The opinion of the court was delivered by: DAWSON
This is an action for a permanent injunction brought by the plaintiff under § 16 of the Clayton Act, 15 U.S.C.A. § 26, in which plaintiff alleges that it is threatened with loss or damage because of the alleged violation by defendant of § 7 of the Clayton Act (15 U.S.C.A. § 18) in that defendant has acquired a substantial block of stock in the plaintiff corporation.
Plaintiff asks the Court to grant an injunction whereby defendant's officers, directors and agents, and all others acting in its behalf, will be: (a) enjoined from voting shares of stock at any meeting of plaintiff's stockholders, (b) enjoined from acquiring representation on plaintiff's board of directors, (c) enjoined from acquiring additional stock of plaintiff company and (d) required to divest themselves of plaintiff's stock in such amounts and under such terms and conditions as the Court may prescribe.
Immediately after filing the complaint, plaintiff moved for a preliminary injunction granting the same relief pendente lite, except for divesture. This motion was denied by Judge Cashin on the ground that the court was not convinced 'of immediacy of harm to the plaintiff.' D.C.S.D.N.Y.1956, 143 F.Supp. 100, 102.
Thereafter pretrial conferences were held pursuant to Rule 16 of the Federal Rules of Civil Procedure, 28 U.S.C.A. and the issues to be tried were formulated as follows:
1. Are the parties in competition with each other in any line of commerce in any section of the country? If so, to what extent and in what section are they in competition?
2. Whether the effect of the acquisition of plaintiff's shares made by the defendant has been such as to substantially lessen competition in any line of commerce in any section of the country. Whether the effect of such acquisition or any acquisition to be made in the future may be substantially to lessen competition in any line of commerce in any section of the country.
3. If the defendant's acquisition of the plaintiff's stock is in violation of the anti-trust laws, is the plaintiff threatened with loss or damage thereby?
4. Whether the defendant in purchasing the stock of the plaintiff purchased it soley for investment.
5. Whether the defendant in purchasing such stock and owning it is not using the same by voting or otherwise to bring about or attempting to bring about a substantial lessening of competition.
A trial having been held and concluded, the Court makes the following findings of fact and conclusions of law on the issues formulated in the pretrial order.
Are the parties in competition with each other in any line of commerce in any section of the country? If so, to what extent and it what section are they in competition?
1. American Crystal Sugar Co. (hereinafter referred to as 'Crystal') is a corporation organized and existing under the laws of the State of New Jersey, with its principal office in Denver, Colorado. Plaintiff's principal business is the manufacture of sugar from sugar beets and the sale of such sugar. Plaintiff owns and operates ten factories: four in Minnesota, two in California and one each in Montana, Colorado, Nebraska and Iowa. The beets processed in such factories are purchased from growers in surrounding areas under contracts giving the grower a percentage of the selling price of the sugar produced; the sales of such sugar are made in interstate commerce and principally in the midwestern and southeastern parts of the United States.
2. The Cuban-American Sugar Co. (hereinafter referred to as 'Cuban-American') is a corporation organized and existing under the laws of the State of New Jersey, maintaining its principal office in New York, N.Y. It transacts business and is found within the Southern District of New York.
3. The defendant is a holding company and does not directly engage in the manufacture, sale or distribution of sugar. Defendant's wholly owned subsidiary, Colonial Sugars Company (hereinafter referred to as 'Colonial') is a New Jersey corporation owning and operating a cane sugar refinery at Gramercy, Louisiana, which imports raw cane sugar from Cuba or obtains it from Puerto Rice, Hawaii, the Philippine Islands and the State of Louisiana; and which markets the refined sugar in interstate commerce in the midwestern and southeastern parts of the United States.
4. Both plaintiff and defendant's wholly owned subsidiary, Colonial, are engaged in interstate commerce. In addition, both Crystal and Cuban-American are listed on the New York Stock Exchange.
5. The parties stipulated in the pretrial order that: 'Plaintiff and defendant's wholly owned subsidiary, Colonial Sugars Company, are to some extent in competition in a line of commerce in certain parts of the country.'
6. The line of commerce in which both plaintiff and Colonial are in competition is the sale of refined sugar.
7. Plaintiff and Colonial market substantial quantities of sugar in a ten state area in the neighborhood of the Mississippi River, sometimes referred to as the 'River Territory.' These states are Arkansas, Illinois, Indiana, Iowa, Kansas, Minnesota, Missouri, Nebraska, Oklahoma and Wisconsin.
8. The average amount of sugar by hundredweight, and the average dollar value of sugar sold by Crystal and Colonial in the ten state area, during the years 1951 through 1956, and in the year 1956, and the percentage by physical volume of each to the total quantity of sugar sold in the area for the same period are approximately as follows:
Plaintiff $24,000,000 2,607,000 cwt. 7.3%
Colonial 19,000,000 2,059,000 cwt. 5.9%
Total $43,000,000 4,666,000 cwt. 13.2%
Plaintiff $31,000,000 3,383,000 cwt. 8.8%
Colonial 18,000,000 1,939,000 cwt. 5.0%
Total $49,000,000 5,322,000 cwt. 13.8%
9. Crystal and Colonial in the aggregate sell more sugar than any other marketer in the River Territory except Great Western Sugar Company, a beet processor.
10. In the year 1956 Crystal and Colonial sold in the States of Illinois, Iowa and Wisconsin approximately $ 26,900.000 of sugar, which constituted 13.1% of the total quantity of sugar sold in those three states in that area. Over the last six years the sales of these two companies in those three states aggregated approximately $ 22,700,000, which constituted about 13% of the sugar sold in those three states for that period.
11. The sales of sugar sold by Crystal and Colonial in the State of Iowa during the year 1956 aggregated approximately $ 4,500,000, being about 22% of the total sales of sugar sold in Iowa in that year; and in the preceding five years the aggregate sales of these two companies in the State of Iowa were approximately $ 4,900,000, constituting about 25% of the total sales of sugar sold in Iowa in that period.
12. Sales by Crystal and Colonial to customers in the ten state area who at any time during the period 1951 to 1955, inclusive, bought from both companies, were in the dollar amounts shown below, and such sales represented the indicated percentages of the total volume of sales of each of the two companies in the ten state area. Corresponding percentages in the States of Illinois, Iowa and Wisconsin are as follows:
10-state area Ill. Iowa Wis.
Dollar volume %
Crystal $ 34,830,658 30 53% 45% 33%
Colonial $ 34,844,264 37 45% 70% 29%
13. Crystal made no sales in Arkansas until 1954, and no sales in Indiana, except a nominal amount, until 1953. Since starting to sell in those two states Crystal has been increasing its sales so that in 1955 and 1956 Crystal's sales were:
Arkansas $290,513 $379,146
Indiana $392,606 $264,288
14. Colonial has been seeking to increase its customers in the ten state area over and above the present level of sales; and the testimony of C. W. Briggs, Vice President and General Sales Manager of Crystal, is that Crystal and Colonial are very competitive in the States of Iowa, Wisconsin and Illinois.
15. During the past five years Crystal has increased its percentage share of the beet sugar sold in the River Territory from 13.8% to 20.4%; and plaintiff plans to increase its production of sugar in Nebraska, Colorado and Minnesota.
16. The list price of beet sugar is normally 20 cents per cwt. less than that of cane sugar, but a change in the price of one produces a prompt and corresponding change in the list price of the other. Except in rare instances industrial users buy beet and cane sugar on the basis of price.
17. As a general rule it is the beet sugar processors who are responsible for price reductions and the cane sugar refiners follow those price reductions. Sugar prices are lowest in that portion of the United States where the largest quantities of beet sugar are sold; over the years the price of cane sugar in the ten state area has been lower than in any other parts of the country, due to the large quantity of beet sugar sold in the area.
18. The parties are in competition with each other in the sale of sugar in the ten state area hereinabove defined, and they constitute major competitive factors in the sale of sugar in that area.
Whether the effect of the acquisition of plaintiff's shares made by the defendant has been such as to substantially lessen competition in any line of commerce in any section of the country. Whether the effect of such acquisition or any acquisition to be made in the future may be substantially to lessen competition in any line of commerce in any section of the country.
1. Plaintiff is a publicly held corporation with 364,017 shares of common stock and 58,969 shares of preferred stock issued and outstanding. Both classes of stock have equal voting rights and ...