[Federal Register Volume 59, Number 250 (Friday, December 30, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-32146]


[[Page Unknown]]

[Federal Register: December 30, 1994]


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DEPARTMENT OF JUSTICE
 

U.S. v. Topa Equities (V.I.), Ltd.; Proposed Final Judgment and 
Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. Section 16 (b) through (h), that a proposed 
Final Judgment, a Stipulation and a Competitive Impact Statement have 
been filed with the United States District Court for the District of 
the Virgin Islands in United States of America v. Topa Equities (V.I.), 
Ltd., Civil No. 1994-179.
    The Complaint in the case alleges that Topa obtained the exclusive 
Virgin Islands distribution rights to almost every brand of distilled 
spirits in the world market, and that in obtaining and retaining these 
rights, Topa restrained trade.
    In the Proposed Final Judgment Topa agreed to allow its suppliers 
of distilled spirits to deal with other wholesalers and not to 
interfere with the business operations of its competitors.
    Public comment on the proposed Final Judgment is invited within the 
statutory 60-day comment period. Such comments and responses thereto 
will be published in the Federal Register and filed with the Court. 
Comments should be directed to John T. Orr, Chief, Atlanta Field 
Office, Antitrust Division, Department of Justice, Suite 1176, Richard 
B. Russell Federal Building, 75 Spring Street, Atlanta, Georgia 30303 
(telephone: 404/331-7100).
Constance K. Robinson,
Director of Operations, Antitrust Division.

United States District Court, District of the Virgin Islands, St. 
Thomas Division

Complaint

    The United States of America, through its attorneys of the 
Antitrust Division, acting under the direction of the Attorney General 
of the United States, brings this civil action to obtain equitable and 
other relief against the defendant named herein and alleges as follows:

I

Jurisdiction and Venue

    1. This complaint is filed and this action is instituted under 
Section 4 of the Sherman Act, 15 U.S.C. 4, to prevent and restrain the 
continuing violation by the defendant, as hereinafter alleged, of 
Section 3 of the Sherman Act, 15 U.S.C. 3. This Court has jurisdiction 
over the subject matter and the person of the defendant pursuant to 
Section 12 of the Clayton Act, 15 U.S.C. 22, and 28 U.S.C. 1331 and 
1337.
    2. The defendant is a Virgin Islands corporation and maintains 
offices, transacts business and is found in the District of the Virgin 
Islands. Venue is proper in the District of the Virgin Islands under 15 
U.S.C. 22 and 28 U.S.C. 1391(c).

II

Defendant

    3. Topa Equities (V.I.), Ltd. is made a defendant herein. Topa 
Equities (V.I.), Ltd. is a holding company that wholly owns the Virgin 
Islands wholesale distilled spirits companies West Indies Corporation 
and Bellows International, Ltd. (Hereinafter in this Complaint, Topa 
Equities (V.I.), Ltd. and its subsidiaries will be referred to 
collectively as ``Topa.'') In 1991, Topa had total sales of distilled 
spirits in the Virgin Islands of approximately $24.7 million.
    4. The activities of Topa are within the flow of, and substantially 
affect, commerce within the Virgin Islands and between the Virgin 
Islands and the several states and foreign nations.

III

Definitions

    5. ``Distilled spirits'' means liquor products of all types 
intended for human consumption, including, but not limited to, whiskey, 
gin, vodka, rum, tequila, brandy, liqueurs and cordials, but excluding 
wine and malt beverages and non-alcoholic beverages.
    6. ``Virgin Islands'' means the Territory of the Virgin Islands of 
the United States.
    7. ``Retailer'' means any person engaged in the business of 
purchasing distilled spirits from wholesalers, as defined herein, and 
reselling them to consumers in establishments located in the Virgin 
Islands, including such Virgin Islands-located establishments as retail 
liquor stores, grocery stores, convenience stores, restaurants and 
hotels.
    8. ``Supplier'' means any licensed manufacturer, distiller or 
importer of distilled spirits from which defendant or any other 
wholesaler, as defined herein, purchases or has purchased distilled 
spirits.
    9. ``Wholesaler'' means any person holding a wholesaler's license 
for distilled spirits from the government of the Virgin Islands, and 
who is engaged in the business of purchasing distilled spirits from 
suppliers and reselling them to other wholesalers or to retailers 
located in the Virgin Islands.

IV

Trade and Commerce

    10. Most distilled spirits sold within the Virgin Islands are 
imported from outside of the Virgin Islands. The imported distilled 
spirits are transported to the Virgin Islands mainly in container 
ships. A few brands of distilled spirits are produced within the Virgin 
Islands. Wholesalers like Topa purchase distilled spirits from 
suppliers, store them in warehouses and sell them to retailers who in 
turn sell to consumers in retail outlets. Every wholesaler and retailer 
must be licensed by the Virgin Islands government. Under Virgin Islands 
law, a wholesaler must obtain a license for distilled spirits 
wholesaling and is prohibited from retailing such products.
    11. In the world distilled spirits market, production and 
distribution of most distilled spirits are controlled by several large 
international conglomerates. These conglomerates own the companies that 
produce most of the distilled spirits available in the world market, 
and each conglomerate offers a portfolio of products from the various 
distilled spirits categories. The conglomerates produce or handle the 
worldwide distribution of most of the distilled spirits sold in the 
Virgin Islands, and in 1991 their products accounted for approximately 
64% of all distilled spirits sold in the Virgin Islands.
    12. In the world distilled spirits market, liquor suppliers often 
grant exclusive distribution rights to wholesalers. In the Virgin 
Islands, Topa and other wholesalers generally hold exclusive 
distribution rights for the distilled spirits that they sell. The 
distribution rights usually are limited to the Virgin Islands. Topa has 
the exclusive Virgin Islands distribution rights to almost every 
popular brand of distilled spirits available in the world market.
    13. Exclusive distribution rights for the most popular brands of 
distilled spirits, including those brands forming the portfolios of the 
large international distilled spirits conglomerates, are important to 
the success of a Virgin Islands distilled spirits wholesaler. A 
significant entrant in the Virgin Islands wholesale distilled spirits 
market would need the rights to distribute the products of one or more 
major suppliers to have a successful business. It is difficult, 
however, for a potential or existing wholesaler to obtain a brand or 
portfolio that is already being distributed by another wholesaler in 
the market, in part because a Virgin Islands law, Title 12A V.I.C. 
sections 131 and 132, allows a dealer to sue a supplier for wrongful 
termination.
    14. The distribution of distilled spirits by wholesalers 
constitutes a relevant product market. The relevant geographic market 
for the relevant product is the Virgin Islands.
    15. Most retail distilled spirits business in the Virgin Islands 
takes place on the island of St. Thomas. On St. Thomas, warehouse space 
suitable for the operation of a wholesale distilled spirits business is 
scarce and expensive because of the restricted terrain. An entrant in 
the Virgin Islands wholesale distilled spirits market would need 
adequate and accessible storage space for its distilled spirits on St. 
Thomas to have a successful business.
    16. The potential for litigation under the Virgin Islands wrongful 
termination statute helps to protect Topa's exclusive rights to 
distribute the various brands of distilled spirits in the Virgin 
Islands and makes it more difficult for a potential or existing 
competitor to obtain the rights to distribute these brands. This 
potential for litigation and the scarcity of warehouse space on St. 
Thomas are among the most important barriers to entry which makes entry 
for a competitor difficult and costly, and significant entry has not 
occurred in at least ten years and is unlikely to occur without a Court 
order.

Violation Alleged

    17. Topa entered the Virgin Islands wholesale distilled spirits 
market through a predecessor company in 1980. Through this entry and a 
series of acquisitions of competitors, Topa acquired the exclusive 
Virgin Islands distribution rights to almost every brand of distilled 
spirits in the world market. Topa has retained these distribution 
rights through continuing contractual relationships, both written and 
oral, with its suppliers. As a result of its acquisitions, and its 
retention of the exclusive distribution rights acquired, in 1991 Topa 
had a market share of approximately 96% of wholesale distilled spirits 
sold in the Virgin Islands market.
    18. Topa obtained and has retained its monopoly position in the 
Virgin Islands through the exclusive Virgin Islands distribution rights 
to almost every brand of distilled spirits in the world market. Topa's 
possession and retention of these distribution rights has made 
significant entry extremely difficult in the Virgin Islands.
    19. The contracts in restraint of trade by which Topa obtained and 
has retained its monopoly position have had the following effects, 
among others:
    a. The wholesale distribution of distilled spirits in the Virgin 
Islands is a monopoly;
    b. Competition in the wholesale distribution of distilled spirits 
in the Virgin Islands has been reduced;
    c. Retailers of distilled spirits in the Virgin Islands have been 
deprived of the benefits of free and open competition in that Topa is 
their only source for almost all distilled spirits and there are no 
alternative sources in the Virgin Islands for competing distilled 
spirits; and
    d. Suppliers of distilled spirits to the Virgin Islands have been 
deprived of the benefits of free and open competition, in part because 
Topa has inherent conflicts of interest in the representation of their 
distilled spirits such that the representation of one product 
necessarily results in diminished representation for competing 
products.
    20. The violation alleged in this complaint is continuing and will 
continue unless the relief hereinafter prayed for is granted.

Prayer

    Wherefore, plaintiff prays:
    1. That the series of acquisitions of competitors through which 
Topa acquired the exclusive Virgin Islands distribution rights to 
almost every brand of distilled spirits available in the world market 
and its retention of those exclusive distribution rights be adjudged 
contracts in restraint of trade in violation of Section 3 of the 
Sherman Act;
    2. That plaintiff have such other and further relief as the Court 
may deem just and proper; and
    3. That plaintiff recover the costs of this action.

    Dated: December 7, 1994.
Anne K. Bingaman,
Assistant Attorney General.
Robert E. Litan,
Deputy Assistant Attorney General.
Mark C. Schechter,
Deputy Director of Operations, U.S. Department of Justice, Antitrust 
Division.
Clarence B. Taylor,
for the United States Attorney District of the Virgin Islands.
John T. Orr,
Justin M. Nicholson,
James L. Weis,
Attorneys, Antitrust Division, U.S. Department of Justice, Richard B. 
Russell Building, Suite 1176, 75 Spring Street, SW., Atlanta, GA 30303, 
(404) 331-7100.

Stipulation

    It is stipulated by and between the undersigned parties, by their 
respective attorneys, that:
    1. This Court has jurisdiction over the subject matter of this 
action and over the parties hereto, and venue of this action is proper 
in the United States District Court for the District of the Virgin 
Islands, St. Thomas Division;
    2. The parties to this Stipulation consent that a Final Judgment in 
the form attached may be filed and entered by the Court, upon any 
party's or 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), without further notice to any party or other proceedings, 
provided that plaintiff has not withdrawn its consent, which it may do 
at any time before entry of the proposed Final Judgment by serving 
notice on the defendant and by filing that notice with the Court;
    3. Defendant agrees to be bound by the provisions of the proposed 
Final Judgment pending its approval by the Court. If plaintiff 
withdraws its consent or the proposed Final Judgment is not entered 
pursuant to this Stipulation, this Stipulation shall be of no effect 
whatever and its making shall be without prejudice to any party in this 
or any other proceeding; and
    4. This Stipulation and the Final Judgment to which it relates are 
for settlement purposes only and do not constitute an admission by 
defendant in this or any other proceeding that Section 3 of the Sherman 
Act, 15 U.S.C. 3, or any other provision of law, has been violated.

    Dated:
Anne K. Bingaman,
Assistant Attorney General.
Robert E. Litan,
Deputy Assistant Attorney General.
Mark C. Schechter,
Deputy Director of Operations.
John T. Orr,
Chief, Atlanta Field Office, U.S. Department of Justice, Antitrust 
Division.
Ernest Gellhorn,
Counsel for Defendant, Jones, Day, Reavis & Pogue, Metropolitan Square 
Building, 1450 G Street NW., Washington, DC 20005, (202) 879-3863.
Justin M. Nicholson,
James L. Weis,
Attorneys, Antitrust Division, U.S. Department of Justice, Richard B. 
Russell Building, 75 Spring Street S.W., Suite 1176, Atlanta, Georgia 
30303, (404) 331-7100.

Final Judgment

    Plaintiff, United States of America, filed its Complaint on 
December 7, 1994. Plaintiff and defendant, by their respective 
attorneys, have consented to the entry of this Final Judgment without 
trial or adjudication of any issue of fact or law. This Final Judgment 
shall not constitute any evidence against, or any admission by, any 
party with respect to any issue of fact or law. Defendant has agreed to 
be bound by the provisions of this Final Judgment pending its approval 
by the Court. Therefore, before the taking any testimony, and without 
trial or adjudication of any issue of fact or law, and upon the consent 
of the parties,
    IT IS HEREBY ORDERED, ADJUDGED AND DECREED as follows:

I

    This Court has jurisdiction over the subject matter of this action 
and each of the parties consenting to this Final Judgment. The 
Complaint states a claim upon which relief may be granted against 
defendant under Section 3 of the Sherman Act (15 U.S.C. 3).

II

    As used in this Final Judgment:
    A. ``Distilled spirits'' means liquor products of all types 
intended for human consumption, including, but not limited to, whiskey, 
gin, vodka, rum, tequila, brandy, liqueurs and cordials, but excluding 
wine and malt beverages and non-alcoholic beverages.
    B. ``Person'' means any individual, association, cooperative, 
partnership, corporation or other business or legal entity.
    C. ``Virgin Islands'' means the Territory of the Virgin Islands of 
the United States.
    D. ``Retailer'' means any person engaged in the business of 
purchasing distilled spirits from wholesalers, as defined herein, and 
reselling them to consumers in establishments located in the Virgin 
Islands, including such Virgin Islands-located establishments as retail 
liquor stores, grocery stores, convenience stores, restaurants and 
hotels.
    E. ``Supplier'' means any licensed manufacturer, distiller or 
importer of distilled spirits from which defendant or any other 
wholesaler, as defined herein, purchases distilled spirits or has 
purchased distilled spirits within one year prior to this Final 
Judgment.
    F. ``Wholesaler'' means any person holding a wholesaler's license 
for distilled spirits from the government of the Virgin Islands and who 
is engaged in the business of purchasing distilled spirits from 
suppliers and reselling them to other wholesalers or to retailers 
located in the Virgin Islands.
    G. ``Topa Equities (V.I.), Ltd.'' (hereinafter referred to as 
``Topa'') means defendant and its parent (but only to the extent of its 
effective supervision of, or direct involvement in, defendant's 
wholesale distribution of distilled spirits in the Virgin Islands), 
wholesaler subsidiaries, wholesaler affiliates, successors and assigns 
(excluding any independent purchasers), directors, officers, managers, 
agents and employees and any other person acting for or on behalf of 
them.

III

    The provisions of this Final Judgment shall apply to Topa and to 
all their persons in active concert or participation with Topa who 
shall have received actual notice of this Final Judgment by personal 
service or otherwise.

IV.

    Topa is enjoined and restrained from:
    A. Taking any action under any contract or under Title 12A, 
Sections 131 and 132, of the Virgin Islands Code to prevent its 
suppliers from canceling their distribution arrangements for distilled 
spirits, whether written or not, with Topa upon thirty days' written 
notice and appointing another wholesaler in its stead. In the event of 
such cancellation of distribution arrangements for distilled spirits by 
a supplier, Topa shall, at the supplier's request, sell back to the 
supplier, at the prices Topa paid to the supplier to purchase the 
products, plus storage, handling and transportation costs, as well as 
all taxes and duties paid by Topa, all distilled spirits that Topa then 
has in its possession that were purchased by Topa from the supplier and 
that have not been sold or otherwise committed, and otherwise assist in 
the orderly disposition of such existing inventory;
    B. Entering into with, or enforcing or attempting to enforce 
against, any officer of Topa, any written contract, agreement or 
covenant not to compete in the distilled spirits industry in the Virgin 
Islands; and countering an offer of employment to any officer of Topa 
from any wholesaler with which a Topa supplier has entered into any 
arrangement to distribute its distilled spirits in the Virgin Islands. 
Otherwise, Topa may give its officers raises, bonuses and promotions in 
the ordinary course of business, counter offers of employment from 
distributors not engaged in the distribution of distilled spirits and 
take action against its former officers for the unlawful disclosure of 
trade secrets;
    C. Making unsolicited offers of employment to any executive 
employee of any wholesaler with which a supplier has entered into any 
arrangement to distribute its distilled spirits in the Virgin Islands 
for two years following the opening for business of such wholesaler, 
unless such employee has previously resigned from or been terminated by 
such wholesaler;
    D. Refusing to deal with any retailer because that retailer deals 
with another wholesaler;
    E. Intentionally presenting, or attempting to prevent, any 
wholesalers with which a supplier has entered into any arrangement to 
distribute its distilled spirits in the Virgin Islands from obtaining 
warehouse space for the distribution of distilled spirits. Topa may, in 
the ordinary course of business, seek, retain and acquire warehouse 
space to meet its ordinary and necessary business requirements;
    F. Directly or indirectly merging or consolidating with, or 
acquiring securities of, any other wholesaler without obtaining the 
prior written consent of the Antitrust Division of the Department of 
Justice; and
    G. Acquiring, without obtaining the prior written consent of the 
Antitrust Division of the Department of Justice, either any quantity in 
excess of 5% of a wholesaler's assets, excluding inventory, applied to 
the wholesale distribution of distilled spirits in the Virgin Islands, 
or any quantity in excess of 30% of a wholesaler's inventory of 
distilled spirits.
    Within thirty days of the entry of this Final Judgment, Topa shall 
cause to be delivered to all suppliers who have contracts then in 
existence with Topa, written or otherwise, by certified letter or its 
equivalent, a copy of this Final Judgment.
    For the purpose of determining of securing compliance with this 
Final Judgment and subject to any recognized privilege, from time to 
time:
    A. Duly authorized representatives of the Department of Justice 
shall, upon written request by the Attorney General or by the Assistant 
Attorney General in charge of the Antitrust Division, and on reasonable 
written notice to defendant made to its principal office in Los 
Angeles, California, be permitted:
    1. Access during the office hours of defendant to inspect and copy 
all books, ledgers, accounts, correspondence, memoranda, and other 
records and documents in the possession or under the control of 
defendant, which may have counsel present, relating to any of the 
matters contained in the Final Judgment; and
    2. Subject to the reasonable convenience of defendant and without 
restraint or interference from it, to interview officers, employees and 
agents of defendant, any of whom, together with defendant, may have 
counsel present, regarding any such matters.
    B. Upon written request by the Attorney General or the Assistant 
Attorney General in charge of the Antitrust Division made to 
defendant's principal office in Los Angeles, California, defendant 
shall submit such written reports, under oath if requested, with 
respect to any of the matters contained in this Final Judgment, as may 
be requested.
    C. No information obtained by the means provided in this Final 
Judgment shall be divulged by any representative of the Department of 
Justice to any person other than a duly 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, or for the 
purpose of securing compliance with the Final Judgment or as otherwise 
required by law.
    D. If at the time information or documents are furnished by 
defendant to plaintiff, defendant represents and identifies in writing 
the material in any such information or documents to be that to which a 
claim of protection may be asserted under Rule 26(c)(7) of the Federal 
Rules of Civil Procedure or as otherwise provided by statute, 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,'' or as otherwise provided by statute, then ten days' notice 
shall be given by the United States to defendant prior to divulging 
such material in any legal proceeding (other than a grand jury 
proceeding) to which defendant is not a party.

VI

    Topa shall:
    A. Establish and implement a plan for monitoring compliance by its 
officers, directors, agents, managers and other employees with the 
terms of the Final Judgment; and
    B. File with this Court and serve upon plaintiff, within ninety 
days after the date of entry of this Final Judgment, an affidavit as to 
the fact and manner of its compliance with this Final Judgment.

VII

    Jurisdiction is retained by this Court for the purpose of enabling 
either of the parties to this Final Judgment to apply to this Court at 
any time for such further orders and directions as may be necessary or 
appropriate for the construction or modification of any of the 
provisions hereof, for the enforcement of compliance herewith and for 
the punishment of violations hereof.

VIII

    This Final Judgment will expire on the fifth anniversary of its 
date of entry.

IX

    Entry of this Final Judgment is in the public interest.

    Dated: ________.

____________________
United States District Judge, District of the Virgin Islands.

COMPETITIVE IMPACT STATEMENT

    Pursuant to Section 2(b) of the Antitrust Procedures and Penalties 
Act (``APPA''), 15 U.S.C. 16(b)-(h), the United States submits this 
Competitive Impact Statement relating to the proposed Final Judgment 
submitted for entry with the consent of Topa Equities (V.I.), Ltd. in 
this civil antitrust proceeding.

I

Nature and Purpose of the Proceeding

    On December 7, 1994, the United States filed a civil antitrust 
complaint, under Section 4 of the Sherman Act, 15 U.S.C. 4, against 
Topa Equities (V.I.), Ltd., alleging that Topa Equities (V.I.), Ltd. 
restrained trade in violation of Section 3 of the Sherman Act, 15 
U.S.C. 3, through its acquisition and retention of exclusive Virgin 
Islands distribution rights to almost every brand of distilled spirits 
in the world market. (Hereinafter, the United States Virgin Islands 
will be referred to as ``the Virgin Islands.'')
    Topa Equities (V.I.), Ltd., is a holding company that wholly owns 
the Virgin Islands wholesale distilled spirits companies West Indies 
Corporation and Bellows International, Ltd. (Hereinafter, Topa Equities 
(V.I.), Ltd. and its subsidiaries will be collectively referred to as 
``Topa.'') Topa has the distribution rights in the Virgin Islands for 
almost every popular brand of distilled spirits available in the world 
market. Distilled spirits means liquor products of all types intended 
for human consumption, including, but not limited to, whiskey, gin, 
vodka, rum, tequila, brandy, liqueurs and cordials, but excluding wine 
and malt beverages and non-alcoholic beverages. Topa obtained these 
distribution rights mainly through the acquisition of its competitors.
    The complaint alleges that the effect of the contracts in restraint 
of trade by which Topa obtained and has retained its monopoly position 
has been to lessen competition substantially, in violation of Section 3 
of the Sherman Act, 15 U.S.C. Sec. 3, by:
    1. Decreasing actual and potential competition in the wholesale 
distribution of distilled spirits in the Virgin Islands;
    2. Depriving retailers in the Virgin Islands of the benefits of 
free and open competition because Topa is the only source for almost 
all distilled spirits products and there are no alternative sources for 
competing distilled spirits products; and
    3. Depriving suppliers of distilled spirits products to the Virgin 
Islands of the benefits of free and open competition, in part because 
Topa has inherent conflicts of interest in the representation of their 
distilled spirits products, such that the representation of one product 
necessarily results in diminished representation for competing 
products.
    On December 7, 1994, the United States and Topa filed a Stipulation 
by which they consented to the entry of a proposed Final Judgment 
designed to increase competition in the wholesale distilled spirits 
market in the Virgin Islands. The proposed Final Judgment, as explained 
more fully below, would order Topa to take no action to prevent its 
distilled spirits suppliers from canceling their distribution 
arrangements and appointing another wholesaler. The Final Judgment also 
contains a number of provisions ordering Topa not to interfere with the 
business operations of a competitor.
    The United States and Topa have stipulated that the proposed Final 
Judgment may be entered after compliance with the APPA. Entry of the 
proposed Final Judgment will terminate this action, except that the 
Court will retain jurisdiction to construe, modify and enforce the 
Final Judgment and to punish violations of the Final Judgment.

II

Events Giving Rise to the Alleged Violation

    Under Virgin Islands law, every distilled spirits wholesaler and 
retailer must be licensed by the Virgin Islands government. In 
addition, any wholesaler who obtains a license for distilled spirits 
wholesaling is prohibited from retailing such products. Topa entered 
the wholesale distilled spirits business in the Virgin Islands through 
a predecessor company in 1980 and thereafter made a series of 
acquisitions of competitors. Topa now imports most of the distilled 
spirits products sold within the Virgin Islands. (Only a few brands of 
distilled spirits are produced within the Virgin Islands.) Wholesalers 
like Topa purchase distilled spirits products from suppliers, store 
them in warehouses, and sell them to retailers who, in turn, sell to 
consumers in retail outlets.
    In the world distilled spirits market, liquor suppliers often grant 
exclusive distribution rights to wholesalers. In the Virgin Islands, 
wholesalers generally hold exclusive distribution rights for the 
distilled spirits products that they sell. The distribution rights 
usually are limited to the Virgin Islands. Exclusive distribution 
rights for some of the most popular brands are important to the success 
of a Virgin Islands distilled spirits wholesaler. It is difficult, 
however, to obtain a brand that is already being distributed by another 
wholesaler in the area, in part because a Virgin Islands law, Title 12A 
V.I.C. Sections 131 and 132, allows a dealer to sue a supplier for 
wrongful termination. Topa has the exclusive distribution rights in the 
Virgin Islands for almost every popular brand of distilled spirits 
available in the world market.
    Most retail distilled spirits business in the Virgin Islands takes 
place on the island of St. Thomas. On St. Thomas, warehouse space 
suitable for the operation of a wholesale distilled spirits business is 
scarce and expensive because of the restricted terrain. An entrant in 
the Virgin Islands wholesale distilled spirits market would need 
adequate and accessible storage space for its distilled spirits 
products on St. Thomas to have a successful business.
    The potential for litigation under the Virgin Islands wrongful 
termination statute helps to protect Topa's exclusive rights to 
distribute the various brands of distilled spirits in the Virgin 
Islands and makes it difficult for a potential or existing competitor 
to obtain the rights to distribute these brands. This potential for 
litigation and the scarcity of warehouse space on St. Thomas are among 
the most important barriers to entry which make entry for a competitor 
difficult and costly, and significant entry into the Virgin Islands 
wholesale distilled spirits market has not occurred in at least ten 
years.

B. Effects on Competition

    Through entry into the market and a series of acquisitions of 
competitors. Topa acquired the exclusive Virgin Islands distribution 
rights to almost every brand of distilled spirits in the world market. 
Topa has retained these distribution rights through continuing 
contractual relationships, both written and oral, with its suppliers. 
As a result of its acquisitions, and its retention of the exclusive 
distribution rights acquired, in 1991 Topa had a market share of 
approximately 96% of wholesale distilled spirits sold in the Virgin 
Islands market.
    The United States filed its complaint because the effect of the 
contracts in restraint of trade by which Topa obtained and has retained 
its monopoly position has been to lessen competition substantially in 
the wholesale distribution of distilled spirits in the Virgin Islands. 
Retailers are deprived of alternative sources for competing products. 
Suppliers are also deprived of the benefits of free and open 
competition, in part because Topa has inherent conflicts of interest in 
the representation of their distilled spirits products and cannot 
represent all competing brands equally.

III

Explanation of the Proposed Final Judgment

    The United States and Topa have stipulated that the Court may enter 
the proposed Final Judgment after compliance with the APPA. The 
stipulation provides that entry of the Final Judgment does not 
constitute any evidence or admission by any party with respect to any 
issue of fact or law. Under the provisions of the APPA, the proposed 
Final Judgment may not be entered unless the Court finds that entry is 
in the public interest. The Department believes that the proposed Final 
Judgment provides an adequate remedy for the alleged violation and is 
in the public interest. The term of the proposed Final Judgment is five 
years.
    The Final Judgment allows suppliers of distilled spirits to leave 
Topa if they desire and also reduces substantial barriers to 
competition in the wholesale distilled spirits market in the Virgin 
Islands.
    Paragraph IV.A orders Topa to take no action under any contract or 
under Title 12A, Sections 131 and 132, of the Virgin Islands Code (the 
local statute that protects dealers from wrongful termination by a 
supplier) to prevent its suppliers from canceling their distribution 
arrangements for distilled spirits, whether written or not, with Topa 
upon thirty-days' written notice and appointing a new wholesaler 
instead. If a supplier does cancel its distribution arrangements, Topa 
must, at the supplier's request, sell back to the supplier all of the 
distilled spirits Topa bought from the supplier and otherwise assist in 
the orderly disposition of the existing inventory of the supplier's 
product.
    Under this provision of the Final Judgment, any dissatisfied 
supplier will be free to find an alternative distributor if the 
supplier chooses to do so, and, moreover, a potential new wholesaler 
can freely solicit the business of any supplier. The Final Judgment 
also provides that Topa must waive its rights under the Virgin Islands 
statute which allows a dealer to sue a supplier for wrongful 
termination. Topa's waiver of its rights under this statute removes a 
significant potential impediment to a supplier changing wholesalers, 
and also removes a major potential problem for any wholesaler trying to 
take brands away from Topa.
    Qualified personnel, with the necessary connections with the retail 
trade, are difficult to find in the Virgin islands. Paragraphs IV.B and 
IV.C may help an entrant to hire and retain qualified personnel to run 
a distilled spirits business in the Virgin Islands without undue 
interference from Topa.
    Paragraph IV.B orders Topa not to enter into with, or enforce or 
attempt to enforce against, any officer of Topa, any written contract, 
agreement or covenant not to compete in the distilled spirits industry 
in the Virgin Islands; and not to counter an offer of employment to any 
officer of Topa from any wholesaler with which a Topa supplier has 
entered into any arrangement to distribute its distilled spirits in the 
Virgin Islands. Otherwise, Topa may give its officers raises, bonuses 
and promotions in the ordinary course of business, counter offers of 
employment from distributors not engaged in the distribution of 
distilled spirits and take action against its former officers for the 
unlawful disclosure of trade secrets.
    Paragraph IV.C orders Topa not to make unsolicited offers to hire 
any executive employee of any wholesaler with which a supplier has 
entered into any arrangement to distribute its distilled spirits in the 
Virgin Islands for two years following the opening for business of the 
new wholesaler, unless the employee has previously resigned from or 
been terminated by such wholesaler.
    Paragraph IV.D. orders Topa not to refuse to deal with any retailer 
because the retailer deals with another wholesaler. Topa has the Virgin 
Islands distribution rights for almost every major brand of distilled 
spirits available in the world market. Consequently, even if Topa loses 
some brands to a new or existing wholesaler, Topa will retain enormous 
influence over retailers. This provision will prevent Topa from abusing 
that position in the retail trade and will help ensure that a new or 
existing wholesaler will be able to compete fairly in the marketplace.
    Paragraph IV.E orders Topa not to prevent, or attempt to prevent, 
any wholesaler with which a supplier has entered into any arrangement 
to distribute its distilled spirits in the Virgin Islands from 
obtaining warehouse space for the distribution of distilled spirits. 
This provision helps ensure that a Topa competitor will be able to 
obtain warehouse space for its products. Under the wording of this 
provision, the United States can seek Court-ordered relief should Topa 
do anything to prevent a competitor from obtaining warehouse space. The 
provision allows Topa to obtain warehouse space for its own use, if it 
is acquired in ``the ordinary course of business'' and is an ``ordinary 
and necessary'' business requirement.
    Paragraph IV.F orders Topa not to, directly or indirectly, merge or 
consolidate with, or acquire securities of, any other wholesaler 
without obtaining the prior written consent of the Antitrust Division 
of the Department of Justice. Paragraph IV.G also orders Topa not to 
acquire, without obtaining the prior written consent of the Antitrust 
Division of the Department of Justice, either any quantity in excess of 
5% of a wholesaler's assets, excluding inventory, applied to the 
wholesale distribution of distilled spirits in the Virgin Islands, or 
any quantity in excess of 30% of a wholesaler's inventory of distilled 
spirits.
    Topa is also ordered, within thirty days of the entry of this Final 
Judgment, to deliver to all suppliers who have contracts then in 
existence with Topa, written or otherwise, by certified letter or its 
equivalent (necessary because so many of the suppliers are not in the 
United States), a copy of the Final Judgment.

IV

Remedies Available to Potential 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 suit in federal court to recover three times 
the damages the person has suffered, as well as costs and reasonable 
attorney's fees. Entry of the proposed Final Judgment will neither 
impair nor assists the bringing of any private antitrust actions under 
the Clayton Act. Under the provisions of Section 5(a) of the Clayton 
Act, 15 U.S.C. 16(a), the proposed Final Judgment has no prima facie 
effect in any private lawsuit that may be brought against the 
defendants.

V

Procedures Available for Modification of the Proposed Final 
Judgment

    As provided by the APPA, any person believing that the proposed 
Final Judgment should be modified may submit written comments within 
the sixty day period from the date of publication in the Federal 
Register to John T. Orr, Chief, Atlanta Field Office, Antitrust 
Division, U.S. Department of Justice, Suite 1176, 75 Spring Street, 
S.W., Atlanta, GA 30303, (404) 331-7100. These comments, and the 
Department's responses, will be filed with the Court and published in 
the Federal Register. All comments will be given due consideration by 
the Department of Justice, which remains free to withdraw its consent 
at any time prior to entry. The proposed Final Judgment provides that 
the Court retains jurisdiction over these actions, and any party may 
apply to the Court for any order necessary or appropriate for their 
modification, interpretation or enforcement.

VI

Alternatives to the Proposed Final Judgment

    The United States considered, as an alternative to the proposed 
Final Judgment, litigation seeking structural relief, including forcing 
Topa to unilaterally terminate its distribution arrangements with some 
of its suppliers. The United States rejected that alternative because 
such structural relief would place an unacceptably large burden on the 
third-party suppliers. Moreover, the relief in the proposed Final 
Judgment presents an effective means to improve the level of 
competition in the Virgin Islands wholesale distilled spirits market 
without creating a regulatory environment that might interfere with 
free market forces.

VII

Determinative Documents

    No documents were determinative in the formulation of the proposed 
Final Judgment. Consequently, the United States has not attached any 
such documents to the proposal Final Judgment.

    Dated: December 7, 1994.
Justin M. Nicholson,
James L. Weis,
Attorneys, Antitrust Division, U.S. Department of Justice, Richard B. 
Russell Building, Suite 1176, 75 Spring Street, S.W., Atlanta, Georgia 
30303, (404) 331-7100.
[FR Doc. 94-32146 Filed 12-29-94; 8:45 am]
BILLING CODE 4410-01-M