[Federal Register Volume 69, Number 216 (Tuesday, November 9, 2004)]
[Notices]
[Pages 64969-64977]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-24902]


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DEPARTMENT OF JUSTICE

Antitrust Division


Competitive Impact Statement, Proposed Final Judgment and 
Complaint; United States v. Connors Bros. Income Fund and Bumble Bee 
Seafoods, LLC

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, 
Hold Separate Stipulation and Order, and Competitive Impact Statement 
have been filed with the United States District Court for the District 
of Columbia in United States v. Connors Bros. Income Fund and Bumble 
Bee Seafoods, LLC, Civil Case No: 1:04 CV 01494. 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 August 31, 2004, the United States filed a Compliant alleging 
that the acquisition by Connors Bros. Income Fund (``Connors'') of 
Bumble Bee Seafoods LLC (``Bumble Bee'') would, as originally proposed, 
violate Section 7 of the Clayton Act, 15 U.S.C. 18, by substantially 
lessening competition for the sale of sardine snacks in the Untied 
States. Connors' sardine snack brands account for approximately 63 
percent of the sales in the market, while Bumble Bee's sardine snack 
brand accounts for about 13 percent. The remaining share is comprised 
of small independent fringe players or regional sellers of sardine 
snacks unlikely to be able to expand to the level required to 
compensate for the loss of a competitor of Bumble Bee's significance.
    To preserve competition, the proposed Final Judgment, filed the 
same time as the Complaint, requires Connors to divest its Port Clyde, 
Commander, Possum, Bulldog, Admiral, and Neptune brands (but not 
Neptune brand clam products) and related assets to an acquirer, 
including, at the acquirer's option, no more than one of the following 
Connors' processing assets: The Bath, Maine plant or the Grand Manan, 
New Brunswick plant, to an acquirer acceptable to the United States in 
its sole discretion. A Competitive Impact Statement, filed by the 
United States, describes the Complaint, the proposed Final Judgment, 
and the remedies available to 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 North, 325 Seventh Street, NW., 20530 
(telephone: 202/514-2692) and at the Office of the Clerk of the Untied 
States District Court for the District of Columbia, 333 Constitution 
Avenue, NW., Washington, DC 20001.
    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).

J. Robert Kramer, II,
Director of Operations, Antitrust Division.
    United States of America, U.S. Department of Justice, Antitrust 
Division, 325 7th Avenue, NW., Suite 500, Washington, DC 20530, 
Plaintiff, v. Connors Bros. Income Fund, 669 Main Street, Blacks 
Harbour, New Brunswick, Canada, E5h 1K1, and Bumble Bee Seafoods, 
LLC, 9655 Granite Ridge Drive, San Diego, CA 92123-2674, Defendants; 
Judge: John D. Baker.

Competitive Impact Statement

    Plaintiff United States of America (``United States''), pursuant to 
Section 2(b) of the Antitrust Procedures and Penalties Act (``APPA'' 
and ``Tunney Act''), 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 on August 31, 2004.

I. Nature and Purpose of the Proceeding

    Defendant Connors Bros. Income Fund (``Connors''), an income trust 
fund organized under Canadian law, entered into a Transaction 
Agreement, dated February 10, 2004, in which it proposed to acquire 
Bumble Bee Seafoods, LLC (``Bumble Bee'') from Centre Capital Investors 
III, L.P. (The ``Transaction''). Connors partially financed its 
acquisition through a subscription agreement, and those funds were held 
in escrow pending final consummation of the Transaction. Under Canadian 
law, the escrow agreement expired on April 30, 2004; the funds had to 
be returned to subscribers if Connors had not consummated the 
Transaction by that date.
    On April 30, 2004, the United States and Defendants reached an 
agreement by which: the United States agreed not to file suit at that 
time to enjoin the Transaction; the Defendants signed a Hold Separate 
Stipulation and Order and a proposed Final Judgment, which included 
remedies that would restore the competition that the United States' 
preliminary analysis indicated would be lost through the combination of 
the Connors and Bumble Bee sardine businesses; and the United States 
agreed to defer filing the executed Hold Separate and proposed Final 
Judgment until it completed a thorough investigation into the likely 
competitive effects of the Transaction. At the completion of this 
investigation, the United States confirmed that it was likely that the 
transaction as originally proposed would harm competition for the sale 
of sardine snacks in the United States, but decided to narrow the scope 
of the original Final Judgment to eliminate certain remedies that it 
had subsequently determined were not needed to restore competition in 
the relevant antitrust market.
    Accordingly, on August 31, 2004, the United States filed a 
Complaint alleging the likely effect of the Transaction, as originally 
proposed, would be to lessen competition substantially for the sale of 
sardine snacks throughout the United States in violation of Section 7 
of the Clayton Act. This loss of competition would result in U.S. 
consumers paying higher prices for sardine snacks. At the same time, 
the United States also filed the Hold Separate Stipulation and Order 
and a proposed Final Judgment, which are designed to eliminate the 
anticompetitive effects of the acquisition.
    The proposed Final Judgment, which is explained more fully below, 
requires Connors to divest its Port Clyde brand, several smaller brands 
(Commander, Possum, Bulldog, Admiral and Neptune), and related assets 
that an acquirer of those brands might need in order to become a viable 
and active competitor in the sale of sardine snacks throughout the 
United States. Under the terms of the Hold Separate Stipulation and 
Order, Connors must maintain the commercial value of the Port Clyde 
brand until it is divested to an acquirer acceptable to the United 
States.
    The United States and the Defendants have stipulated that the 
proposed Final Judgment may be entered after compliance with the APPA. 
Entry of the proposed Final Judgment would terminate this action, 
except that the Court would retain jurisdiction to

[[Page 64970]]

construe, modify, or enforce the provisions of the proposed Final 
Judgment and to punish violations thereof.

II. Description of the Events Giving Rise to the Alleged Violation

A. The Defendants and the Proposed Transaction

    Connors marketed the first, second and fourth largest selling 
brands of sardine snacks in the United States (Brunswick, Beach Cliff, 
and Port Clyde, respectively) before this Transaction. In 2003, Connors 
brands accounted for approximately 63% of the sardine snack sales in 
the United States; and it earned revenues of about $43 million from the 
sale of these products.
    Bumble Bee, a Delaware limited liability corporation with its 
headquarters in San Diego, California, marketed the third largest 
selling brand of sardine snacks in the United States before the 
Transaction. In 2003, its Bumble Bee brand accounted for approximately 
13% of U.S. sardine snack sales; and it earned about $9 million from 
the sale of these products.
    The Transaction, as initially proposed by Defendants, would lessen 
competition substantially as a result of Connors' acquisition of Bumble 
Bee's sardine snack business. This acquisition is the subject of the 
Complaint and proposed Final Judgment filed by the United States on 
August 31, 2004.

B. The Competitive Effects of the Transaction on Consumers of Sardine 
Snacks

    The Complaint alleges that the relevant product market is sardine 
snacks, which is an ``overlap'' product, because Connors and Bumble Bee 
sell competing sardine snack products in the United States. Several 
characteristics distinguish sardine snacks (also called ``mainstream'' 
sardines in the industry) from other sardine products. Typically, 
sardine snacks are made from herring and other varieties of small fish, 
which are caught off the coasts of the United States (primarily Maine), 
Canada, Poland, Morocco, South America and Thailand, processed in those 
countries, and sold in the United States. Sardine snacks, as the name 
implies, are sold primarily as snacks; and they are packed in snack-
size cans (primarily 3.75 ounce ``dingley'' cans or 4.4 ounce ``club'' 
cans). In the United States, the average retail price of sardine snacks 
is about $.21 per ounce.
    Evidence gathered in the course of the United States' investigation 
indicated that a sardine product called ``premium'' sardines in the 
industry is not in the same product market as sardine snacks. Premium 
sardines typically consist of the brisling species of fish, which are 
caught off the coasts of Norway and Scotland, processed in those 
countries, and imported into the United States (and other countries). 
In the United States, the average retail price of premium sardines is 
about $.52 per ounce.
    The evidence also showed that a sardine product called ``ethnic'' 
sardines in the industry is not in the same product market as sardine 
snacks. Typically, these sardines are marketed to specific ethnic 
groups, consumed as main courses rather than as snacks, and packed in 
meal-size cans (primarily 15 ounce ``oval'' cans). They typically 
consist of larger herring and other species that are perceived to be of 
a lower quality than the herring used for sardine snacks, and sell for 
an average of about $.08 per ounce (or about 40% of the price of 
sardine snacks). In addition, grocery stores often display these 
sardines exclusively in the ethnic section of their stores, rather than 
the canned seafood section (e.g., Perla Pacifica might be displayed 
next to other Hispanic food products, several aisles away from Connors 
and Bumble Bee sardine snacks).
    Connors and Bumble Bee sell sardine snacks throughout the United 
States. A small, but significant, increase in the price of sardine 
snacks would not cause a sufficient number of purchasers to switch to 
sardine snack brands not presently marketed in the United States to 
make the increase unprofitable. The United States, therefore, concluded 
that the appropriate geographic market for the purpose of analyzing the 
competitive effects of the Transaction is no larger than the United 
States, and that the United States is the relevant geographic market 
within the meaning of Section 7 of the Clayton Act.
    Even before Connors acquired Bumble Bee, the U.S. sardine snack 
market was highly concentrated. Connors brands accounted for 
approximately 63% of the sales in this market, while Bumble Bee's 
sardine brand held about a 13% share. The remaining share is accounted 
for by brands with small individual market shares that can be described 
as ``fringe'' players. Using a measure of concentration called the 
Herfindahl-Hirschman Index (``HHI''), which is defined and explained in 
Exhibit A to the Complaint, the pre-transaction HHI was about 4200--
well in excess of the 1800 point level for characterizing markets as 
highly concentrated.
    The Transaction resulted in Connors' main rival exiting the sardine 
snack market and a substantial increase in concentration in an already 
concentrated market. Post-transaction, the combined Connors/Bumble Bee 
firm would account for over 75% of the market; and none of its 
remaining competitors would have as much as a 5% share of the remaining 
sales. The Transaction would increase the HHI by about 1600 points--
well in excess of levels that raise significant antitrust concerns.
    In fact, as the Complaint alleges, it is likely that the 
elimination of Bumble Bee as an independent competitor would give the 
combined Connors/Bumble Bee firm unilateral power to profitably raise 
prices, whether or not the remaining fringe players responded by 
raising their prices. For example, the combined firm could raise the 
price of the Bumble Bee brand of sardine snacks with little concern 
that it would lose sufficient sales to make the Bumble Bee price 
increase unprofitable.
    The evidence gathered during the investigation also indicated that 
entry into the sale of sardine snacks in the United States would not be 
timely, likely, or sufficient to deter any exercise of market power by 
the combined Connors/Bumble Bee entity. Brand recognition is an 
important factor in the marketing and sale of sardine snacks in the 
United States, and consumers of sardine snacks generally restrict their 
purchases to brands they know and trust. New entry would require years 
of effort and the investment of substantial sunk costs, including 
promotion expenditures and slotting allowances (in many grocery 
chains), to create brand awareness among consumers. Likewise, the 
investigation showed that these same barriers would make it difficult 
for existing fringe players or regional sellers of sardine snacks to 
expand to the level required to make up for the loss of a competitor of 
Bumble Bee's significance.

III. Explanation of the Proposed Final Judgment

    The devestiture required by the proposed Final Judgment will 
eliminate the anticompetitive effects of the acquisition in sardine 
snack products by establishing a new, independent, and economically 
viable competitor with several recognized brand names in the sardine 
snack market. The purchaser will acquire several sardine snack brands. 
Moreover, the acquirer may sell other canned seafood products under its 
brand names (as do Connors, Bumble Bee and other sellers of sardine 
snacks)--as Connors will transfer all of its rights to produce, 
distribute and sell seafood products under the divested brands (with 
the limited exception of

[[Page 64971]]

clam products, which Connors may continue to sell under the Neptune 
brand.) For example, the acquirer will obtain the right to sell 
kippered herring snacks, which a firm with a sardine snack processing 
plant can easily produce at its plant, in addition to sardine stacks. 
The divestiture also includes a packing plant, inventories, and the 
other tangible and intengible assets that an acquirer might need to 
produce, distribute and sell sardine snacks under the divested brand 
names in the United States.
    Port Clyde is the fourth largest brand of sardine snacks, and 
Commander is in the top ten. The remaining brands to be divested 
(Possum, Bulldog, Admiral and Neptune) have relatively small national 
market shares, but each is a significant seller in one or more regions. 
In the aggregate, the divested Connors brands accounted for 
approximately 14% of U.S. sardine snack sales in the United States in 
2003, as compared to about a 13% market share for the Bumble Bee brand.
    The proposed divesture, therefore, will re-establish the 
competitive constraint that the Transaction would have removed from the 
U.S. sardine snack market. Within one hundred and twenty calendar days 
after the filing of the Complaint, or five days after notice of the 
entry of the Final Judgment by the Court, whichever is later, Connors 
must transfer the divested brands, and related assets, in a way that 
satisfies the United States, in its sole discretion, that the 
operations can and will be operated by the purchaser as a viable, 
ongoing and competitive business. In exercising its discretion, the 
United States will ensure that the assets are transferred to an 
acquirer who has the incentive and opportunity to compete as 
effectively in the sardine snack business as did Bumble Bee.
    Defendants must take all reasonable steps necessary to accomplish 
the divestiture quickly and shall cooperate with prospective 
purchasers. In the event that Defendants do not accomplish the 
divestiture within the periods prescribed in the proposed Final 
Judgment, the Final Judgment provides that the Court will appoint a 
trustee selected by the United States to effect the divestiture, and 
the defendants will pay all costs and expenses of the trustee. The 
trustee's commission will be structured so as to provide an incentive 
for the trustee based on the price obtained and the speed with which 
the divestiture is accomplished. After his or her appointment becomes 
effective; the trustee will file monthly reports with the Court and the 
United States setting forth his or her efforts to accomplish the 
divestiture.
    At the end of three months after the trustee's appointment, if the 
divestiture has not been accomplished, the trustee and the United 
States will make recommendations to the Court, which shall enter such 
orders as appropriate, in order to carry out the purpose of the trust, 
including extending the trust or the term of the trustee's appointment.

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 suit in federal court to recover three times 
the damages the person has suffered, as well as costs and reasonable 
attorneys' fees. Entry of the proposed Final Judgment will neither 
impair nor assist the bringing of any private antitrust damage action. 
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 it any 
subsequent private lawsuit that may be brought against the Defendants.

V. Procedures Available for Modification of the Proposed Final Judgment

    The United States and Defendants 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 
sixty 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 Defendants. The 
United States could have entered into litigation and sought an 
injunction against the combination of Connors and Bumble Bee's sardine 
snack business. The United States is satisfied, however, that the 
divestiture of assets described in the proposed Final Judgment will 
preserve competition for the provision of sardine snacks in the United 
States.
    The United States also considered requiring the Defendants to grant 
a long-term, but finite, license allowing an acquirer to use the Bumble 
Bee brand name for sardine snacks while it transitioned the product to 
its own brand name, but rejected this in favor of a clean structural 
remedy.

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 sixty-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) & (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

[[Page 64972]]

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. 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).\1\ Rather:
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    \1\ 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 
---------------------------------------------------------------------------
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 insuring 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 would best serve society, but 
whether the settlements 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)(citations omitted).\2\
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    \2\ Cf. BNS, 858 F.2d at 463 (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, and 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 brining 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: October 19, 2004.

Respectfully submitted,
Robert L. McGeorge, DC Bar 91900.
U.S. Department of Justice, Antitrust Division, Transportation, 
Energy & Agriculture Section, 325 7th Street, NW; Suite 500, 
Washington, DC 20530.

Certificate of Service

    I hereby certify that on October 19, 2004, I have caused a copy of 
the foregoing Competitive Impact Statement to be served on counsel for 
defendants by electronic mail and first class mail, postage prepaid:

Counsel for Defendants Connors Bros. Income Fund and Bumble Bee 
Seafoods, LLC:

David Beddows, Esq.,
Richard G. Parker, Esq.
O'Melveny & Myers LLP, 1625 Eye Street, NW., Washington, DC 2006.

Michelle Livingston, Member of the DC Bar, 461268.
U.S. Department of Justice, Antitrust Division, 325 Seventh Street, 
NW., Suite 500, Washington, DC 20530; (202) 353-7328, (202) 307-2784 
(Fax).

Final Judgment

    Whereas, plaintiff, United States of America, and defendants, 
Connors Bros. Income Fund and Bumble Bee Seafoods, LLC, by their 
respective attorneys, have consented to the entry of this Final 
Judgment without trial 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, defendants agree that venue and jurisdiction are 
proper in this Court;
    And Whereas, defendants agree 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 divestiture of the Divestiture Assets by defendants to assure 
that competition is not substantially lessened;
    And Whereas, plaintiff requires defendants to make certain 
divestitures for the purpose of remedying the loss of competition 
alleged in the Complaint;
    And Whereas, defendants have represented to the United States that 
the divestitures required below can and will be made and that 
defendants will later raise no claim of hardship or difficulty as 
grounds for asking the Court to modify any of the divestiture 
provisions contained 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:

[[Page 64973]]

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 defendants under Section 7 of the Clayton 
Act, as amended (15 U.S.C. 18).

II. Definitions

    As used in this Final Judgment:
    A. ``Acquirer'' menas the entity to whom defendants or the trustee 
divest the Divestiture Assets.
    B. ``Bumble Bee'' means defendant Bumble Bee Seafoods, LLC, a 
Delaware limited liability corporation with its headquarters in San 
Diego, California, its successors and assigns, and its subsidiaries, 
divisions groups, partnerships and joint ventures, and their directors, 
officers, mangers, agents, and employees.
    C. ``Connors'' means defendant Connors Bros. Income Fund, a 
Canadian income trust with its headquarters in Blacks Harbour, New 
Brunswick, Canada, its successors and assigns, and its subsidiaries, 
divisions, groups, partnerships and joint ventures, and their 
directors, officers, mangers, agents, and employees.
    D. ``Label'' means all legal rights owned or possessed by the 
defendants pertaining to a brand's trademarks, trade names, service 
names, service marks, copyrights, designs, and trade dress associated 
with the goods and services sold under a brand name.
    E. ``Divestiture Assets'' include:
    1. The Port Clyde, Commander, Bulldog, Neptune, Admiral, and Possum 
Labels, except the Neptune Label for clam products;
    2. All existing inventories of sardines, kippered herring snacks, 
and other canned seafood products sold under the Port Clyde, Commander, 
Bulldog, Neptune, Admiral, and Possum Labels;
    3. All existing inventories of cans and wrappings for sardines, 
kippered herring snacks, and other canned seafood products that are 
marked with Port Clyde, Commander, Bulldog, Neptune, Admiral, and 
Possum Labels;
    4. At the Acquirer's option, no more than one of the following 
Connors processing assets:
    a. The Bath plant located at 101 Bowery Street, Bath, Maine 04530; 
including all rights, titles and interests in any tangible assets (e.g. 
land, buildings, docking and unloading facilities, warehouses, other 
real property and improvements, fixtures, machinery, equipment, 
tooling, fixed assets, personal property, and office furniture), 
relating to Connors canned seafood business, including all fee and 
leasehold and renewal rights in such assets or any options to purchase 
any adjoining property; or
    b. The Grand Manan plant located in New Brunswick, Canada at Seal 
Cove, Grand Manan, New Brunswick EOG 3BO; including all rights, titles 
and interests in any tangible assets (e.g., land, buildings, docking 
and unloading facilities, warehouses, other real property and 
improvements, fixtures, machinery, equipment, tooling, fixed assets, 
personal property, and office furniture), relating to Connors canned 
seafood business, including all fee and leasehold and renewal rights in 
such assets or any options to purchase any adjoining property;
    5. All additional tangible and intangible assets that are used in 
manufacturing, distributing, marketing and selling sardines, kippered 
herring snacks, and other canned seafood products sold under the Port 
Clyde, Commander, Bulldog, Neptune, Admiral, and Possum Labels, 
including research and development activities and equipment; all 
licenses, permits and authorizations issued by any governmental 
organization; all contracts, teaming arrangements, agreements, leases, 
commitments, certifications, and understandings; marketing studies, 
promotion plans, advertising materials; packaging, marketing and 
distribution know-how and documentation, such as route maps; inventory, 
delivery and storage vehicles, storage and warehouse facilities and 
agreements; customer lists, contracts accounts, credit records, and 
agreements; supplier lists and agreements; repair and performance 
records, and all other records; and
    6. All additional intangible assets that are used in manufacturing, 
distributing, marketing, and selling sardines, kippered herring snacks, 
and other canned seafood products sold under the Port Clyde, Commander, 
Bulldog, Neptune, Admiral, and Possum labels, including those used in 
developing, producing, and servicing such products, including, but not 
limited to all patents, licenses, and sublicenses, intellectual 
property, copyrights; grand technical information and production know-
how, including but not limited to, recipes and formulas and any 
improvements to, or line extensions thereof; and computer software and 
related documentation; know-how, trade secrets, drawings, blueprints, 
designs, design protocols, specifications for materials, specifications 
for parts and devices; safety procedures for the handling of materials 
and substances; all research data concerning historic and current 
research and development; quality assurance and control procedures; 
design tools and simulation capability; all manuals and technical 
information defendants provide to their own employees, customers, 
suppliers, agents or licensees; and all research data concerning 
historic and current research and development efforts, including, but 
not limited to designs of experiments, and the results of successful 
and unsuccessful designs and experiments.

III. Applicability

    A. This Final Judgment applies to defendants Connors and Bumble 
Bee, as defined above, and all other persons in active concert or 
participation with any of them who receive actual notice of this Final 
Jugment by personal service or otherwise.
    B. If the defendants sell or otherwise dispose of all of their 
assets, or lesser business units that include the Divestiture Assets, 
they shall require that the purchaser agrees to be bound by the 
provisions of this Final Judgment, provided, however, that defendands 
need not obtain such an agreement from the Acquirer.

IV. Divestitures

    A. Defendants are ordered and directed, within one hundred and 
twenty (120) 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 divest the Divestiture 
Assets in a manner consistent with this Final Judgment to an Acquirer 
acceptable to the United States in its sole discretion. The United 
States, in its sole discretion, may agree to one or more extensions of 
this time period, which collectively shall not exceed sixty (60) days 
in total, and shall notify the Court in such circumstances. Defendants 
shall use their best efforts to divest the Divestiture Assets as 
expeditiously as possible.
    B. In accomplishing the divestiture ordered by this Final Judgment, 
defendants promptly shall make known, by usual and customary means, the 
availability of the Divestiture Assets. Defendants shall inform any 
person making inquiry regarding a possible purchase of the Divestiture 
Assets that they are being divested to this Final Judgment and provide 
that person with a copy of this Final Judgment. Defendants shall offer 
to furnish to all prospective Acquirers, subject to customary 
confidentiality assurances, all information and documents relating to 
the Divestiture Assets customarily provided in a due diligence process 
except such information or documents

[[Page 64974]]

subject to the attorney-client or work-product privileges. Defendants 
shall make available such information to the United States at the same 
time that such information is made available to any other person.
    C. Defendants shall provide the prospective Acquirers and the 
United States information relating to the personnel involved in the 
operation and management of the Divestiture Assets to enable the 
Acquirer to make offers of employment. Defendants will not interfere 
with any negotiations by the Acquirer to employ any defendant's 
employee whose primary responsibility is the operation and management 
of the Divestiture Assets.
    D. Defendants shall permit prospective Acquirers to have reasonable 
access to personnel and to make inspections of the physical facilities 
of the Divestiture Assets, access to any and all environmental, zoning, 
and other permit documents and information relating to the Divestiture 
Assets, and access to any and all financial, operational, strategic or 
other documents and information relating to the Divestiture Assets 
customarily provided as part of a due diligence process.
    E. Defendants shall warrant to all prospective Acquirers that each 
asset will be operational on the date of sale.
    F. Defendants shall not take any action that will impede in any way 
the permitting, operation, or divestiture of the Divestiture Assets.
    G. Defendants will not introduce or sell any canned seafood 
products under the Labels contained in the Divestiture Assets; however, 
defendants may continue to introduce and sell clam products under the 
Neptune Label.
    H. Defendants shall warrant to the Acquirer of the Divestiture 
Assets that there are no material defects in the environmental, zoning 
or other permits pertaining to the operation of each asset, and that 
following the sale of the Divestiture Assets, defendants will not 
undertake, directly or indirectly, any challenges to the environmental, 
zoning, or other permits relating to the operation of the Divestiture 
Assets.
    I. Unless the United States otherwise consents in writing, the 
divestiture pursuant to Section IV, or by trustee appointed pursuant to 
Section V, of this Final Judgment, shall include the entire Divestiture 
Assets, shall be sold to a single Acquirer, and shall be accomplished 
in such a way as to satisfy the Untied States, in its sole discretion, 
that the Divestiture Assets can and will be used by the Acquirer as 
part of a viable, ongoing business of the sale of canned sardines.
    J. The divestitures, whether pursuant to Section IV or Section VI 
of this Final Judgment,
    1. Shall be made to an Acquirer that, in the United States's sole 
judgment, has the intent and capability (including the necessary 
managerial, operational, technical and financial capability) of 
competing effectively in the business of packing and producing (unless 
otherwise acquired), marketing, distributing, and selling canned 
sardine products; and
    2. Shall be accomplished so as to satisfy the United States, in its 
sole discretion, that none of the terms of any agreement between an 
Acquirer and defendants give defendants the ability unreasonably to 
raise the Acquirer's costs, to lower the Acquirer's efficiency, or 
otherwise to interfere in the ability of the Acquirer to compete 
effectively.

V. Appointment of Trustee

    A. If defendants have not divested the Divestiture Assets within 
the time period specified in Section IV(A), defendants shall notify the 
United States of that fact in writing. Upon application of the United 
States, the Court shall appoint a trustee selected by the United States 
and approved by the Court to effect the divestiture of the Divestiture 
Assets.
    B. After the appointment of a trustee becomes effective, only the 
trustee shall have the right to sell the Divestiture Assets. The 
trustee shall have the power and authority to accomplish the 
divestiture to an Acquirer acceptable to the United States at such 
price and on such terms as are then obtainable upon reasonable effort 
by the trustee, subject to the provisions of Sections IV, V, and VI of 
this Final Judgment, and shall have other powers as this Court deems 
appropriate. Subject to Section V(D) of this Final Judgment, the 
trustee may hire at the cost and expense of defendants any investment 
bankers, attorneys, or other agents, who shall be solely accountable to 
the trustee, reasonably necessary in the trustee's judgment to assist 
in the divestiture.
    C. Defendants shall not object to a sale by the trustee on any 
ground other than the trustee's malfeasance. Any such objections by 
defendants must be conveyed in writing to the United States and the 
trustee within ten (10) calendar days after the trustee has provided 
the notice required under Section VI.
    D. The trustee shall serve at the cost and expense of defendants, 
on such terms and conditions as the plaintiff approves, and shall 
account for all monies derived from the sale of the assets sold by the 
trustee and all costs and expenses so incurred. After approval by the 
Court of the trustee's accounting, including fees for its services and 
those of any professionals and agents retained by the trustee, all 
remaining money shall be paid to defendants and the trust shall then be 
terminated. The compensation of the trustee and any professionals and 
agents retained by the trustee shall be reasonable in light of the 
value of the Divestiture Assets and based on a fee arrangement 
providing the trustee with an incentive based on the price and terms of 
the divestiture and the speed with which it is accomplished, but 
timeliness is paramount.
    E. Defendants shall use their best efforts to assist the trustee in 
accomplishing the required divestiture. The trustee and any 
consultants, accountants, attorneys, and other persons retained by the 
trustee shall have full and complete access to the personnel, books, 
records, and facilities of the business to be divested, and defendants 
shall develop financial and other information relevant to such business 
as the trustee may reasonably request, subject to reasonable protection 
for trade secret or other confidential research, development, or 
commercial information. Defendants shall take no action to interfere 
with or to impede the trustee's accomplishment of the divestiture.
    F. After its appointment, the trustee shall file monthly reports 
with the United States and the Court setting forth the trustee's 
efforts to accomplish the divestiture ordered under this Final 
Judgment. To the extent such reports contain information that the 
trustee deems confidential, such reports shall not be filed in the 
public docket of the Court. Such reports shall include the name, 
address, and telephone number of each person who, during the preceding 
month, made an offer to acquire, expressed an interest in acquiring, 
entered into negotiations to acquire, or was contacted or made an 
inquiry about acquiring any interest in the Divestiture Assets, and 
shall describe in detail each contact with any such person. The trustee 
shall maintain full records of all efforts made to divest the 
Divestiture Assets.
    G. If the trustee has not accomplished such divestiture within 
three (3) months after its appointment, the trustee shall promptly file 
with the Court a report setting forth (1) the trustee's efforts to 
accomplish the required divestiture, (2) the reasons, in the trustee's 
judgment, why the required divestiture has not been accomplished, and 
(3) the trustee's recommendations. To the extent such reports contain 
information that the trustee deems confidential, such reports

[[Page 64975]]

shall not be filed in the public docket of the Court. The trustee shall 
at the same time furnish such report to the plaintiff who shall have 
the right to make additional recommendations consistent with the 
purpose of the trust. The Court thereafter shall enter such orders as 
it shall deem appropriate to carry out the purpose of the Final 
Judgment, which may, if necessary, include extending the trust and the 
term of the trustee's appointment by a period requested by the United 
States.

VI. Notice of Proposed Divestiture

    A. Within two (2) business days following execution of a definitive 
divestiture required herein, shall notify the United States of any 
proposed divestiture required by Section IV or V of this Final 
Judgment. If the trustee is responsible, it shall similarly notify 
defendants. The notice shall set forth the details of the proposed 
divestiture and list the name, address, and telephone number of each 
person not previously identified who offered or expressed an interest 
in or desire to acquire any ownership interest in the Divestiture 
Assets, together with full details of the same.
    B. Within fifteen (15) calendar days of receipt by the United 
States of such notice, the United States may request from defendants, 
the proposed Acquirer, any other third party, or the trustee if 
applicable, additional information concerning the proposed divestiture, 
the proposed Acquirer, and any other potential Acquirer. Defendants and 
the trustee shall furnish any additional information requested within 
(15) calendar days of the receipt of the request, unless the parties 
otherwise agree.
    C. Within thirty (30) calendar days after receipt of the notice or 
within twenty (20) calendar days after the United States has been 
provided the additional information requested from defendants, the 
proposed Acquirer, any third party, and the trustee, whichever is 
later, the United States shall provide written notice to defendants and 
the trustee, if there is one, stating whether or not it objects to the 
proposed divestiture. If the United States provides written notice that 
it does not object, the divestiture may be consummated, subject only to 
defendants' limited right to object to the sale under Section V(C) of 
this Final Judgment. Absent written notice that the United States does 
not object to the proposed Acquirer or upon objection by the United 
States, a divestiture proposed under Section IV or Section V shall not 
be consummated. Upon objection by defendants under Section V(C), a 
divestiture proposed under Section V shall not be consummated unless 
approved by the Court.

VII. Financing

    Defendants shall not finance all or any part of any purchase made 
pursuant to Section IV or Section V of this Final Judgment.

VIII. Hold Separate

    Until the divestiture required by this Final Judgment has been 
accomplished defendants shall take all steps necessary to comply with 
the Hold Separate Stipulation and Order entered by this Court. 
Defendants shall take no action that would jeopardize the divestiture 
ordered by this Court.

IX. Affidavits

    A. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, and every thirty (30) calendar days thereafter until 
the divestiture has been completed under Section IV or Section V, 
defendants shall deliver to the United States an affidavit as to the 
fact and manner of its compliance with Section IV or Section V of this 
Final Judgment. Each such affidavit shall include the name, address, 
and telephone number of each person who, during the preceding thirty 
(30) days, made an offer to acquire, expressed an interest in 
acquiring, entered into negotiations to acquire, or was contacted or 
made an inquiry about acquiring, any interest in the Divestiture 
Assets, shall describe in detail each contact with any such person 
during that period, and shall describe in detail which of the 
Divestiture Assets each such person made an offer to acquire, expressed 
an interest in acquiring, entered into negotiations to acquire, or was 
contacted or made an inquiry about acquiring. Each such affidavit shall 
also include a description of the efforts defendants have taken to 
solicit buyers for the Divestiture Assets, and to provide required 
information to prospective purchasers, including the limitations, if 
any, on such information. Assuming the information set forth in the 
affidavit is true and complete, any objection by the United States to 
information provided by defendants, including limitation on 
information, shall be made within fourteen (14) days of receipt of such 
affidavit.
    B. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, defendants shall deliver to the United States an 
affidavit that describes in reasonable detail all actions defendants 
have taken and all steps defendants have implemented on an ongoing 
basis to comply with Section VIII of this Final Judgment. Defendants 
shall deliver to the United States an affidavit describing any changes 
to the efforts and actions outlined in defendants' earlier affidavits 
filed pursuant to this section within fifteen (15) calendar days after 
the change is implemented.
    C. Defendants shall keep all records of all efforts made to 
preserve and divest the Divestiture Assets until one year after such 
divestiture has been completed.

X. 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 defendants, be 
permitted:

    1. Access during defendants' office hours to inspect and copy, 
or at the United States' option, to require defendants to provide 
copies of, all books, ledgers, accounts, records, and documents in 
the possession, custody, or control of defendants, relating to any 
matters contained in this Final Judgment; and
    2. To interview, either informally or on the record, defendants' 
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 defendants.

    B. Upon the written request of a duly authorized representative of 
the Assistant Attorney General in charge of the antitrust Division, 
defendants 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 
defendants to the United States, defendants

[[Page 64976]]

represent and identify in writing the material in any such information 
or documents to which a claim of protection may be asserted under Rule 
26(c)(7) of the Federal Rules of Civil Procedures, and defendants mark 
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 defendants ten (10) calendar days notice prior 
to divulging such material in any legal proceeding (other than a grand 
jury proceeding).

XI. No Reacquisition

    Defendants may not reacquire any part of the Divestiture Assets 
from the Acquirer, or their successors, during the term of this Final 
Judgment.

XII. 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.

XIII. Expiration of Final Judgment

    Unless this Court grants an extension, this Final Judgment shall 
expire ten (10) years from the date of its entry.

XIV. Public Interest Determination

    Entry of this Final Judgment is in the public interest.

Date:------------------------------------------------------------------

    Court approval subject to procedures of Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16

-----------------------------------------------------------------------
United States District Judge

Complaint

    The United States of America, acting under the direction of the 
Attorney General of the United States, brings this civil action to 
obtain equitable relief against defendants Connors Bros. Income Fund 
(``Connors'') and Bumble Bee Seafoods, LLC (``Bumble Bee''), and 
complains and alleges as follows:
    1. The United States brings this suit to prevent Connors from 
retaining a newly acquired near monopoly in sardine snack foods. On 
April 30, 2004, Connors consummated its acquisition of Bumble Bee. At 
the time of the transaction, Connors and Bumble Bee were the only two 
significant sellers of sardine snacks in the United States.
    2. Unless remedied, the acquisition will eliminate substantial 
head-to-head rivalry between Connors and Bumble Bee. Consequently, the 
elimination of Bumble Bee as an independent significant competitor will 
substantially lessen competition for the sale of sardine snacks and 
result in higher prices to United States consumers. The acquisition, 
therefore, violates Section 7 of the Clayton Act, as amended, 15 U.S.C. 
18.

I. Jurisdiction and Venue

    3. This Complaint is filed and this action is instituted under 
Section 15 of the Clayton Act, as amended, 15 U.S.C. 25, in order to 
prevent and restrain defendants from violating Section 7 of the Clayton 
Act, as amended, 15 U.S.C. 18.
    4. Connors and Bumble Bee sell sardine snacks in the flow of U.S. 
interstate commerce. Defendant's activities in producing and marketing 
that product also substantially affect interstate commerce. The Court 
has subject matter jurisdiction over this action, 28 U.S.C. 1331, 
1337(a) and 1345.
    5. The defendants have consented to personal jurisdiction and venue 
in this judicial district.

II. The Defendants

    6. Connors Bros. Income Fund is a Canadian income trust with its 
headquarters in Blacks Harbour, New Brunswick, Canada.
    7. Even before its acquisition of Bumble Bee, Connors was the 
largest canned sardine company in the United States. It also sold other 
canned seafood products such as kippered herring snacks, fish steaks, 
shrimp, anchovies and oysters, as well as fish meal and fish oil. 
Connors operates four canning and processing facilities, two in Maine 
and two in New Brunswick, Canada. It sells three of the top four 
sardine snack brands in the United States--Beach Cliff, Brunswick, and 
Port Clyde; and its total sales of sardine snacks exceed $43 million in 
2003.
    8. Bumble Bee Seafoods, LLC, is a Delaware limited liability 
corporation with its headquarters in San Diego, California. Bumble Bee 
became a wholly owned corporate subsidiary of Connors after Connors 
acquired it on April 30, 2004. Prior to its acquisition by Connors, 
Bumble Bee was a leading seller of canned seafood products. The Bumble 
Bee brand of sardine snacks was the third largest selling brand in the 
United States. In addition, Bumble Bee is one of the three largest 
sellers of tuna in the United States, and is a leading seller of other 
canned seafood products, such as premium sardines, salmon, mackerel and 
scallops. Bumble Bee reported U.S. sardine snack sales of approximately 
$9 million in 2003.

III. Background

    9. Canned sardines are a processed fish product ready for immediate 
consumption by consumers. Sardine companies sell an array of canned 
sardine products, varying the fish, packaging, prices, and marketing.
    10. Sardine snacks, sometimes referred to as ``mainstream'' 
sardines in the industry, are the principal sardine product in the 
United States, with revenue and unit volumes far in excess of any other 
sardine product. They typically consist of herring and other small 
varieties of fish that are caught off the coasts of the United States 
(primarily Maine), Canada, Poland, Morocco, Thailand and South America, 
and processed in those countries. They are consumed primarily as snacks 
and packed in snack-size 3.75 ounce and 4.4 ounce cans.
    11. Other sardine products include premium and ethic sardines. 
Premium sardines typically consist of brislings that are caught off the 
costs of Norway and Scotland, and processed in those countries. They 
sell for about two and a half times as much as sardine snacks. Ethnic 
sardines typically consist of pilchards and lower quality herring. They 
are generally consumed as main courses, packed in 15 ounce cans, sell 
for less than half the price of sardine snacks, are marketed primarily 
to members of specific ethnic groups, and are often displayed 
exclusively in ethnic sections of grocery stores.
    12. Brand recognition is an important factor in the marketing and 
sales of sardine snacks in the United States. Brands are generally used 
to distinguish different sardine products (i.e., sardine snacks, 
premium sardines and ethnic sardines), and to distinguish the different 
sellers who compete to sell each of those products. Consumers of 
sardine snacks generally will restrict their purchases to brands that 
they know and trust.

IV. Trade and Commerce

A. Relevant Product and Geographic Market

    13. A small but significant increase in the price of sardine snacks 
would not cause enough consumers to switch to other products (including 
premium and ethnic sardines) to make such a price increase 
unprofitable. Accordingly, the sale of sardine snacks is a line of 
commerce and a relevant product market within the meaning of Section 7 
of the Clayton Act.
    14. Both Connors and Bumble Bee sell sardine snacks throughout the 
United States. A small but significant price increase in sardine snacks 
would not

[[Page 64977]]

cause a sufficient number of purchasers to switch to sardine snack 
brands not presently marketed in the United States to make the increase 
unprofitable. The relevant geographic market, therefore, within the 
meaning of Section 7 of the Clayton Act is no larger than the United 
States.

B. Anticompetitive Effects

    15. The sardine snack market is highly concentrated, and the 
defendants are, by far, the largest sellers of those products in the 
United States. Connors and Bumble Bee both sell well established 
sardine brands. Brand recognition is important to consumers of 
sardines, and the transaction has combined the two owners of the four 
most successful sardine snack brands in the United States (Connors' 
Brunswick, Beach Cliff and Port Clyde brands, and Bumble Bee). Connors 
accounts for an approximately 63 percent market share and Bumble Bee's 
share is approximately 13 percent. Together, the two firms account for 
more than 75 percent of United States sales of sardine snacks, and the 
remaining sales are widely dispersed among numerous firms with small 
individual market shares.
    16. The acquisition of Bumble Bee by Connors would substantially 
increase concentration and lessen competition in the United States 
sardine snack market. Using a measure of concentration called the 
Herfindahl-Hirschman Index (``HHI''), defined and explained in Exhibit 
A, combining Connors and Bumble Bee would substantially increase the 
already high concentration in the market. The combination would 
increase the HHI from about 4200 to more than 5800, well in excess of 
levels that raise significant antitrust concerns.
    17. The acquisition of Bumble Bee by Connors gives Connors the 
power profitably to increase prices unilaterally for one or more of its 
brands of sardine snacks, to the detriment of consumers.

C. Entry and Expansion

    18. It is difficult to enter into the sale of sardine snacks in the 
United States, or to significantly expand sales of smaller brands. New 
entry or expansion requires years of effort and the investment of 
substantial sunk costs, including promotional expenditures and slotting 
allowances (for sales through grocery stores) to create brand awareness 
among consumers. Therefore, new entry or expansion would not be timely, 
likely or sufficient to thwart the anticompetitive effects of the 
acquisition.

V. Violation Alleged

    19. The effect of Connors' acquisition of Bumble Bee may be to 
substantially lessen competitive and tend to create a monopoly in 
interstate trade and commerce in violation of Section 7 of the Clayton 
Act.
    20 The combination will likely have the following effects, among 
others:
    a. Competition generally in the sale of sardine snacks in the 
United States would be substantially lessened;
    b. Actual and potential competition between Connors and Bumble Bee 
in the sale of sardine snacks in the United States would be eliminated; 
and
    c. Prices for sardine snacks sold in the United States likely would 
increase.
    21. Unless restrained, the acquisition will violate Section 7 of 
the Clayton Act, as amended, 15 U.S.C. 18.

VI. Requested Relief

    Plaintiff requests:
    1. That Connors' acquisition of Bumble Bee be adjudged and decreed 
to be unlawful and in violation of Section 7 of the Clayton Act, as 
amended, 15 U.S.C. 18;
    2. That Connors be ordered to divest Bumble Bee, and defendants and 
all persons acting on their behalf be permanently enjoined and 
restrained from carrying out any agreement, understanding, or plan, the 
effect of which would be to combine the businesses or assets of the 
defendants;
    3. That plaintiff be awarded its costs of this action; and
    4. That plaintiff receive such other and further relief as the case 
requires and the Court deems proper.

    Dated: August 31, 2004.
Respectfully submitted,

R. Hewitt Pate, D.C. Bar 473598;
Assistant Attorney General.

J. Bruce McDonald
Deputy Assistant Attorney General.

J. Robert Kramer, II, Pa. Bar 23963,
Director of Operations and Civil Enforcement.

Roger W. Fones, DC Bar 303255,
Chief, Transportation, Energy and Agriculture Section.

Donna Kooperstein,
Assistant Chief, Transportation, Energy and Agriculture Section.

Robert L. McGeorge, DC Bar 91900.
Michelle J. Livingston.
Hillary L. Snyder,
Trial Attorneys, United States Department of Justice, Antitrust 
Division, Transportation, Energy and Agriculture Section, 325 7th 
Street, NW.; Suite 500, Washington, DC 20530. Telephone: (202) 307-
6351. Facsimile (202) 307-2784.

Exhibit A--Definition of ``HHI''

    The term ``HHI'' means the Herfindahl-Hirschman Index, a commonly 
accepted measure of market concentration. The HHI is calculated by 
squaring the market share of each firm competing in the market and then 
summing the resulting numbers. For example, for a market consisting of 
four firms with shares of 30, 30, 20, and 20 percent, the HHI is 2,600 
(30\2\ + 30\2\ + 20\2\ + 20\2\ = 2,600). The HHI takes into account the 
relative size and distribution of the firms in a market. It approaches 
zero when a market is occupied by a large number of firms of relatively 
equal size and reaches its maximum of 10,000 when a market is 
controlled by a single firm. The HHI increases both as the number of 
firms in the market decreases and as the disparity in size between 
those firms increases.
    Markets in which the HHI is between 1000 and 1800 are considered to 
be moderately concentrated, and markets in which the HHI is in excess 
of 1800 points are considered to be highly concentrated. Transactions 
that increase the HHI by more than 100 points in highly concentrated 
markets presumptively raise significant antitrust concerns under the 
Department of Justice and Federal Trade Commission 1992 Horizontal 
Merger Guidelines.

[FR Doc. 04-24902 Filed 11-8-04; 8:45 am]
BILLING CODE 4410-11-M