Category Archives: Food

Trial Brief in Adams v. Pilgrim’s Pride Corp.

On July 16, 2012, defendant Pilgrim’s Pride Corp. argued in its trial brief in Adams v. Pilgrim’s Pride Corp. (E.D. Tex.), that Louisiana chicken growers have no standing to sue Pilgrim’s Pride for alleged antitrust violations under Louisiana’s Unfair Trade Practices and Consumer Protection Law (LUTPA).  The LUTPA claims in the Adams case are asserted by former chicken growers for Pilgrim’s Pride’s former Farmerville, Louisiana plant.  They claim that Pilgrim’s Pride idled the plant for the purpose of raising the price of chicken produced by Pilgrim’s Pride at other plants, allegedly in violation of Section 192(e) of the Packers and Stockyards Act and the LUTPA.

In its trial brief, Pilgrim’s Pride argues that the LUTPA claims are not viable, since under Fifth Circuit authority only direct consumers or business competitors have standing to assert LUTPA claims, and the Farmerville contract growers were neither consumers nor competitors, but suppliers of services.  The brief acknowledges that in Cheramie Services, Inc. v. Shell Deepwater Prod., Inc., 35 So. 3d 1053 (La. 2010), three of seven justices of the Louisiana Supreme Court concluded that the LUTPA does not clearly limit private rights of action to consumers or business competitors.  Pilgrim’s Pride argues, however, that since this was not the holding of a majority of the Court, it is not binding on lower courts under Louisiana law, and thus does not abrogate the referenced Fifth Circuit interpretation of the LUTPA.

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European Competition Network reports on food-sector antitrust enforcement

On May 24, 2012, the European Competition Network (ECN) reported on enforcement and monitoring of competition in Europe’s food sector.  The 155-page report appears under the heading “Sector reports” on the ECN’s website, at http://ec.europa.eu/competition/ecn/documents.html

The Report refers to concerns about the functioning of the European Union’s (EU) food supply chain.  The Report discusses among other issues increased price volatility in the EU food sector that followed a “significant” increase in food prices after mid-2007.  The Report notes (p. 15) a disconnect in the movements of agricultural commodity prices, food producer prices and consumer prices since mid-2007.  Some national competition authorities (NCAs) believe that increased consolidation (e.g., creating cooperatives and other forms of cooperation among producers) would make the food sector function more competitively.  These NCAs contend that “atomistic . . . primary production in combination with . . . small-scale farmers hamper[s] the overall competitiveness of the sector.”  (p. 10)   

The Report provides a wealth of data, graphs, tables and charts regarding the food supply chain, prices, antitrust investigations and antitrust cases undertaken by European competition authorities in the food sector since 2004.  This information includes a country-by-country table of antitrust cases brought by NCAs and the European Commission and a list of food sector inquiries, market studies and consultative opinions reported by NCAs since 2004. 

DOJ issues its report on DOJ/USDA Joint Public Workshops on Antitrust in Agriculture

On May 16, 2012, the Antitrust Division of the U.S. Department of Justice (DOJ) issued a 24-page report on the five public competition-in-agriculture workshops that the DOJ co-sponsored with the U.S. Department of Agriculture in 2010.  The report, “Competition and Agriculture: Voices from the Workshops on Agriculture and Antitrust Enforcement in Our 21st Century Economy and Thoughts on the Way Forward,” is available at the following DOJ link: www.justice.gov/atr/public/reports/283291.pdf

In Section II of the Report, “What We Heard at the Workshops,” the DOJ summarizes and discusses themes that were heard repeatedly at the workshops, including anticompetitive mergers, high market concentration, monopsony power, price levels, lack of capital, contracting, market transparency and captive supply, market manipulation and genetically modified seeds.

Section III of the report assesses which of the concerns raised during the workshops fall within the scope of the DOJ’s antitrust enforcement powers, and which do not.  The report states at p. 16, for example, that as a result of the workshops, “the Division has redoubled its efforts to prevent anticompetitive agricultural mergers and conduct,” but observes elsewhere that the antitrust laws do not empower courts to engineer an idealized economic landscape of small farms and ranches, and modest-sized local grain elevators and packers, or to control price volatility that results from market forces and not from anticompetitive practices.  (Report, at 18, 20.)

In re Southeastern Milk Antitrust Litigation, 2:08-MD-1000 (E.D. Tenn.)

On March 27, 2012, the federal district court granted the defendants’ motion for summary judgment in Food Lion, et al. v. Dean Foods Co., et al., No. 2:07-CV-188, one of the cases in the above-referenced MDL, and dismissed the Plaintiffs’ two remaining Sherman Act section 1 and 2 claims.  Those claims alleged respectively a horizontal agreement not to compete among defendants Dean Foods (Dean), Dairy Farmers of America (DFA) and National Dairy Holdings (NDH) and a conspiracy to monopolize among Dean, DFA and NDH.  Food Lion and the other Plaintiffs are retail sellers of processed milk who purchase milk directly from Dean and/or DFA.

The district court’s ruling rested on two ultimate conclusions.  First, since the court found the Plaintiffs’ economic damages model flawed, they could not establish the required element of antitrust injury.  According to the court, the model measured at least in part price increases from a 2001 merger between Dean and Suiza — not challenged in this case — rather than the anticompetitive conduct alleged in this case.  (Slip op. 10)

Second, the court concluded that both remaining Sherman Act claims required proof of a relevant geographic market.  This conclusion independently required summary judgment on both claims, since the Court had ruled previously that the Plaintiffs could not prove a relevant geographic market.

The court ruled on several interesting legal issues in its 21-page opinion.  These included: (1) how Monsanto Co. v. Spray Rite Service Corp., 465 U.S. 752, 764 (1984)  — requiring “evidence that tends to exclude the possibility” that challenged conduct resulted from independent action — applies on a motion for summary judgment; (2) whether a court may properly consider the “cumulative effect” of evidence in deciding whether a genuine issue of fact is presented; (3) whether Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993) and Sixth Circuit precedent require proof of a relevant geographic market in an action under Sherman Act s. 2 for conspiracy to monopolize; and (4) whether the proper Sherman Act s. 1 characterization of an agreement as vertical (rule of reason analysis) or horizontal (per se analysis) is a question of law for the court or a question of fact for the jury.

The court concluded, after surveying authorities, that the horizontal/vertical characterization is a question of law for the court, but found the proper characterization of the challenged agreement in this case “difficult.”  According to the opinion, “the essence of Plaintiffs’ conspiracy claim is a quid pro quo agreement beween competitors at the same level of the distribution chain (Dean and NDH) almost totally carried out through the use of agreements involving the supply of raw milk among a group of firms at other levels of the distribution chain (Dean and DFA, NDH and DFA). . . .  Plaintiffs suggest that two horizontal competitors, Dean and NDH, ‘are central to the argument’ while at the same time arguing that it is the full supply agreements for raw milk between vertical actors that are ‘at the heart’ of their claims.”  Distinguishing In re Pressure Sensitive Label Stock Antitrust Litigation, 2007 WL 4150666 (M.D. Pa. 2007), relied on by the Plaintiffs, the Court decided that “the essence of the agreement alleged by the Plaintiffs is one between Dean in its role as a processor of bottled milk and DFA in its role as a supplier of raw milk and that the milk supply agreements for raw milk are central to the completion of the alleged conspiracy.”  (Slip op. 21)  Since this agreement has “substantial vertical elements,” the Court concluded that it was subject to rule of reason analysis, thus requiring the Plaintiffs to establish a relevant geographic market.  Since as mentioned above, the court had already concluded that the Plaintiffs could not establish such a market, summary judgment dismissing the remaining Sherman Act s. 1 claim was required.

Del Monte Fresh Pineapple Cases, A126638 (Cal. Ct. App., Unpublished)

On March 7, 2012, in the Del Monte Fresh Pineapple Cases, the California Court of Appeal affirmed a trial court decision that refused to certify a class of indirect purchasers [consumers] of pineapples. The class-action complaint alleged monopolizing conduct by Del Monte in connection with its allegedly improper prosecution and enforcement of an extra-sweet pineapple patent, in violation of the California Unfair Competition Law.

In the appeal, the plaintiffs challenged the trial court’s conclusion that substantial individual questions would have to be resolved to establish injury to class members who purchased pineapples from different direct purchasers in different competitive markets. They also challenged the trial court’s conclusion that it would be “difficult, if not impossible, to identify the specific persons who purchased Del Monte extra sweet pineapples during the class period,” and that even if they could be identified, “the administrative costs of identifying the class members and returning a few dollars to each would significantly outweigh the value of the distribution itself.” (Slip op. at 5, 8.)

The appellate court found no error in the trial court’s conclusion that “a class of indirect purchasers would be neither manageable nor superior to alternative methods.” (Slip op. at 7.) The appellate court also rejected the plaintiffs’ arguments that the trial court misinterpreted the concept of a “cy pres” distribution, impermissibly treated the class certification motion as a motion for summary judgment, and improperly relied on the pendency of a federal court direct purchasers’ antitrust class action against Del Monte (later dismissed on its merits) based on the same alleged patent-related misconduct.

Update: Food Safety Modernization Act

Visit the Committee’s Winter 2012 Newsletter  to read Update on the FDA Food Safety Modernization Act,” which provides an overview of this January 2011 upgrade of U.S. food safety law, and outlines the new powers that this law extends to the U.S. Food and Drug Administration.

In re Ferrero Litigation; and POM Wonderful v. Ocean Spray Cranberries

Developments in two food & beverage false-advertising cases related to the Committee’s consumer-protection focus are noted below.  

 On August 29, 2011, the federal court entered an order denying defendant Ferrero U.S.A., Inc.’s (“Ferrero”) Fed. R. Civ. P. 12(b)(6) motion to dismiss the first amended consolidated complaint in In re Ferrero Litigation, No. 11-CV- 205 H (CAB).   The plaintiffs claim to represent a class of consumers who purchased Ferrero’s “Nutella” brand spread in reliance on allegedly deceptive and misleading labeling and advertisements promoting the spread as healthy and beneficial to children, when it allegedly “contains dangerous levels of fat and sugar.”  (Order, 8/30/11, at 1.)  The plaintiffs claim violations of California’s Unfair Competition Law (UCL), False Advertising Law (FAL) and Consumer Legal Remedies Act (CLRA), among other claims.  District Judge Huff rejected Ferrero’s argument that the plaintiffs’ attempt to plead exposure to a long-term advertising campaign was flawed, thereby requiring pleading and proof of individualized reliance on specific misrepresentations.  She concluded that Ferrero had raised valid issues for summary judgment or class certification, but that the plaintiffs had sufficiently pled reliance to confer standing on them to assert their UCL, FAL and CLRA claims.

 Meanwhile, on August 29, 2011, defendant Ocean Spray Cranberries filed a summary judgment brief (available at Comp Law360) that details its legal argument that the Lanham Act and California UCL claims of rival juice-maker POM Wonderful are precluded and preempted, respectively, by the Federal Food, Drug and Cosmetic Act (FFDCA) and Food and Drug Administration (FDA) regulations under the FFDCA.  Ocean Spray’s 14-page supporting brief explains in part that: “The Lanham Act and the FFDCA have overlapping jurisdiction in areas such as marketing and product labeling, which are at issue in this case.  There is no private right of action for alleged violations of the FFDCA, and courts have consistently held that ‘[p]laintiffs may not seek to enforce the FFDCA through the Lanham Act.'”  (Brief, at 2.)