[Federal Register Volume 70, Number 129 (Thursday, July 7, 2005)]
[Notices]
[Pages 39336-39338]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-13354]


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DEPARTMENT OF JUSTICE

Antitrust Division

[Civil No.: 04-CV-5829]


Public Comment and Response on Proposed Final Judgment United 
States v. Eastern Mushroom Marketing Cooperative, Inc.

    Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 
16(b)-(h), the United States of America hereby publishes below the 
comment received on the proposed Final Judgment in United States v. 
Eastern Mushroom Marketing Cooperative, Inc., Civil Action No.: 04-CV-
5829 (TNO), which was filed in the Untied States District Court for the 
Eastern District of Pennsylvania, together with the United States's 
response to the comment.
    Copies of the comment and response are available for inspection at 
the U.S. Department of Justice, Antitrust Division, 325 7th Street, 
NW., Room 200, Washington, DC 20530, (telephone: (202) 514-2481), and 
at the Office of the Clerk of the United States District Court for the 
Eastern District of Pennsylvania, 601 Market Street, Room 2609, 
Philadelphia, Pennsylvania 19106-1797. Copies of any of these materials 
may be obtained upon request and payment of a copying fee.

Dorothy B. Fountain,
Deputy Director of Operations, Antitrust Division.
1/5/05

Roger W. Fones,
Chief, Transportation, Energy & Agriculture Section, U.S. Department 
of Justice, Antitrust Division, 325 7th Street, NW., Suite 500, 
Washington DC 20530

    Dear Mr. Fones: This letter is in response to the investigation 
of the Eastern Mushroom Marketing Cooperative (EMMC). These grower 
packers have pulled the wool over the eyes of the customers, 
consumers, and the Department of Justice. This group has forced many 
members to be in the EMMC or they would not do business with them. 
In the community each company would sell fresh mushrooms to each 
other to fill daily needs. If you were not a member a great deal of 
pressure was put on these people. From not selling to overcharging 
and even trying to limit the picking containers they could pick in. 
Any one that tried to start to sell fresh mushrooms in the new 
period of the EMMC were shut down in other means within the 
industry. This has not been an ethical business plan.
    As far as the growing houses (Farms) what the U.S. Government 
has come up with is a token. These growing houses have been pillaged 
stripped to no value to any one new that wants to purchase as a 
growing facility. The grower farmers are very smart and only will 
give information to the government that it wants them to know. No 
fault of the government which would have no way of knowing anything 
about the growing facilities.
    First this group purchased the growing farms. Threatened anyone 
that competed for the facilities. The Group would go into the 
marketing area and give out low quotes on fresh mushrooms even when 
they were raising the pricing in the home markets.
    Second when they acquired these growing farms they would go in 
and strip the houses of anything useful to grow mushrooms and just 
leave the walls. This was a guarantee no one would start these back 
up. This is the insurance police on top of the restriction. Growing 
of mushrooms is a specialized process. Not just planting in field. 
Must be air conditioned and very sanitary. Compost facilities with 
specialized equipment. Not something that is easy. This is why 
pulling the restrictions mean absolutely nothing. The damage is done 
when they take all the special equipment out.
    Currently this group is trying to purchase the Money's farms 
that are shutting down but waiting for them to close. The plan is to 
purchase these farms and pillage so they will never be able to grow 
mushrooms again. This is a way to get what they want and insult the 
U.S. Government. Think about it. Many businesses have suffered and 
many consumers have overpaid for mushrooms. They have created a 
false market. If this was not true how can people purchase for 
millions and sit on them if they are not taking an unfair advantage 
of the market place.
    JUST SIT BACK AND ASK THE QUESTION OF HOW AND WHY THESE PEOPLE 
ARE DOING THIS. PURE GREED

Judge: Thomas N. O'Neill, Jr.

Response of the United States to Public Comments on the Proposed Final 
Judgment

    Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 
16(b) (``Tunney Act''), the United States of America hereby files 
comments received from a member of the public concerning the proposed 
Final Judgment in this civil antitrust action and the Response of the 
United States to those comments. The United States continues to believe 
that the proposed Final Judgment will provide an effective and 
appropriate remedy for the antitrust violations alleged in the 
Complaint. The United States will move the Court for entry of the 
proposed Final Judgment after the public comment and Response have been 
published in the Federal Register, pursuant to 15 U.S.C. 16(d).

I. Factual Background

A. The Defendant, the Eastern Mushroom Marketing Cooperative 
(``EMMC'').

    The EMMC was incorporated in the Commonwealth of Pennsylvania on 
December 21, 2000, and began operations in January 2001. At the time 
the Complaint was filed in this case, the EMMC had 15 members with a 
single staff person, an executive director. The EMMC is made up of 
entities that grow, buy, package, and ship Agaricus and specialty 
mushrooms to retail and food service outlets across the United States. 
The EMMC members each grow some of their own product, but they also buy 
mushrooms from each other and from nonmembers. Shortly after it began 
operations, the EMMC adopted minimum prices at which its members could 
sell their mushrooms to customers in various geographic regions 
throughout the United States. The minimum prices, with periodic 
adjustments, were published regularly among members.
    According to the United States Department of Agriculture, 844 
million pounds of mushrooms were produced nationwide during the 2001-
2002 growing season with an approximate value of $908 million. The EMMC 
members' estimated collective share of that national market was 60%, 
with their share estimated to be higher in the East region.

[[Page 39337]]

B. The EMMC's Real Estate Transactions

    Shortly after instituting minimum price increases in all regions, 
the EMMC began acquiring mushroom farms. Between May of 2001 and March 
of 2002, the EMMC acquired one mushroom farm in Hillsboro, Texas, one 
farm in Dublin, Georgia, and three in Pennsylvania. These five farms 
had the capacity to grow fresh mushrooms in competition with EMMC 
members' farms even though none of the farms was in operation at the 
time of its respective purchase. Except for the Texas farm, the EMMC 
sold these properties almost immediately after purchasing them and 
filed deed restrictions at the time of resale which effectively 
prohibited in perpetuity the conduct of any business related to the 
mushroom industry.
    In addition to the aforesaid purchases and resales, the EMMC 
entered into lease option agreements for two more mushroom farms, one 
in Ohio and the other in Pennsylvania, in 2002. The EMMC never actually 
entered into leases for these properties, but the agreements gave it 
the right to file deed restrictions prohibiting the production of 
mushrooms on the properties for ten years, and the EMMC exercised that 
right.
    The combined production capacity of the seven farms that were 
purchased/lease-optioned by the EMMC totaled approximately 42-44 
million pounds of mushrooms annually.
    The United States investigated the likelihood that the several land 
acquisitions and related transactions by the EMMC were entered into 
with the sole intent of removing productive capacity from the market to 
avoid competition from nonmembers in violation of Section 1 of the 
Sherman Act (15 U.S.C. 1) as part of a conspiracy to restrain trade in 
the East mushroom market. Upon the completion of the investigation, the 
United States concluded that the EMMC had violated Section 1 of the 
Sherman Act.
    In or about November 2004, and before the filing of the Complaint 
in this case, the United States and the EMMC reached an agreement 
whereby the EMMC agreed to consent to the proposed Final Judgment filed 
with the Complaint in this case. Pursuant to that Final Judgment, the 
EMMC agreed to file all papers necessary to eliminate all deed 
restrictions previously filed on the properties in which it held an 
ownership or leasehold interest and agreed that, in the future, it 
would neither file nor seek to enforce any similar deed restrictions on 
any other properties in which it held an ownership or leasehold 
interest.

C. Complaint

    On December 16, 2004, the United States filed a Complaint alleging 
that the real estate transactions entered into by the EMMC were 
intended to restrict, forestall and exclude competition from nonmember 
farmers in violation of Section 1 of the Sherman Act. The Complaint 
further alleged that the acreage and facilities available to produce 
mushrooms for American consumers were artificially reduced and 
consumers were deprived of the benefits of competition.

D. The Proposed Settlement

    At the time the United States filed its Complaint, it also filed a 
proposed Final Judgment, a Competitive Impact Statement (``CIS''), and 
a Stipulation signed by counsel for the parties. The proposed Final 
Judgment is designed to eliminate the anticompetitive effects of the 
EMMC's real estate transactions by removing the existing deed 
restrictions on properties in which the EMMC has an ownership or 
leasehold interest and preventing the filing of any similar deed 
restrictions in the future.

E. Compliance with the Tunney Act

    To date, the United States and the EMMC have complied with the 
provisions of the Tunney Act as follows:
    1. The Complaint, proposed Final Judgment, CIS and Stipulation were 
all filed on December 16, 2004.
    2. The EMMC filed the statement required by 15 U.S.C. 16(g) on May 
11, 2005.
    3. A summary of the terms of the proposed Final Judgment and CIS 
was published in the Washington Post, a newspaper of general 
circulation in the District of Columbia, for seven days during the 
period February 5, 2005 through February 11, 2005.
    4. A summary of the terms of the proposed Final Judgment and CIS 
was published in the Philadelphia Inquirer, a newspaper of general 
circulation in the region surrounding Philadelphia, Pennsylvania, for 
seven days during the period February 27, 2005 through March 5, 2005.
    5. The Complaint, CIS, and proposed Final Judgment were published 
in the Federal Register on February 10, 2005, 70 FR 7120 (2005) The 
United States also posted the Complaint, proposed Final Judgment and 
the CIS on its Web site, http://www.usdoj.gov/atr/cases/f206900/206919.
    6. The sixty-day comment period specified in 15 U.S.C. 16(b) 
expired on May 5, 2005.
    7. The United States received one comment from an anonymous member 
of the public which is attached hereto as Appendix A. The United States 
hereby files this Response pursuant to 15 U.S.C. 16(b).
    The United States will move this Court for entry of the proposed 
Final Judgment after the comment and the Response are published in the 
Federal Register.

II. Legal Standard Governing the Court's Public Interest Determination

    Upon the publication of the public comment and this Response, the 
United States will have fully complied with the Tunney Act and will 
move for entry of the proposed Final Judgment as being ``in the public 
interest.'' 15 U.S.C. 16(e), as amended. In making the ``public 
interest'' determination, the Court should apply a deferential standard 
and should withhold its approval only under very limited conditions. 
See, e.g., Mass. Sch. of Law at Andover, Inc. v. United States, 118 
F.3d 776, 783 (D.C. Cir. 1997). Specifically, the Court should review 
the proposed Final Judgment in light of the violations charged in the 
complaint. Id. (quoting United States v. Microsoft Corp. 56 F.3d 1448, 
1462 (D.C. Cir. 1995)).
    It is not proper during a Tunney Act review to ``reach beyond the 
complaint to evaluate claims that the government did not make and to 
inquire as to why they were not made.'' Microsoft 56 F.3d at 1459; see 
also United States v. Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6-
7 (D.D.C. 2003) (rejecting argument that court should consider effects 
in markets other than those raised in the complaint); United States v. 
Pearson PLC 55 F. Supp. 2d 43, 45 (D.D.C. 1999) (noting that a court 
should not ``base its public interest determination on antitrust 
concerns in markets other than those alleged in the government's 
complaint''). Because ``[t]he court's authority to review the decree 
depends entirely on the government's exercising its prosecutorial 
discretion by bringing 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 
the United States might have but did not pursue. Microsoft, 56 F.3d at 
1459-60; see also United States v. W. Elec. Co., 993 F.2d 1572, 1577 
(D.C. Cir. 1993) (noting that a Tunney Act proceeding does not permit 
``de novo determination of facts and issues'' because ``[t]he balancing 
of competing social and political interests affected by a proposed 
antitrust decree must be left, in the first instance, to the discretion 
of

[[Page 39338]]

the Attorney General'' (citations omitted)).
    Moreover, the United States is entitled to ``due respect'' 
concerning its ``prediction as to the effect of proposed remedies, its 
perception of the market structure, and its view of the nature of the 
case.'' Archer-Daniels-Midland Co., 272 F. Supp. 2d at 6 (citing 
Microsoft, 56 F.3d at 1461).

III. Summary of Public Comment

    Although it is unclear whether the author intended it as a comment 
in this proceeding, the United States received one anonymous letter 
related to this case during the relevant 30-day time period. The letter 
made a number of allegations about the conduct of Defendant EMMC and 
various unidentified mushroom grower/packers. These allegations are not 
comments on the proposed Final Judgment and therefore are not relevant 
here. In any event, the United States investigated each of these or 
similar allegations and concluded that they were unsubstantiated or did 
not constitute violations of the Federal antitrust laws.
    The letter also commented on the relief contained in the proposed 
Final Judgment, claiming that the EMMC had sold or removed specialized 
equipment from the farms, and questioned the value of removing the deed 
restrictions the EMMC had placed on the properties.

IV. The Response of the United States to the Comment

    In filing this case, the United States was concerned that the EMMC 
had collectively removed 8 percent of the mushroom production capacity 
in the East region of the United States. This was done primarily by 
placing deed restriction on former farms, restrictions that erected an 
absolute barrier to new entry on these farms. By removing these 
restrictions, the proposed Final Judgment assures that new entry can 
occur wherever economically justified.
    There are a number of factors in addition to the presence of 
specialized equipment that make a farm attractive to potential mushroom 
entrants, including suitable buildings, an available trained labor 
force in the area, and existing zoning approvals. Specialized 
equipment, though potentially valuable, is not unique and can be 
replaced. Accordingly, the United States determined that the crucial 
element of relief was the removal of the deed restrictions. The 
proposed final Judgment accomplishes this.

V. Conclusion

    The Competitive Impact Statement and this Response to Comments 
demonstrate that the proposed Final Judgment serves the public 
interest. Accordingly, after the publication of this Response in the 
Federal Register pursuant to 15 U.S.C. 16(b) and (d), the United States 
will move this Court to enter the Final Judgment.

Respectfully submitted,

C. Alexander Hewes, Tracey D. Chambers, David McDowell,

Trial Attorneys, United States Department of Justice, Antitrust 
Division, Transportation, Energy & Agriculture Section, 325 7th Street, 
NW., Suite 500, Washington, DC 20530, Telephone: (202) 305-8519, 
Facsimile: (202) 616-2441.

Laura Heiser, Anne Spiegelman,

Trial Attorneys, Antitrust Division, Philadelphia Field Office.

[FR Doc. 05-13354 Filed 7-6-05; 8:45 am]
BILLING CODE 4410-11-M