Big Three Seafood Companies Accused Of Price-Fixing

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Wholesaler sues StarKist, Bumble Bee, Chicken of the Sea

By Fili Sagapolutele

PAGO PAGO, American Samoa (The Samoa News, Aug. 6, 2015) – The three largest producers of packaged seafood products (PSPs) in the U.S. and its territories are being sued by a New York wholesaler alleging that the defendants, which are all foreign owned, conspired to fix canned tuna prices in violation of federal law.

The defendants are StarKist Co., whose local operation is StarKist Samoa cannery, owned by South Korean based Dongwon industries; Bumble Bee Food, owned by Thailand based Thai Union LLC; and Tri-Union Seafood, producers of Chicken of the Sea (CoS) tuna product, also owned by Thai Union.

StarKist corporate spokesperson Michelle Faist told Samoa News that the company is aware of the complaint, "but does not comment on active litigation".

Responding to email questions and request for comments, Bumble Bee said in a brief statement that, "because of the legal considerations involved, the company is unable to comment on the matter".

There was no immediate reaction from Tri Union Seafood.

The suit was filed Monday at federal court in San Diego by Olean Wholesale Grocery Cooperative, who alleges that its complaint arises out of a conspiracy by the defendants which began no later than July 24, 2011, and continues to the present (the Class Period) "to fix, raise, maintain, and/or stabilize prices for PSPs within the U.S., its territories and Washington D.C. in violation of Sections 1 and three of the federal Sherman Antitrust Act."

Olean says the term PSPs used in the complaint refers to shelf-stable seafood products — predominantly tuna — that are sold in cans, pouches or ready-to-eat serving packages.

According to a May 2012 presentation by Bumble Bee, total US retail sales of shelf-stable seafood products were $2.346 billion in 2011 and were estimated to be $2.397 billion in 2012, the plaintiffs claimed.

In one report, Bumble Bee estimated that canned tuna represents 73% of this value and Bumble Bee estimated that total US retail sales of shelf-stable tuna were $1.719 billion in 2011 and were estimated to be $1.750 billion in 2012.

"The industry is highly concentrated," Olean said and cited news reports by two U.S. publications which provided the shares of the US canned tuna market.

For example, the Wall Street Journal reported last December that the defendants’ respective shares of the domestic market for canned tuna were 13% for CoS, 25% for Bumble Bee, and 36% for StarKist.

"This oligopolistic structure within the industry is the result of recent mergers and acquisitions," according to the plaintiffs, who then provided the history of how foreign companies have come to own the three largest canned tuna providers in the US and its territories.

For Bumble Bee, the plaintiff says that it was last December that Thai Union Food (TUF) announced its acquisition — subject to regulatory approval — of Bumble Bee from Lion Capital for $1.51 billion. "The combination of CoS and Bumble Bee would have created a virtual duopoly, with the combined entity substantially exceeding the market share of StarKist," Olean said.

TUF had planned to finance the acquisition partly through a preferential public offering to existing shareholders that would have raised approximately $380 million, it says.

However on July 23 this year, TUF suspended the preferential public offering in light of a grand jury investigation commenced by the Antitrust Division of the US Justice Department, it says.

TUF disclosed on that day that both Bumble Bee and CoS had received grand jury subpoenas relating to an antitrust investigation of PSPs, according to the plaintiff, who claimed that it appears that StarKist received a subpoena as well and that the DOJ investigation extends to the entire domestic PSP sector.

"There are economic indications that support the conclusion that there was collusive pricing within the domestic PSP industry," Olean said. "Consumption of PSPs, particularly canned tuna, has declined over the last ten years in the United States. The annual consumption per person was 3.1 lbs. in 2005, but had fallen to 2.3 lbs. in 2013."

"Given this decline in consumption of the signature PSP, one would expect rational businesses to reduce the prices for PSPs, but that did not happen," it says.

And even before the proposed merger of Bumble Bee and CoS, the two companies were cooperating closely, through bilateral co-packing agreements. "These interlocking relationships provided an excellent opportunity to collude on pricing," Olean alleges.

It further alleges that the defendants and their unnamed co-conspirators agreed to, and did in fact, restrain trade or commerce by fixing, raising, maintaining, and/or stabilizing at artificial and non-competitive levels, the prices of such PSPs.

Additionally, the defendants and their co-conspirators engaged in anticompetitive activities, the purpose and effect of which were to artificially fix, raise, maintain and/or stabilize the price of PSPs.

Furthermore, the prices charged by defendants to, and paid by, plaintiff for PSPs were fixed, raised, maintained and/or stabilized at artificially high and non-competitive levels.

The plaintiff is seeking, among other things, treble damages to be determined at trial, cost of the lawsuit, and certifying the suit as a class action — which means to include others affected by the defendants’ alleged action.

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