The DOJ Shows Its Sweet Tooth in Bid to Block Sugar Merger

As Americans settle into the holiday season, the Department of Justice has filed suit to protect consumers from potential price increases on a holiday cookie necessity: sugar. The DOJ aims to stop the sale of the Imperial Sugar Company (“Imperial”) from the Louis Dreyfus Company to Imperial’s competitor, the United States Sugar Corporation (“U.S. Sugar”). The refined sugar market, it claims, is already highly concentrated: U.S. Sugar is, itself, part of a “marketing cooperative,” United Sugars Corporation (“United”), with three other refined sugar producers (American Crystal Sugar Company, Minn-Dak Farmers Cooperative, and Wyoming Sugar Company, LLC). The United members do not compete with one another. 

The proposed merger of Imperial with U.S. Sugar would be, the DOJ alleges, particularly detrimental to the Southeast United States, where United and Imperial are two of the three largest suppliers of refined sugar. Together with the third largest—American Sugar Refining (better known as “Domino”)—they control approximately 75% of the market. This merger would, the DOJ alleges, eliminate the aggressive head-to-head competition that currently exists between United and Imperial and further concentrate an already-concentrated market, in violation of Section 7 of the Clayton Act. 

The merger would also, the DOJ claims, increase the incentive and ability for United and Domino to coordinate to raise prices, reduce output, or reduce the quality of sugar. This danger is not merely theoretical. The DOJ alleges, among other things, that soon after the deal was announced, a Domino vice president spoke directly with Imperial’s CEO and reported back to his Domino colleagues that U.S. Sugar’s acquisition of Imperial was “likely [] a good thing for us” and that “it’s going to be more important than ever to stay close to United.”  

In a press release, the DOJ said that U.S. Sugar’s acquisition of Imperial would “substantially lessen[] competition at a time when global supply chain challenges already threaten steady access to important commodities and goods. The department’s lawsuit seeks to preserve the important competition between U.S. Sugar and Imperial Sugar and protect the resiliency of American domestic sugar supply.”

The case is U.S. v. United States Sugar Corp., No. 21-cv-01644 (D. Del.).