By Amanda Bronstad – Daily Business Review (April 22, 2024 at 02:04 PM)
Two years after the U.S. Department of Justice failed to block a $315 million merger between United States Sugar Corp. and Imperial Sugar Co., antitrust lawyers have lodged nearly two dozen class actions at the sugar industry.
“The allegation is essentially that these sugar defendants were using a middleman to communicate,” said Dayron Silverio at Miami’s Podhurst Orseck, which filed two sugar antitrust actions this month in Florida. “This was the person who was sharing price information between the defendants and in a coordinated effort to maintain granulated sugar prices at a certain level.”
The lawsuits, primarily filed in Minnesota, New York and Florida, allege that several sugar producers—including what is now United Sugar Producers & Refiners, which together control 70% of the market—conspired to fix prices by sharing competitively sensitive information through industry analyst Richard Wistisen and his firm, Commodity Information Inc., both of which are named as defendants.
The lawsuits cite testimony and discovery from a 2022 bench trial in the DOJ’s failed case, though the defendants insisted they only provided public information to ensure Wistisen’s data was accurate.
And while the DOJ’s case was limited to a single merger’s impact on the Southeastern U.S., the antitrust class actions detail a nationwide conspiracy to dominate a market valued at $13.2 billion last year.
In addition, the lawsuits all cite testimony and internal emails presented at trial that the sugar producers colluded since 2019 to fix prices. On Sept. 22, 2020, for example, Wistisen provided two sugar producers with information from each other’s executives in emails less than a minute apart.
“One of the things that came out in that lawsuit is internal communications, which are always critical in establishing a conspiracy,” said Peter Prieto, of Podhurst Orseck. “Conspiracies are very difficult to prove, but to the extent you can get your hands on the communications of defendants, that’s key.”
Lawyers for the sugar producers did not respond to requests for comment. They are Latham & Watkins partner Lawrence Buterman, in New York, for United Sugar Producers & Refiners Cooperative; Vanessa Jacobsen, of Eimer Stahl in Chicago, for Michigan Sugar Co.; Shearman & Sterling’s Djordje Petkowski, in Washington, D.C., for ASR Group International, American Sugar Refining Inc. and Domino Foods Inc.; and Chad Blumenfield, of Greene Espel in Minneapolis, for Cargill Inc.
Allegations ‘Mirror the Government’s’
Sugar is one of several industries hit by a rising tide of antitrust class actions, particularly in the past month. After years of declines, antitrust class actions rose in 2023, then skyrocketed in March, according to data from Law.com Radar.
Other lawsuits have targeted replacement tires and real estate commissions. Many have tracked governmental actions brought by the DOJ and the Federal Trade Commission, particularly involving pricing algorithms and Big Tech companies like Apple and Google, or the European Commission.
The first lawsuit targeting sugar producers was filed last month by Hausfeld, Roberts Law Firm and Kohn, Swift & Graf. Those lawyers, as well as attorneys in another class action that followed, filed a motion before the U.S. Judicial Panel on Multidistrict Litigation to transfer all the lawsuits to the Southern District of New York, where five cases are now pending.
Other lawyers have argued for the District of Minnesota, where United Sugars and Cargill are based, or the Southern District of Florida, where 50% of the nation’s sugar cane is produced and three other defendants, ASR Group, ASR and Domino, have headquarters.
“This district, the Southern District of Florida, has a very strong connection to the product at the root of this MDL, and that’s historic,” Prieto said.
The sugar producers insist the cases should go to the District of Delaware and, specifically, U.S. District Judge Maryellen Noreika, who oversaw the DOJ’s four-day bench trial. She concluded that the government hadn’t provided an adequate market to allege the merger of U.S. Sugar and Imperial Sugar would leave two players in control of 75% of the industry in the Southeastern U.S.
“The government has failed to identify the proper relevant market because its product market and geographic markets ignore the commercial realities of sugar supply in the U.S.,” she wrote in her 2022 opinion, which was upheld in 2023 by the U.S. Court of Appeals for the Third Circuit.
“Judge Noreika is already deeply familiar with plaintiffs’ allegations, competition and pricing in the sugar industry,” the defendants wrote in their response to the motion for multidistrict litigation in the antitrust class actions, “and the extensive federal regulation of the industry, all of which will be key issues in these cases.”
“Plaintiffs’ allegations regarding the alleged conspiracy—including all of the communications purportedly excerpted in the various complaints—mirror the government’s and are admittedly based on the government’s proposed findings of fact from the Sugar litigation,” they added. “Indeed, plaintiffs concede that these proceedings are based on, and stem from, the Sugar litigation.”
Cargill, who hasn’t been named in all the lawsuits, called the move for multidistrict litigation “premature and unwarranted.”
The U.S. Judicial Panel on Multidistrict Litigation plans to hear the cases next month in Salt Lake City.