001, the EMMC purchased a farm in Dublin, Georgia at a
bankruptcy auction. The Dublin farm had an annual mushroom production
capacity of approximately eight million pounds. At the auction, the
EMMC outbid a nonmember mushroom grower based in Colorado that was
attempting to enter mushroom farming in the eastern United States in
competition with EMMC. Three months later, the EMMC entered into a land
exchange with a land developer not connected to the mushroom industry,
in which the EMMC exchanged the Dublin farm for another mushroom farm
consisting of two parcels in Evansville, Pennsylvania, plus cash. As
part of the exchange, the EMMC placed a permanent deed restriction on
the Dublin farm prohibiting the conduct of any business related to the
growing of mushrooms. The EMMC lost approximately $525,000 on the
Dublin farm purchase and exchange transactions.
21. Within three months of the Dublin farm/Evansville land
exchange, the EMMC sold the largest parcel of the Evansville,
Pennsylvania farm to a third party, with a permanent deed restriction
prohibiting the conduct of any business related to the growing of
mushrooms. Less than a year later, the EMMC sold the second parcel with
the same permanent deed restriction. The two parcels making up the
Evansville, Pennsylvania farm, with an annual mushroom growing capacity
of 15 million pounds, were sold at a collective loss of $137,000.
22. In January 2002, the EMMC purchased Gallo's Mushroom Farm
(``Gallo's''), in Berks County, Pennsylvania. Gallos' had an annual
mushroom growing capacity of two million pounds. Less than four months
later, the EMMC sold Gallos' at a loss of $77,500 with a permanent deed
restriction prohibiting the conduct of any business related to the
growing of mushrooms.
23. In February 2002, the EMMC agreed to pay one million dollars to
the owners of Ohio Valley Mushroom Farms for, among other things, a
non-complete agreement, a right of first refusal to lease the mushroom
growing operations, a right of first refusal to purchase the
properties, and the right to record a deed restriction prohibiting the
conduct of any business related to mushroom growing on the property for
ten years. The EMMC did not lease or purchase the property, but filed
the deed restriction on the Ohio Valley Farm, which had recently been
operated as a mushroom growing concern with annual capacity of nine
million pounds.
24. In March, 2002, the EMMC purchased the La Conca D'Oro mushroom
farm in Berks County, Pennsylvania. The La Conca D'Oro farm had an
annual production capacity of approximately five million pounds. The
EMMC sold the farm and the mushroom-growing equipment on the farm
approximately three months later at a loss of $500,000. Like the other
EMMC-acquired properties, this land was sold with a deed restriction
prohibiting anyone from conducting any business related to the growing
of mushrooms on the property.
25. In August 2002, the EMMC purchased a ten-year lease option on
the Amadio Farm in Berks County, Pennsylvania for $230,000. The Amadio
Farm had an annual mushroom production capacity of approximately five
million pounds. The owner of the property agreed with the EMMC to the
filing of a deed restriction on the property prohibiting anyone other
than the EMMC from conducting any business related to the growing of
mushrooms for ten years. EMMC never entered into a lease on the
property.
26. As a result of the deed restrictions placed by the EMMC on
these six mushroom farms in the eastern United States, the EMMC removed
more than 42 million pounds of annual growing capacity from that
region, or approximately 8 percent of the total capacity in the eastern
United States.
27. The EMMC purpose in entering into the purchase and lease
transactions was to reduce or eliminate the agaricus mushroom growing
capacity available to potential independent competitors in the eastern
United States, thereby improving the ability of its members to maintain
the price increases to which they had agreed.
28. Depending on the size and location, building a new mushroom
growing and production facility costs millions of dollars and generally
requires zoning approval. Building a new facility takes much longer to
generate any revenue than purchasing or leasing an existing growing
operation. By eliminating the existing available productive capacity,
the EMMC effectively forestalled competitive entry by at least 18
months.
VI. Capper-Volstead
29. The EMMC was formed pursuant to the Capper-Volstead Act.
Congress enacted the Capper-Volstead Act to improve the bargaining
power of individual farmers when dealing with the corporate purchasers
of their products by allowing farmers to act collectively without
violating the antitrust laws. Under the Capper-Volstead Act, farmers,
in a cooperative may collectively market their crops, including jointly
setting prices, but they may not engage in exclusionary practices,
monopolize trade or suppress competition with the cooperative.
VII. Violations Alleged
30. Fresh agaricus mushrooms is a relevant product market within
the meaning of Section 1 of the Sherman Act, 15 U.S.C. 1. The eastern
United States is a relevant geographic market within the meaning of
section 1 of the Sherman Act.
31. The Supply Control campaign adopted and implemented by the EMMC
constitutes a conspiracy in unreasonable restraint of trade to prevent,
forestall and restrict competition from independent mushroom producers
of section 1 of the Sherman Act, 15 U.S.C. 1.
32. To form and effectuate this conspiracy, EMMC and its members
did the following things, among others:
a. Collectively funded the Supply Control campaign:
b. Sold four properties with permanent deed restrictions forbidding
the conduct of any business related to the production of mushrooms;
c. Entered agreements with nonmembers to place deed restrictions on
two properties for which the cooperative purchased lease options; and
d. Filed deed restrictions on the two lease-optioned properties
prohibiting the conduct of any business related to the production of
mushrooms for ten years.
33. The Supply Control campaign is not a joint activity protected
by the exemption from the antitrust laws created by the Capper Volstead
Act, 7 U.S.C. 291, et seq.
34. Unless the deed restrictions are voided and similar
transactions are restrained in the future, the EMMC's violations likely
will have the following effects, among others:
[[Page 7127]]
a. Competition generally in fresh market agaricus mushrooms in the
eastern United States will be restrained.
b. Actual and potential competition between the cooperative's
members and other mushroom farmers will be prevented, forestalled and
restricted;
c. Acreage and facilities available to produce mushrooms in the
eastern United States will be artificially reduced; and
d. Consumers will be deprived of the benefits of competition.
VIII. Requested Relief
Wherefore, Plaintiff requests:
1. That the deed restrictions the EMMC placed on the six properties
identified above be adjudged and decreed to be unlawful and in
violation of section 1 of the Sherman Act, 15 U.S.C. 1.
2. That the Defendant and all persons acting on its behalf be
permanently enjoined and restrained from enforcing the deed
restrictions on the above-mentioned properties and from entering into
or carrying out any contract, agreement, understanding, or plan, the
effect of which would be to limit, forestall or prohibit the conduct of
any business related to the growing of mushrooms on any property in the
United States;
3. That the Defendant be ordered to file appropriate documents in
the land records of each jurisdiction in Georgia, Pennsylvania and Ohio
where the EMMC previously filed deed restrictions, to nullify the
recorded deed restrictions that had the effect of prohibiting the
conduct of business related to the cultivation, growing, production or
marketing of mushrooms; and
4. That Plaintiff have such other relief as the Court may deem just
and proper.
Respectfully submitted,
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R. Hewitt Pate,
Assistant Attorney General.
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J. Bruce McDonald,
Deputy Assistant Attorney General.
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Dorothy B. Fountain,
Deputy Director of Operations and Civil Enforcement.
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Roger W. Fones,
Chief, Transportation , Energy & Agriculture Section.
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Donna N. Kooperstein,
Assistant Chief, Transportation, Energy & Agriculture Section.
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C. Alexander Hewes.
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Tracey D. Chambers.
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J. David McDowell,
Trial Attorneys, United States Department of Justice Antitrust
Division, Transportation, Energy & Agriculture Section.
325 7th Street, NW., Suite 500, Washington, DC 20530, Telephone:
(202) 305-8519, Facsimile: (202) 307-2784.
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Laura Heiser.
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Anne Spiegelman,
Trial Attorneys, Antitrust Division, Philadelphia Field Office.
December 16, 2004.
United States District Court for the Eastern District of Pennsylvania
United States of America, Plaintiff, v. Eastern Mushroom Marketing
Cooperative, Inc., Defendant; Stipulation
Civil Case No.: 2:04-CV-5829.
Judge Thomas N. O'Neill, Jr.
Date Stamp: 12/16/2004.
It is stipulated by and between the undersigned parties by their
respective attorneys that:
1. The Court has jurisdiction over the subject matter of this
action and over each of the parties hereto, and venue of this action is
proper in the Eastern District of Pennsylvania.
2. The parties consent that a Final Judgment in the form hereto
attached may be filed and entered by the Court, upon the motion of any
party or upon the Court's own motion, at any time after compliance with
the requirements of the Antitrust Procedures and Penalties Act (15
U.S.C. 16), and without further notice to any party or other
proceedings, provided that the United States has not withdrawn its
consent.
3. The defendant shall abide by and comply with the provisions of
the proposed Final Judgment pending entry of the Final Judgment, and
shall, from the date of the filing of this Stipulation, comply with all
the terms and provisions thereof as though the same were in full force
and effect as an order of the Court.
4. In the event the proposed Final Judgment is not entered pursuant
to this Stipulation, this Stipulation shall be of no effect whatever,
and the making of this Stipulation shall be without prejudice to any
party in this or any other proceeding.
Dated: December 16, 2004.
Eastern Mushroom Marketing Cooperative
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William A. DeStefano, Saul Ewing, LLP,
Centre Square West, 1500 Market Street, 38th Floor, Philadelphia, PA
19102-2186, (215) 972-8578.
Counsel for the Eastern Mushroom Marketing Cooperative.
United States of America
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Laura Heiser,
Trial Attorney, United States Department of Justice, Antitrust
Division, Philadelphia Office,
The Curtis Center, Suite 650 W., 170 S. Independence Mall West,
Philadelphia, PA 19106-2424, (215) 597-7405.
Counsel for the United States.
[FR Doc. 05-2495 Filed 2-9-05; 8:45 am]
BILLING CODE 4410-11-M