The U.S. Department of Justice lost its appeal of U.S. Sugar’s $315 million purchase of rival Imperial Sugar, signaling potential future hurdles for the government in halting major food company acquisitions.
The 3rd U.S. Circuit Court of Appeals in Philadelphia upheld a September 2022 ruling from a Delaware Federal district court allowing the merger. Circuit Judge David Porter, writing for a three-judge panel, said the government failed to provide evidence about which markets would be impacted by the purchase.
In response to the DOJ’s claim that the purchase would lessen competition in the southeastern U.S., Porter said the department “defined the relevant geographic market without regard for the high mobility of sugar throughout the country.”
U.S. Sugar agreed to purchase Texas-based Imperial from Louis Dreyfus Company, its owner since 2012, in March 2021. The acquisition closed in November 2022.
In November 2021, the DOJ announced it was suing to block U.S. Sugar’s purchase. The government claimed it would consolidate an “already cozy sugar industry” and leave the vast majority of refined sugar sales in the Southeast region in the hands of just two producers — U.S. Sugar and American Sugar Refining, which sells the sweetener under the Domino brand.
Jonathan Kanter, the assistant attorney general for the DOJ’s antitrust division said in a 2021 statement that the deal would raise prices and significantly weaken competition during a time of upheaval in the supply chain.
The court’s unwillingness to undo the merger could indicate a difficult path for regulators in opposing future commodity company acquisitions.
The DOJ has clamped down on companies in the food industry since President Joe Biden took office in 2021, particularly in the meat sector, amid concerns they have too much pricing power. Last year, the department failed to prosecute five executives from Pilgrim’s Pride and Claxton Poultry, which it accused of conspiring to fix the price of chicken products.
Broadly, the DOJ’s efforts under Kanter have sought to block mergers and acquisitions that it views as having potential monopoly power. The assistant attorney general told Reuters in 2022 that if a deal is likely to lessen competition, “in most situations, we should seek a simple injunction to block the transaction.”