US Sugar: DOJ has ‘static, contrived, and internally inconsistent view of how competition for the sale of refined sugar occurs today’
The DOJ filed a civil antitrust lawsuit* in Delaware late last year alleging that the proposed transaction would “leave an overwhelming majority of refined sugar sales across the Southeast in the hands of only two producers” and that, “as a result, American businesses and consumers would pay more for refined sugar, a significant input for many foods and beverages.”
According to the complaint, the proposed acquisition would increase the likelihood that United and Domino (ASR Group), the two largest remaining refiners in the region, "will find it in their mutual self-interest to coordinate rather than compete on price, quality, and service reliability.
"If US Sugar is allowed to acquire Imperial and to fold Imperial’s production into the United cooperative, United and just one other company, American Sugar Refining (ASR/Domino), would account for nearly 75% of sugar sales across the Southeast, leaving wholesale customers in this region at the mercy of a cozy duopoly.”
US Sugar: Deal will provide greater job security for employees at Imperial Sugar’s refinery
In a court filing responding to the complaint, however, attorneys for Florida-based US Sugar argued that the deal would not result in higher prices or harm sugar buyers, and claimed the acquisition would provide an additional refinery for sugar cane grown by its farmers in south Florida and provide greater job security for employees at Imperial Sugar’s refinery in Port Wentworth, Georgia.
“Without the acquisition, Imperial will at best continue to be a supplier of high-priced refined sugar dependent on high-cost raw sugar imports from Mexico. At worst, Imperial’s Port Wentworth refinery may no longer be able to serve customers in the future if it cannot secure lower cost supplies of raw sugar.”
US Sugar: ‘Louis Dreyfus Co has attempted to sell Imperial for years and ceased making capital improvements in its refinery’
Dutch firm Louis Dreyfus Company “has attempted to sell Imperial for years and ceased making capital improvements in the Imperial refinery, consistent with its divestment from other sugar businesses,” added US Sugar, which “currently grows and mills more raw sugar than its Clewiston plant [in Florida] can refine.”
The deal would also allow US Sugar, through marketing co-op United Sugars, to reduce customer delivery costs by coordinating shipments across its two facilities, it argued.
US Sugar: DOJ is withholding info from USDA that could be highly pertinent to the case
The DOJ alleges that the cost of transporting sugar is so high that only suppliers located near customer facilities can compete for their business, an outdated view, according to US Sugar, which says buyers can secure refined sugar at competitive prices from suppliers “located throughout the country.”
It also argued that were US Sugar to attempt to raise prices or restrict supply post the deal, the USDA would have “numerous tools to increase sugar supplies and thereby deter or counteract any such attempt,” given that it “regulates the amount of sugar that is marketed from domestic production each year, as well as the amount of sugar that can be imported from abroad.”
In a letter to the judge handling the case (Mary Ellen Noreika) sent this week, attorneys for US Sugar went on to request “the immediate production of documents and communications” from the USDA concerning the acquisition, which it claimed, “may contradict DOJ’s allegations that the transaction will result in harm.”
The DOJ is refusing to make these documents available during the discovery process “on the grounds that the documents at issue are supposedly privileged,” claimed US Sugar, which is seeking an order compelling DOJ to produce USDA’s internal assessments of the deal and share its communications with the DOJ about the deal.
US Sugar is the world’s largest vertically integrated cane sugar milling and refining operation, operating a large sugar refinery in Florida, and selling all of its refined sugar through United Sugars, a marketing co-op owned by US Sugar and three other refined sugar producers (American Crystal Sugar Company, Minn-Dak Farmers Cooperative, and Wyoming Sugar Company).
Imperial Sugar (owned by Louis Dreyfus Company LLC,) operates a sugar refinery in Georgia and an intermediate sugar transfer and liquification facility in Kentucky, and sells its refined sugar directly to customers, generating revenues topping $700m in 2020.
*The case is United States of America v United States Sugar Corporation, United Sugars Corporation, Imperial Sugar Company, and Louis Dreyfus Company LLC 1:21-cv-01644. The DOJ seeks a ruling finding that the deal violates The Clayton Act, and to permanently stop the two parties from getting together.