United States v. Topa Equities (V.I.), Ltd.; Public Comments and Response on Proposed Final Judgment

DEPARTMENT OF JUSTICE

Antitrust Division

United States v. Topa Equities (V.I.), Ltd.; Public Comments and

Response on Proposed Final Judgment

Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C.

16(b)-(h), the United States publishes below the comments received on

the proposed Final Judgment in United States v. Topa Equities (V.I.),

Ltd, Civil Action No. 1994-179, United States District Court for the

District of the Virgin Islands St. Thomas/St. John Division, together

with the response of the United States to the comments.

Copies of the response and the public comments are available on

request for inspection and copying in room 3233 of the Antitrust

Division, U.S. Department of Justice, Tenth Street and Pennsylvania

Avenue, NW, Washington, DC 20530, and for inspection at the Office of

the Clerk of the United States District Court for the District of the

Virgin Islands, United States Courthouse, Federal Building and U.S.

Courthouse, 5500 Veterans Drive, St. Thomas, United States Virgin

Islands 00802.

Rebecca P. Dick,

Acting Deputy Director of Operations, Antitrust Division.

United States' Response to Public Comments

[Civil No: 1994-179]

Introduction

Pursuant to section 2(d) of the Antitrust Procedures and Penalties

Act (``APPA''), 15 U.S.C. 16(d), the United States responds to public

comments on the proposed Final Judgment submitted for entry in this

civil antitrust proceeding. [[Page 28169]]

This action began on December 7, 1994, when the United States filed

a Complaint alleging that Topa Equities (V.I.), Ltd. (hereinafter

``Topa'') had violated section 3 of the Sherman Act (15 U.S.C. 3). The

Complaint alleges that through a series of exclusive distribution

agreements with all major suppliers of distilled spirits, Topa holds a

monopoly on the wholesale distribution in the Virgin Islands of almost

every major brand of distilled spirits. The Complaint further alleges

that these exclusive distribution rights, taken together, are contracts

in restraint of trade within the meaning of the Sherman Act.

Simultaneously with the filing of the Complaint, the United States

filed a proposed Final Judgment, a Competitive Impact Statement

(``CIS''), and a Stipulation signed by Topa for entry of the proposal

Final Judgment. The proposed Final Judgment resolves the antitrust

violation alleged in the Complaint by enjoining Topa from taking any

action to prevent its suppliers of distilled spirits from canceling

their distribution arrangements with Topa and appointing new

wholesalers instead. The proposed Final Judgment also imposes a number

of restrictions on Topa's business practices in order to prevent Topa

from unreasonably interfering with the operations of a competitor.

A summary of the terms of the proposed Final Judgment and CIS and

directions for the submission of written comments relating to the

proposal were published in The Washington Post for seven consecutive

days beginning December 25, 1994, and in The Virgin Islands Daily News

on December 21-24 and December 27-29, 1994. The proposed Final Judgment

and CIS were published in the Federal Register on December 30, 1994. 59

FR 67728 (1994).

The 60-day period for public comments commenced on December 30,

1994, and expired on March 2, 1995. The United States received two

comments on the proposed Final Judgment, from St. Thomas Food Products

Corp. (``St. Thomas Foods'') and IPV, Inc. trading as A.H. Riise Liquor

Stores (``A.H. Riise''). Those comments are being filed with the Court

along with this response. Upon careful consideration of these comments,

as fully explained below, the United States urges that the proposed

Final Judgment be entered as originally submitted to the Court.

I. Legal Standards Governing the Court's Public Interest

Determination

The procedural requirements of the APPA are intended to eliminate

secrecy from the consent decree process, to ensure that the Justice

Department has access to public comments bearing on the consent decree,

and to create a public record of the reasoning behind the government's

consent to the decree. Hearings on H.R. 9203, H.R. 9947, and S. 782,

Consent Decree Bills Before the Subcomm. on Monopolies and Commercial

Law of the House Judiciary Committee, 93rd Cong. 1st. Sess. 39-40

(1973) (Statement of Senator Tunney). See also United States v.

American Tel. and Tel. Co., 552 F. Supp. 131, 148 (D.D.C. 1982), aff'd

sub nom. Maryland v. United States, 460 U.S. 1001 (1983).

The APPA requires the Court to determine whether the entry of the

decree is ``in the public interest.'' 15 U.S.C. 16(e). The Court's role

is not to make a de novo determination of facts and issues, but ``to

determine whether the Department of Justice's explanations were

reasonable under the circumstances,'' for ``[t]he balancing of

competing social and political interests affected by a proposed

antitrust consent decree must be left, in the first instance, to the

discretion of the Attorney General.'' United States v. Western Electric

Co., 993 F.2d 1572, 1577 (D.C.Cir.), cert. denied, 114 S.Ct. 487

(1993), quoting United States v. Bechtel Corp., 648 F.2d 660, 666 (9th

Cir.), cert. denied, 544 U.S. 1083 (1981). Thus, the ``court is

required to determine not whether a particular decree is the one that

will best serve society, but whether the settlement is `within the

reaches of the public interest.' '' Bechtel Corp., 648 F.2d at 666.

Congress did not intend to require the courts to follow elaborate

procedures in making the public interest determination under the APPA.

To the contrary, Congress was concerned that unduly protracted

proceedings might interfere with the consent decree process. Thus,

``the court is adjured to adopt `the least complicated and least time-

consuming means possible.' '' United States v. Gillette Co., 406

F.Supp. 713, 715 (D.Mass. 1975), (quoting S. Rep. No. 93-298, 93d

Cong., 1st Sess. 6 (1973); H. Rep. No. 93-1463, 93d Cong., 2d Sess. 8

(1974)).

The Court's public interest inquiry must be conducted in light of

the ``violations set forth in the complaint.'' 15 U.S.C. 16(e)(2). The

enforcement agency's decision about what charges to bring in its

complaint is a matter generally ``committed to the agency's absolute

discretion.'' Heckler v. Chaney, 470 U.S. 821, 831 (1985).

II. Public Comments

A. Comment of St. Thomas Foods

St. Thomas Foods, a Virgin Island wholesaler of beer, wine,

distilled spirits, and other products, commented that the proposed

Final Judgment should be rejected because it does not address the wine

and beer markets, in which St. Thomas Foods alleges that Topa also has

a monopoly, and because it does not require Topa to abandon all rights

to distribute certain brands of distilled spirits. The proposed Final

Judgment should not be amended in response to this comment.

The Complaint alleges that Topa maintained, through an

anticompetitive series of contracts, a monopoly in the wholesale

distribution of distilled spirits in the Virgin Islands, but it does

not allege maintenance of a monopoly in the wholesale distribution of

beer or wine. The United States fully reviewed all of Topa's

distribution businesses and determined to challenge only conduct

relating to its distribution of distilled spirits. The determination of

what conduct to challenge and the scope of any complaint is a matter

solely within the discretion of the United States. Thus St. Thomas

Foods' initial comment falls outside the scope of Tunney Act review.

St. Thomas also questions the relief the United States has

negotiated with Topa relating to the wholesale market for distilled

spirits. This is a matter properly before this Court under the Tunney

Act. As noted in the CIS filed with the Complaint and proposed Final

Judgment, the United States considered whether to pursue litigation in

order to win structural relief terminating some of Topa's exclusive

distribution arrangements with suppliers of distilled spirits. The

United States concluded that this alternative would place an

unacceptably large burden on some suppliers, which are among the

victims of Topa's conduct. The competitive problem in this case arises

from the fact that Topa has had exclusive distribution agreements with

all major suppliers of distilled spirits. If some suppliers shift to

other distributors, exclusive contracts between Topa and remaining

suppliers would not be anticompetitive; competition among brands would

mitigate the lack of intra-brand competition in brands sold exclusively

through a single wholesaler. The Untied States did not have a basis for

determining which suppliers should be shifted to other distributors,

nor for urging a court to single out certain suppliers for such

treatment. Thus the United States concluded that the better course

would be to permit each supplier to determine, for itself, whether to

[[Page 28170]] continue to deal through Topa exclusively. The relief

imposed by the proposed Final Judgment presents an effective means to

invigorate competition in the wholesale distribution of distilled

spirits in the Virgin Islands without establishing unnecessary

regulatory constraints that would interfere with free market forces.

B. Comment of A.H. Riise

A.H. Riise owns four retail liquor stores in the Virgin Islands and

probably is the largest retailer of distilled spirits in the territory.

The defendant, Topa, is A.H. Riise's principal source for distilled

spirits. A.H. Riise objected that the proposed remedies do not bar Topa

from interfering with suppliers that want to sell directly to

retailers. Thus, A.H. Riise urges adoption of a provision prohibiting

Topa from communicating with any supplier for the purpose, or with the

effect, of urging, compelling, or coercing the supplier to refrain from

bypassing the wholesale level of distribution altogether and selling

directly to a retailer. This suggested provision would allow suppliers

to violate their exclusive distribution arrangements with Topa in order

to sell directly to retailers. In addition, A.H. Riise suggests that

price regulation be imposed, forcing Topa to offer lower prices to A.H.

Riise and thus enabling A.H. Riise to compete more effectively in the

tourist duty-free market. Finally, A.H. Riise wants to extend the term

of the Final Judgment form five years to ten.

A.H. Riise may be the only retailer large enough to attract direct

sales from even a small supplier. Conceivably, a supplier might want to

deal directly with A.H. Riise while distributing through a wholesaler

to other retailers. Nothing in the proposed Final Judgment impedes this

type of arrangement, and the provisions A.H. Riise proposes are not

needed to achieve the full relief in this action of enabling distillers

to break free of their exclusive agreements with Topa.

There is no reason to provide for special relief for the duty-free

market. The interbrand competition that will result from the relief in

this case will benefit the duty-free market as well as the retail

market for Virgin Islands consumers.

A.H. Riise has also urged that the term of the proposed Final

Judgment be changed to ten years. The five-year duration of the

proposed Final Judgment is adequate to accomplish its objective. The

time needed for a supplier of distilled spirits to switch wholesalers

is limited, probably no more than thirty to sixty days. All that is

necessary to accomplish the switch is the transfer of existing

inventory from one warehouse to another. In wholesaling as opposed to

manufacturing, start-up times are short. In wholesaling, there is no

need to build a factory, assemble complicated machinery, or arrange for

supplies of raw materials; basically, all that is needed is a warehouse

and a truck. Thus, even a new-entrant wholesaler could have its

business up and running quickly. Sufficient capital to finance

inventory is necessary, of course. But the necessary level of capital,

while not trivial, is far from prohibitive. Also, the proposed Final

Judgment provides that Topa must furnish a copy of the Judgment to each

supplier, so its term will be well-known in the industry within days of

its entry by the Court. For these reasons, the term of the proposed

Final Judgment need be no longer than five years.

The United States also notes statements, cited by A.H. Riise and

attributed to the defendant and its counsel in this action, stating

that the decree is ineffective. This talk is more wishful than

accurate: The decree is carefully designed to ensure full and effective

relief. Moreover, the United States assures the Court, the people of

the Virgin Islands, and the defendant that we will vigorously enforce

this decree and monitor its success. Should competitive problems in the

distribution of alcoholic beverages in the Virgin Islands recur, the

United States stands ready to address them.

The proposed Final Judgment will make it attractive for certain

suppliers to find new wholesalers that will more vigorously promote

their products in the Virgin Islands, thereby correcting the

competitive harms resulting from Topa's past conduct and increasing

competition in the local wholesale distilled spirits market. Therefore,

the proposed Final Judgment should be entered as proposed by the

parties.

Conclusion

For the reasons set forth above, entry of the decree as submitted

by the parties to the Court is in the public interest. St. Thomas

Foods' comment, A.H. Riise's comment, and this response will be

published in the Federal Register.

Dated: May 5, 1995.

Respectfully submitted,

Anne K. Bingaman,

Assistant Attorney General.

John T. Orr,

Justin M. Nicholson,

James L. Weis,

Attorneys, Antitrust Division, Department of Justice, Richard B.

Russell Building, Suite 1176, 75 Spring Street, SW., Atlanta, GA 30303,

(404) 331-7100.

Certificate of Service

I hereby certify that I have caused a copy of the foregoing UNITED

STATES' RESPONSE TO PUBLIC COMMENTS to be served upon Ernest Gellhorn,

2907 Normanstone Lane NW., Suite 100, Washington, DC 20008-2725, by

first class mail, postage prepaid.

Dated: May 5, 1995.

Justin M. Nicholson,

Antitrust Division, U.S. Department of Justice, Richard B. Russell

Building, Suite 1176, 75 Spring Street, SW., Atlanta, GA 30303, (404)

331-7100.

January 19, 1995

Mr. John T. Orr,

Chief, Atlanta Field Office,

Antitrust Division, Dept. of Justice,

Richard B. Russell Federal Building,

75 Spring Street, SW.,--Suite 1176,

Atlanta, Georgia 30303.

Re: U.S. v. Topa Equities (V.I.), Civil No. 1994-179

Dear Mr. Orr: I have read with great interest the Complaint,

Stipulation and proposed Final Judgment in the above referenced

case, which was provided to me by Mr. James L. Weis of your office.

This letter is being written to give you my comments on the proposed

Final Judgment.

To say the least I am simply amazed at the conclusion of this

case. Justice has accomplished absolutely nothing after many years

of investigation and I am sure the expenditure of several hundreds

of thousands of dollars.

The Topa Equities (V.I.), Ltd., monopoly remains intact. There

is no provision in the proposed Final Judgment for any kind of

divestiture of liquor brands where Topa has an exclusive agency

arrangement. Therefore Topa remains is full control of 90% plus of

all the liquor imported and sold in the Virgin Islands. This leaves

Topa with the same monopoly position they enjoyed prior to the

extensive investigation of the Dept. of Justice. The fact that the

Final Judgment precludes Topa from interfering with a supplier

moving liquor brands from Topa to another agent is simply a joke.

Topa being fully aware of their mononuclear position in the liquor

market never would have sued or interfered with a supplier moving

brands because they are fearful of their monopolistic practices

becoming public in open court.

Another observation I have on the proposed Final Judgment is

that it does not address the Wine and Beer business in the Virgin

Islands. I am sure that your investigation revealed that Topa also

controls and monopolizes the Wine and Beer [[Page 28171]] importing/

distributing business in the Virgin Islands. Topa has the exclusive

agency rights for all the major brands of United States beers,

Anheuser Busch, Coors and Miller Brewing. Topa also represents many

of the major brands of imported beers, Becks, Corona, Carlsberg,

Caribe, Guiness, Tennants, and Red Stripe. This then gives Topa 85%

market share of all beers of U.S. manufacturer and 70% market share

of all imported beers. Yet your Final Judgment makes no mention of

the beer business in the Virgin Islands.

The same is true of the Wine importing/distribution business in

the Virgin Islands. Topa owned companies have control of over 80% of

this business and again the Final Judgment makes no provisions to

address this monopoly.

In my opinion the proposed Final Judgment should not be accepted

by the District Court of the Virgin Islands. The Judgment should be

sent back to the Dept. of Justice and the investigation reopened to

address the oversights that I have made above. Topa should be forced

to divest itself of brands it controls to once and for all end the

monopoly it has enjoyed for all these years. These brands should not

only be liquor agencies but should include beer as well as wine.

Further Topa should be assessed money damages to at least cover the

costs of the investigation and whatever fines the Court deems

appropriate.

All in all I am very dissatisfied with the results of your

investigation and the proposed Final Judgment. I feel that your

investigation was a waste of your time, my time and great deal of

tax payer money.

Sincerely.

St. THOMAS FOOD PRODUCT CORP.

Bruce Kimelman.

President

BK/lf

cc. District Court of the Virgin Islands, Division of St. Thomas-St.

John

February 24, 1995

John T. Orr, Chief, Atlanta Field Office, Antitrust Division, U.S.

Department of Justice, Richard B. Russell Federal Building, Suite

1176, 75 Spring Street, Atlanta, GA 30303

Re: United States of America v. Topa Equities (V.I.), Ltd., D.V.I.

Civil No. 1994-179

Dear Chief Orr: In response to the Notice published in the

Federal Register on December 30, 1994 (59 FR 67728), I am submitting

herewith, on behalf of my client IPV, Inc. trading as A.H. Riise

Liquor Stores, the enclosed ``Comments of A.H. Riise Liquor Stores

on Proposed Final Judgment'' in the above case.

Very truly yours,

Samuel H. Seymour.

SHS/ced

Enclosures

cc: Justin M. Nicholson, Esq., James L. Weis, Esq.

Comments of A.H. Riise Liquor Stores on Proposed Final Judgment

Moore & Bruce

Samuel H. Seymour, Jonathon R. Moore, 1627 Eye Street, NW., Suite 880,

Washington, DC 20006, Tel: (202) 775-5980, Counsel for IPV, Inc.,

trading as A.H. RIISE LIQUOR SHOPS

Table of Contents

I. The defendant's own comments demonstrate that the proposed final

judgment is not in the public interest.

II. A.H. Riise is an interested party.

III. The court has the authority to reject the proposed final

judgment if competition will not be restored.

IV. The proposed final judgment is not in the public interest.

A. The Proposed Final Judgment Is Premised on a Complaint that

Overlooks Material Factors in the Relevant Markets.

1. The proposed Final Judgment Defines Away the Most Immediate

Prospect for Restoring Competition.

2. The Complaint, Proposed Final Judgment and CIS Overlook the

Significance of the Tourist Submarket to the Public Interest.

3. It Is Contrary to the Public Interest to Permit Defendant's

Monopolistic Pricing to Continue.

B. The Remedies in the Proposed Final Judgment Do Not Adequately

Address the Competitive Harm Identified.

V. At a minimum, any final judgment should expressly recognize and

protect retailers' rights to deal directly with suppliers, without

interference from defendant.

VI. The five year duration for the proposed final judgment is

patently inadequate.

Conclusion.

Exhibits

TOPA Press Release.

``Red-lined'' Proposed Final Judgment Showing Recommended Revisions

to be in the Public Interest.

Comments of A.H. Riise Liquor Stores on Proposed Final Judgment

IPV, Inc., trading as A.H. Riise Liquor Stores, P.O. Box 6280, St.

Thomas, U.S. Virgin Islands 00804-6280 (``A.H. Riise''), through its

attorneys, hereby responds to the Federal Register notice soliciting

public comments on the Proposed Final Judgment and Competitive Impact

Statement (``CIS'') in the above-captioned case, 59 FR 67728 (Dec. 30,

1994). A.H. Riise respectfully submits that adoption of the Final

Judgment in the form proposed is not in the public interest, because

the remedies proposed provide no tangible or immediate prospect for

achieving the goals set forth in the CIS: The restoration of

competition in the wholesale market for distilled spirits in the Virgin

Islands.

I. The Defendant's Own Comments Demonstrate That the Proposed Final

Judgment Is Not in the Public Interest

As a threshold matter, before we describe A.H. Riise or analyze the

Proposed Final Judgment, it is incumbent upon us to bring to the

attention of the Court and the Department the contemptuous manner in

which the Defendant holds the Proposed Final Judgment. A Press Release

issued by Defendant Topa upon the announcement of the settlement with

the Department states:

According to Ernest Gellhorn, an antitrust lawyer from

Washington, D.C. retained by Topa, ``the proposed remedy is all bark

and no bite.'' Pointing to the decree's ``meaningless provisions

that would modify contract terms written by suppliers or would make

supposed scarce warehouse space available to new entrants,''

Gellhorn called ``this probably the weakest consent decree ever

negotiated by the Department of Justice.'' (Emphasis added.)

A copy of Defendant's Press release is attached hereto as Exhibit 1.

Significantly, the Defendant distributed this Press Release to its

suppliers two days before the Department filed the Complaint and the

Proposed Final Judgment with the Court. The message is clear: Nothing

will change.

The Court--and the Department--should scrutinize the motives and

substance behind Defendant's Press Release. It is a red flare. It sends

a vivid warning: something is seriously wrong with the Proposed Final

Judgment. The Press Release belies any assertion in the CIS that the

Proposed Final Judgment is in the public interest.

Under the circumstances, the only proper course is for the

Department to withdraw its consent to the Proposed Final Judgment.

Should it fail to do so, the Court should not rubber stamp the apparent

oversights or miscalculations that have brought this case to the brink

of approval, lest it, too, be the subject of Defendant's derision.

II. A.H. Riise is an Interested Party

A.H. Riise owns and operates four retail stores for distilled

spirits \1\ in St. Thomas, Virgin Islands. It is among the class of

retailers of distilled spirits in the Virgin Islands which has ``been

deprived of the benefits of free and open competition'' by Defendant's

actions. Complaint, para. 19(c). A.H. Riise is a family-owned business,

whose current owners are the third and fourth generations of the family

to be involved [[Page 28172]] in the ownership and management of retail

liquor businesses in the Virgin Islands.

\1\ Unless otherwise noted, the defined terms from Section III

of the Complaint are utilized in these comments.

---------------------------------------------------------------------------

Defendant Topa is A.H. Riise's major source of supply of distilled

spirits. Based upon the description of Defendant's business in

Paragraph 3 of the Complaint, A.H. Riise purchases represent at least

20% of Defendant's sales in the Virgin Islands. As such, A.H. Riise is

a significant participant in the market which is the subject of the

Complaint in this action.

A.H. Riise is also a major factor in the tourist market for

distilled spirits in the Virgin Islands. Although conspicuously omitted

from the Complaint, the Proposed Final Judgment and the CIS, the

tourist submarket for duty-free distilled spirits in the Virgin Islands

may represent as much as 60% of the relevant market. On information and

belief, A.H. Riise's sales constitute more than half of the sales of

distilled spirits to this submarket. A.H. Riise is among the class of

retailers most adversely effected by Defendant's monopolistic pricing

practices and anti-competitive efforts to dissuade suppliers from

selling directly to retailers.

III. The Court Has the Authority To Reject the Proposed Final

Judgment if Competition Will Not Be Restored

The Antitrust Procedures and Penalties Act (the ``Tunney Act'')

provides in pertinent part that ``before entering any consent judgment

proposed by the United States * * *, the court shall determine that

entry of such judgment is in the public interest.'' 15 U.S.C. 16(e).

The power of the courts in connection with determining the public

interest and the legal standard of review to be applied is

comprehensively set forth in United States v. American Tel. & Tel. Co.,

552 F. Supp. 131, 147-153 (D.D.C. 1982), aff'd sub nom Maryland v.

United States, 460 U.S. 1001 (1983).

In reviewing the purposes of the Tunney Act, the AT&T Court

referred to the legislative history, which asserted that previously

``consent decrees often fail(ed) to provide appropriate relief, either

because of miscalculations by the Justice Department or because of the

`great influence and economic power' wielded by antitrust violators.''

Id at 148. In support, the Court cited Senator Tunney: ``Regardless of

the ability and negotiating skill of the Government's attorneys, they

are neither omniscient nor infallible.'' Id at 148, note 70, citing 119

Cong. Rec. 3452 (1973). In response, the public comment procedure was

added to the antitrust laws, along with judicial review based on the

public interest standard. The express purpose of such review is to

``eliminate judicial rubber-stamping'' of proposed consent orders

submitted to courts by the Department. Id at 149.

Senator Tunney's comments are particularly appropriate in this

case. As discussed below, it is apparent that the Complaint, the

Proposed Final Judgment and the CIS overlook highly relevant and

significant facts relating to the Defendant's anti-competitive

practices. The legislative history makes it clear that the Court here,

as the Court did in the recent decision in the United States v.

Microsoft Corporation, C.A. No. 94-1564 (Memorandum Order dated Feb.

14, 1995), can and should look beyond the four corners of the complaint

in determining whether the public interest is being served by the

Proposed Final Judgment.

In examining the legal standard to be applied in determining the

public interest, the AT&T Court stated that antitrust ``decisions

granting relief after a finding of liability form the most relevant

yardstick for determining whether the proposed consent decree will

further antitrust policies.'' After noting that the purpose of

antitrust remedies is to restore competition and end monopoly power,

the Court stated that proposed decrees ``must leave the Defendant

without the ability to resume the action which constituted the

antitrust violation in the first place. For these reasons, the decree

should not be limited to past violations; it must also effectively

foreclose the possibility that antitrust violations will occur or

reoccur.'' Id at 150. As discussed below, the Proposed Final Judgment

is particularly deficient in addressing restoration of competition in

the future. When evaluated under the standards articulated by the AT&T

Court, the Proposed Final Judgment will be found to be inconsistent

with the public interest.

The AT&T Court premised its analysis upon the fundamental purpose

of the Tunney Act to ``fully promote the goals of the antitrust laws

and further public confidence in their fair enforcement.'' The Court

noted that the consent order procedure prior to the enactment of the

Tunney Act was essentially secret, and thereby ``undermin(ed)

confidence in the legal system.'' It is submitted that the Defendant's

arrogant and disparaging characterizations of the Proposed Final

Judgment should be the catalyst that brings these fundamental concerns

into sharp focus in the Court's determination of the public interest.

IV. The Proposed Final Judgment Is Not in the Public Interest

A. The Proposed Final Judgment Is Premised on a Complaint That

Overlooks Material Factors in the Relevant Markets

Both the Complaint and the Proposed Final Judgment are based on an

incorrect view of the market for distilled spirits in the Virgin

Islands. The Department apparently has misunderstood or overlooked

important facts concerning the channels of distribution in the Virgin

Islands market, the important of the submarket for distilled spirits

sold to tourists, and, most importantly, the Defendant's monopolistic

pricing practices. Accordingly, the Complaint and Proposed Final

Judgment overlook the only way in which existing market forces can be

used to restore competition: By permitting suppliers and retailers to

deal directly with each other without interference from the Defendant.

1. The Proposed Final Judgment Defines Away the Most Immediate Prospect

for Restoring Competition

Deficiencies in the Proposed Final Judgment's analysis are first

evident in the definitional provisions in the Complaint and the

Proposed Final Judgment. The term ``retailer'' is defined in Paragraph

7 of the Complaint and Paragraph IID of the Proposed Final Judgment to

mean ``any person engaged in the business of purchasing distilled

spirits from wholesalers as defined herein, and reselling them to

consumers in establishments located in the Virgin Islands * * *

(Emphasis added.) Significantly, however, some retailers, including

A.H. Riise, purchase directly from suppliers, and would do so to a

greater extent if it were not for the Defendant's active interference.

Yet the possibility that retailers can purchase from suppliers is not

even recognized by this definition. Accordingly, the one present and

tangible means by which Defendant's monopoly power can be reduced under

existing competitive conditions is obviated definitionally.

The definition of ``supplier'' in Paragraph 8 of the Complaint and

Paragraph IIE of the Proposed Final Judgment is similarly deficient.

This definition provides that supplier means ``any licensed

manufacturer, distiller, or importer of distilled spirits from which

Defendant or any other licensed wholesaler, as defined herein,

purchases or has purchased distilled spirits.'' (Emphasis added.)

Again, the Complaint and the Proposed Final Judgment do not even

recognize that suppliers do sell [[Page 28173]] directly to retailers

and would do so to a greater extent if Defendant's interference were

eliminated. Although Virgin Islands law does not permit vertical

integration of retailers and wholesalers, Complaint para. 10 and para.

CIS II, there is no prohibition against retailers dealing directly with

suppliers.

In fact, Defendant's monopoly power has enabled it to prevent most

retailers from obtaining distilled spirits directly from suppliers.

This interference occurs particularly where Defendant has exclusive

arrangements with suppliers, and even where it does not. The Proposed

Final Judgment, as drafted, could be understood by the Defendant to

sanction its activities in this regard, which could well intensify as a

result. Failure to recognize that retailers can purchase directly from

suppliers, and that such arrangements require protection from

Defendant's monopoly power, are glaring deficiencies in the Complaint.

2. The Complaint, Proposed Final Judgment and CIS Overlook the

Significance of the Tourist Submarket to the Public Interest

The Complaint, the Proposed Final Judgment and the CIS also

conspicuously omit any mention of the tourist market for distilled

spirits. Tourism is a significant part of the Virgin Islands economy.

The duty-free rules, which allow visitors from the United States

mainland to enter up to five bottles per person duty-free into the

United States from the Virgin Islands,\2\ are important enhancements

for tourism in the Virgin Islands and, indeed, are a substantial

feature of the competitive landscape of the market defined by the

Complaint. Tourists, however, will only purchase distilled spirits

``duty-free'' in the Virgin Islands if they are priced competitively

with products that they can purchase on cruise ships and at other

Caribbean destinations, and, of course, in the continental United

States.

\2\ Persons returning to the United States mainland from the

Virgin Islands are exempted from duty on four liters (the equivalent

of five fifths) of distilled spirits, plus an additional liter of

any such product produced in the Virgin Islands. Heading 9804.00.70,

Harmonized Tariff Schedule of the United States (1995).

---------------------------------------------------------------------------

Defendant's monopolistic pricing practices have had a material

adverse impact on commerce in distilled spirits in the Virgin Islands

in the tourist market, but no one would ever know this from the

Complaint, the Proposed Final Judgment and the CIS.\3\ Without any

competition at the wholesale level, Defendant Topa is able to take far

larger wholesale mark-ups than are customary. Retailers like A.H. Riise

have had no alternative other than to accept Defendant's monopolistic

pricing, except in instances where they have been able to by-pass Topa

and purchase directly from suppliers. Even after cutting their margins

to the bone, retailers often cannot compete with prices of distilled

spirits on cruise ships, other Caribbean Islands and, even sometimes on

the U.S. mainland, since monopolistic margins are exacted by Defendant

at the wholesale level. Thus, A.H. Riise's sales--and those of other

retailers--are far lower than they otherwise would be. Accordingly,

tourists buy less in the Virgin Islands, and the Virgin Islands economy

loses substantial excise and gross receipts tax revenues, as well as

lost employment opportunities for retailers and others who serve the

tourists trade.

\3\ The impact of Defendant's monopolistic practices is far more

significant in the tourist market for distilled spirits than in the

local market. This is because residents of the Virgin Islands have

no choice but to purchase locally, whereas tourists can buy

distilled spirits on board cruise ships, on other Caribbean Islands

or on the U.S. mainland.

---------------------------------------------------------------------------

3. It is Contrary to the Public Interest To Permit Defendant's

Monopolistic Pricing to Continue

Since the Complaint does not allege anti-competitive pricing

practices on the part of Defendant, it is hardly surprising that such

practices are not remedied in the Proposed Final Judgment. It is

remarkable that after citing injury to suppliers and retailers,

Complaint para. 19 (c) and (d), CIS para. IIB, there is no mention of

injury to consumers. Yet there is no single factor that has a greater

bearing on the Court's determination of the public interest in this

case than Defendant's pricing practices. Defendant's monopolistic

pricing damages consumers--both Virgin Islands residents and tourists--

to the detriment of the Virgin Islands economy.

On those occasions when suppliers have been willing to sell

directly to A.H. Riise, often over interference from the Defendant,

A.H. Riise has been able to substantially reduce prices offered to

tourists so that they are more competitive with prices offered by

cruise ship stores, on other Caribbean islands and in the U.S. As a

result, sales increased dramatically, as did profits. Further, A.H.

Riise was able to spend considerably more on advertising and promotion

to encourage cruise ship passengers to purchase distilled spirits in

the Virgin Islands, rather than at foreign ports.

These results were demonstrated again recently when A.H. Riise was

finally able to conclude arrangements to purchase directly from a

supplier, which had previously sold only through Defendant Topa.

Without excessive wholesale margins, A.H. Riise was able to lower the

per unit price by $5.00, which increased the gap between its prices and

U.S. mainland prices from $1-$2 to $6-$7 per unit. In only a two week

period, sales increased 500% and profits increased 100%. Corresponding

increases were realized in revenues paid to the Virgin Islands taxing

authority.

Conversely, when the prices it receives from Defendant Topa compel

retail pricing that a higher, the same or only slightly lower than

competing sources available to tourists, sales decline, profits are

non-existent, and resources available for promotion are marginal. In

A.H. Riise's experience, tourists are generally well-educated on the

subject of distilled spirits prices. Accordingly, when they can

purchase distilled spirits at substantial savings, they are inclined to

make most of their duty-free purchases from retailers in the Virgin

Islands. Moreover, once tourists see that duty-free prices for

distilled spirits are lower, they tend to purchase greater amounts of

other duty-free merchandise in the Virgin Islands as well. Thus, it is

not difficult to see how monopolistic pricing at the wholesale level

has an immediate negative and depressing impact on sales, profits and

promotional activities, with a corresponding impact on employment, tax

revenues and the Virgin Islands economy.

In its review of the proposed consent order in United States v.

Microsoft, supra, the Court recognized that the failure of the

Department to address significant anti-competitive practices by the

defendant was grounds for a determination that the proposed order was

not in the public interest. Notwithstanding the vehement objections of

the defendant and the Department in that case, the Court refused to

accept an order that was limited to operating systems software for X86

microprocessors. There, as here, the proposed Complaint and relief are

too narrow, and for that reason must be found not to be in the public

interest.

B. The Remedies in the Proposed Final Judgment Do Not Adequately

Address the Competitive Harm Identified

The Complaint and the CIS correctly point out that the Defendant

has virtual monopoly in the wholesale distilled spirits market in the

Virgin Islands. Complaint para. 17; CIS para. II B. Certain effects of

this monopoly are then identified: (1) Retailers are deprived of

alternative sources for competing products; and (2) suppliers are

deprived [[Page 28174]] of the benefits of free and open competition,

in part because Defendant Topa has inherent conflicts of interest in

the representation of competing products and cannot represent all

competing brands equally. Complaint, para. 19 (c) and (d); CIS para. II

B. The CIS then states that the purpose of the Proposed Final Judgment

is to remedy these effects. But not only are the Complaint and Proposed

Final Judgment drafted too narrowly, the remedies proposed are also

ineffective.

Rather than ordering a breakup of the Defendant, divestiture of the

acquisitions by which it obtained its monopoly, Complaint para. 17, or

unilateral termination of its distribution agreements, CIS para. VI,

the Proposed Final Judgment merely attempts to establish new ground

rules for the distilled spirits wholesale market in the Virgin Islands

that purport to make it more likely for new entrants to dilute the

Defendant's monopoly power and thereby restore a competitive

environment. There are two main features of the Proposed Final

Judgment: (1) Permitting suppliers to break exclusive contracts with

Defendant, but only to deal with another wholesaler; and (2) enjoining

Defendant from enforcing its rights under Title 12A, Sections 131 and

132, of the Virgin Islands Code for ``wrongful termination.'' Once new

entrants appear, the Defendant would be enjoined from (1) interfering

with any of the potential new entrants' employees and (2) from

acquiring any stock or interest in such new entrants.\4\ Proposed Final

Judgment Paras. IV (b), (c), (f) and (g).

\4\ We have deliberately omitted any analysis of the problem of

the scarcity of warehouse space, which is given inordinate

attention. Complaint at para. 16, Proposed Final Judgment para. IV

E, CIS para. II. Defendant's reference to this issue as ``supposed

scarce warehouse space'' in its Press Release, Exhibit 1, suggests

that this issue is be a straw man.

---------------------------------------------------------------------------

In a moment of candor, the Defendant characterized the foregoing as

``meaningless provisions'' that are ``all bark and no bite.'' Press

Release, Exhibit 1. A.H. Riise agrees.

Rather than providing a mechanism for existing market forces to

restore competitiveness, the proposed remedies depend on new entrants

coming into the wholesale distilled spirits business in the Virgin

Islands. The relief proposed, therefore, is merely hopeful. At best, it

poses a theoretical framework for competition to develop in the future.

Whether the proposed remedies will in fact have any immediate and

tangible effect on the competitive environment in the Virgin Islands

must depend totally on extrinsic factors, the existence of which are

unknown or speculative.

How likely is it that ``new players'' will arrive to compete on the

new theoretical ``level playing field'' constructed by the Proposed

Final Judgment? Not likely at all.\5\ To become viable, potential

entrants will need very substantial capital for inventory and warehouse

facilities, employees who know the business, and the ability to attract

suppliers' business. Each of these factors is far more significant to

entering the market than the elements of the proposed remedies. In

determining whether the remedies in the Proposed Final Judgment have a

reasonable chance of achieving their stated goals, the Court should not

overlook the fact that every potential entrant that has tried to come

into this market in the last decade has failed. CIS para. 2. At the

present time, A.H. Riise knows of no company or individual with the

necessary capital, personnel and know-how that could enter the Virgin

Islands wholesale market for distilled spirits. Further, based on

discussions with wholesalers outside the Virgin Islands, little

incentive to enter the Virgin Islands market is perceived.

\5\ See CIS para. VI. The only reason that unilateral

termination of Defendant's exclusive arrangements with suppliers

might ``place an unacceptably large burden'' on them is if no other

wholesaler entered the market, notwithstanding the proposed relief.

---------------------------------------------------------------------------

The lack of confidence that the proposed remedies will achieve

their stated goals is seen in the CIS. For example, the CIS states:

``qualified personnel, with the necessary connections with the retail

trade, are difficult to find in the Virgin Islands. Paragraphs IV(b)

and IV(c) may help an entrant to hire and retain qualified personnel to

run a distilled spirits business in the Virgin Islands without undue

interference from Topa.'' (Emphasis added.) CIS para. III. They also

may not. Indeed, potential entrants will need substantial capital to

succeed much more than Topa's noninterference with their employees.

Moreover, as a practical matter, once suppliers are freed from

exclusive arrangements with the Defendant, it does not necessarily

follow that suppliers will switch to new entrants. Indeed, without a

strong track record, why should a major supplier of distilled spirits

trust a new entrant to develop its market in the Virgin Islands? The

CIS recognizes this problem: ``Any disatisfied supplier will be free to

find an alternative distributor if the supplier chooses to do so* * *''

(Emphasis added.) CIS para. III. The CIS candidly admits that suppliers

will have to be dissatisfied with Topa before they would switch to new,

unknown wholesalers.

Because any decision to switch must lie with the suppliers, there

can be no guarantee that the model in the Proposed Final Judgment will

restore competition.

In fact, the ingredients needed to restore this market to a

competitive one are already in place, but have been overlooked in the

Proposed Final Judgment. Existing retailers already know the products,

the suppliers, and the markets. It is the retailers, in their pricing

and promotion, that make markets for each brand. But for the on-going

interference by the Defendant, retailers would be in the position now

to restore competition to the distilled spirits market in the Virgin

Islands by dealing directly with suppliers. It is therefore contrary to

the public interest to rely solely upon speculative, future, unknown,

external factors to enter the wholesale market, as posited by the

Proposed Final Judgment. Instead, suppliers' and retailers' rights to

deal with each other need to be recognized--and protected.

V. At a Minimum, Any Final Judgment Should Expressly Recognize and

Protect Retailers' Rights To Deal Directly With Suppliers, Without

Interference From Defendant

Even though the Proposed Final Judgment is deficient in its

theoretical approach to restoration of competition, A.H. Riise does not

believe that divestiture or the termination of exclusivity arrangements

with suppliers are the only remedies that can help erode Defendant's

monopoly. With slight modifications, the Proposed Final Judgment can be

rectified to achieve the stated goal of providing retailers with

alternative sources and freeing suppliers from a single wholesaler that

also represents their competitors. That remedy is to recognize--and

protect--suppliers and retailers' rights to deal directly with one

another without interference from the Defendant. We have attached as

Exhibit 2 a ``red-lined'' copy of the Proposed Final Judgment on which

we have made recommended revisions that, with minor modifications,

would permit the Proposed Final Judgment to achieve the competitive

goals set forth in the CIS.

The following language, which could be added after Paragraph IV A

of the Proposed Final Judgment, would implement this approach: (Topa is

enjoined and restrained from:)

Communicating with any supplier, wholesaler or other person for

the purpose or with the effect of urging, compelling, or coercing

any supplier or wholesaler to refrain from selling distilled spirits

to any retailer in the Virgin Islands. Nothing in this paragraph

[[Page 28175]] of Section IV shall be construed to inhibit Topa from

negotiating, entering into and adhering to a contract dealing with a

supplier on an exclusive basis; provided, that such designation

shall not directly or indirectly prevent any retailer in the Virgin

Islands from acquiring distilled spirits directly from any supplier.

The suggested language is derived from the consent order issued in

United States v. Maryland State Licensed Beverage Association, Inc.,

CCH Trade Reg. Rep. para. 69,261 (D. Md., 1958). In that case,

distributors and wholesalers were charged with collusion in attempting

to keep retailers from dealing directly with suppliers. The appropriate

remedy to enjoin such anti-competitive practices was to recognize

retailers' and suppliers' rights to deal directly with each other,

while continuing to permit exclusive arrangements between wholesalers

and suppliers. The same approach is appropriate here.

In addition, the current Paragraph D of Section IV of the Proposed

Final Judgment should be amended as follows:

(Topa is enjoined and restrained from:)

D. Refusing to deal with any retailer because that retailer

deals with another wholesaler or directly with a supplier.''

(Suggested revision emphasized.)

In commenting on Paragraph IVD of the Proposed Final Judgment, the CIS

points out: ``Even if Topa loses some brands to a new or existing

wholesaler, Topa will retain enormous influence over retailers. This

provision (as drafted) will prevent Topa from abusing that position in

the retail trade * * *.'' However, unless language is added to

Paragraph IVD expressly protecting retailers' and suppliers' rights to

deal directly with each other, the Proposed Final Judgment could be

read by Defendant Topa to sanction refusals to deal in circumstances

where suppliers deal directly with retailers.

It is imperative that the Proposed Final Judgment expressly

prohibit Topa's interference with efforts on the part of retailers to

deal directly with suppliers. It is this omission that poses the

greatest threat to competition in the Virgin Islands. As one of

Defendant's attorneys points out in the Press Release, Exhibit 1: ``nor

will (the Proposed Final Judgment) change how Topa does business

`because the company is not being asked to anything different from what

it has been doing over the past five years.' '' One of the things Topa

has been doing over the past five years is interfering with direct

supplier-retailer relationships. Unless Topa's behavior changes,

competition will not be restored to the wholesale distilled spirits

market in the Virgin Islands.

Only by recognizing and protecting suppliers' and retailers' rights

to deal directly with each other can the discipline of competition be

restored. For example, if A.H. Riise is able to purchase from

suppliers, there is nothing to prevent the Defendant or other

wholesalers from selling to A.H. Riise if they can provide better

price/service/delivery than can be obtained from suppliers directly.

Presumably the wholesale prices that Defendant and other wholesalers

can obtain for providing wholesaler functions will be lower than the

prices retailers will be able to obtain directly. Therefore, there will

always be a role for the Defendant to play in the Virgin Islands

distilled spirits wholesale market, provided the Defendant prices

competitively.

VI. The Five Year Duration for the Proposed Final Judgment Is

Patently Inadequate

There is probably no other area that more accurately demonstrates

Defendant's characterization that the Proposed Final Judgment is the

``weakest * * * ever negotiated by the Department of Justice'' than the

five-year term proposed for the order. Proposed Final Judgment para.

VIII. Defendant has enjoyed its monopoly power for over a decade. Old

habits die hard. Even if A.H. Riise's recommended modifications in the

Proposed Final Judgment were to be adopted, such an order should remain

in effect for a minimum of ten years to give competitive forces an

opportunity to develop and become viable and effective.

Conclusion

The Proposed Final Judgment is not in the public interest, because

it is too narrowly drawn and its remedies will not restore competition

in the distilled spirits market in the Virgin Islands. The Complaint

and the proposed remedies totally overlook Defendant's monopolistic

pricing practices. Moreover, the terms of the Proposed Final Judgment

which purport to provide fertile soil for potential new entrants to

enhance competition, in the words of the Defendant, are ``meaningless

provisions.'' Topa Press Release, Exhibit 1.

Price competition will be quickly restored if suppliers are freed

to deal directly with retailers. Competitive pricing in this market is

in the public interest, because it will boost tourism and tourism-

related commerce, thereby enhancing employment and tax revenues in the

Virgin Islands. Unfortunately, the Proposed Final Judgment does not

promote this goal. It should therefore be rejected.

Conversely, adoption of the Proposed Final Judgment as drafted will

permit Defendant's monopoly power to go unchecked. Since, as correctly

characterized by Defendant's Press Release, Exhibit 1, Defendant is not

required to change its behavior, adoption of the Proposed Final

Judgment will legitimize and institutionalize its anti-competitive

practices and monopolistic power. A continuation of these practices

would be detrimental to suppliers, retailers, the consuming public,

and, more generally, the economy of the Virgin Islands, and thus, the

public interest. Therefore, the Proposed Final Judgment should be

withdrawn and modified as suggested in Exhibit 2.

Respectfully submitted,

Samual H. Seymour

Jonathan R. Moore

Note: Retyped by Department of Justice

TOPA Press Release

Topa Equities (V.I.), Ltd. today announced that it had reached a

settlement with the Department of Justice closing down the government's

drawn out investigation of acquisitions by Topa of distilled spirits

distributors in the early 1980's.

``Topa conceded nothing nor did it acknowledge that these

acquisitions had any effect on competition,'' said Maria Hodge, counsel

for Topa. ``The case was settled and a proposed consent decree was

accepted for one reason--to end the five-year investigation.''

Hodge further stated that ``the decree would have no effect on

Topa's business activities'' even though the investigation ``had

examined all of its on-going business activities. Apparently they

couldn't find anything wrong that could be challenged under the

antitrust laws except some acquisitions over a decade ago.''

According to Ernest Gellhorn, an antitrust lawyer from Washington,

DC retained by Topa, ``the proposed decree is all bark and no bite.''

Pointing to the decree's ``meaningless provisions that would modify

contract terms written by suppliers or that would make supposed scare

warehouse space available to new entrants,'' Gellhorn called ``this

probably the weakest consent decree ever negotiated by the Department

of Justice.''

Gellhorn also said that the reason that the Department of Justice

was willing to accept this ``moral defeat'' was that ``after combing

through ten years of Topa's records and interviewing scores

[[Page 28176]] of others, the government could not find anything to

object to about how Topa conducts its business.''

Topa's decision to settle this matter ``involves no finding or

acknowledgment of any wrong-doing,'' attorney Hodge emphasized. Nor

will it change how Topa does business ``because the Company is not

being asked to do anything different from what it has been doing over

the past five years.''

All the government has complained about is that Topa's acquisitions

resulted in it being the sole wholesale distributor for major distilled

spirits in the U.S. Virgin Islands. ``What the government fails to

note,'' according to Ms. Hodge, ``is that Topa has been successful

because it has served both its suppliers and its customers so well.''

Nonetheless, ``it has accepted this settlement in order to end what has

been a significant drain on the company's resources,'' Hodge said.

Topa owns West Indies Corp. and Bellows International, Ltd. in the

U.S. Virgin Islands. ``None of the acquisitions we have made in the

Virgin Islands have been sought out by us,'' said Topa Chairman, John

Anderson. ``In several cases, we were asked to help a failing company,

which in turn allowed many employees to keep their jobs. Our only aim

has been to be a good employer and a good corporate citizen in the V.I.

community and a solid performer for our many quality brands.'' Topa

employees (sic) over 225 employees in the Territory.

For additional information, please call Maria Hodge (809-774-6845).

December ________, 1994

Note: Retyped by Department of Justice. Brackets (``[ ]'')

substituted by Department of Justice for redlining in the original.

Final Judgment

Plaintiff, United States of America, filed its Complaint on

December 7, 1994. Plaintiff and defendant, by their respective

attorneys, have consented to the entry of this Final Judgment without

trial or adjudication of any issue of fact or law. This Final Judgment

shall not constitute any evidence against, or any admission by, any

party with respect to any issue of fact or law. Defendant has agreed to

be bound by the provisions of this Final Judgment pending its approval

by the Court. Therefore, before the taking of any testimony, and

without trial or adjudication of any issue of fact or law, and upon the

consent of the parties, it is hereby ordered, adjudged and decreed as

follows:

I

This Court has jurisdiction over the subject matter of this action

and each of the parties consenting to this Final Judgment. The

Complaint states a claim upon which relief may be granted against

defendant under Section 3 of the Sherman Act (15 U.S.C. Sec. 3).

II

As used in this Final Judgment:

A. ``Distilled spirits'' means liquor products of all types

intended for human consumption, including, but not limited to, whiskey,

gin, vodka, rum, tequila, brandy, liqueurs and cordials, but excluding

wine and malt beverages and non-alcoholic beverages.

B. ``Person'' means any individual, association, cooperative,

partnership, corporation or other business or legal entity.

C. ``Virgin Islands'' means the Territory of the Virgin Islands of

the United States.

D. ``Retailer'' means any person engaged in the business of

purchasing distilled spirits from wholesalers [or suppliers], as

defined herein, and reselling them to consumers in establishments

located in the Virgin Islands, including such Virgin Islands-located

establishments as retail liquor stores, grocery stores, convenience

stores, restaurants and hotels.

E. ``Supplier'' means any licensed manufacturer, distiller or

importer of distilled spirits from which defendant or any other

wholesaler [or any retailer], as defined herein, purchases distilled

spirits or has purchased distilled spirits within one year prior to

this Final Judgment.

F. ``Wholesaler'' means any person holding a wholesaler's license

for distilled spirits from the government of the Virgin Islands and who

is engaged in the business of purchasing distilled spirits from

suppliers and reselling them to other wholesalers or to retailers

located in the Virgin Islands.

G. ``Topa Equities (V.I.), Ltd.'' (hereinafter referred to as

``Topa'') means defendant and its parent (but only to the extent of its

effective supervision of, or direct involvement in, defendant's

wholesale distribution of distilled spirits in the Virgin Islands),

wholesaler subsidiaries, wholesaler affiliates, successors and assigns

(excluding any independent purchasers), directors, officers, managers,

agents and employees and any other person acting for or on behalf of

them.

III

The provisions of this Final Judgment shall apply to Topa and to

all other persons in active concert or participation with Topa who

shall have received actual notice of this Final Judgment by personal

service or otherwise.

IV

Topa is enjoined and restrained from:

A. Taking any action under any contract or under Title 12A,

Sections 131 and 132, of the Virgin Islands Code to prevent its

suppliers from canceling their distribution arrangements for distilled

spirits, whether written or not, with Topa upon thirty days' written

notice and appointing another wholesaler in its stead. In the event of

such cancellation of distribution arrangements for distilled spirits by

a supplier, Topa shall, at the supplier's request, sell back to the

supplier, at the prices Topa paid to the supplier to purchase the

products, plus storage, handling and transportation costs, as well as

all taxes and duties paid by Topa, all distilled spirits that Topa then

has in its possession that were purchased by Topa from the supplier and

that have not been sold or otherwise committed, and otherwise assist in

the orderly disposition of such existing inventory;

[B.] Communicating with any supplier, wholesaler or other person

for the purpose or with the effect of urging, compelling, or coercing

any supplier or wholesaler to refrain from selling distilled spirits to

any retailer in the Virgin Islands. Nothing in this paragraph of

Section IV shall be construed to inhibit Topa from negotiating,

entering into, and adhering to a contract dealing with a supplier on an

exclusive basis; provided, that such designation shall not directly or

indirectly prevent any retailer in the Virgin Islands from acquiring

distilled spirits directly from any supplier.]

[C.] Entering into with, of enforcing or attempting to enforce

against, any officer of Topa, any written contract, agreement or

covenant not to compete in the distilled spirits industry in the Virgin

Islands; and countering an offer of employment to any officer of Topa

from any wholesaler with which a Topa supplier has entered into any

arrangement to distribute its distilled spirits in the Virgin Islands.

Otherwise, Topa may give its officers raises, bonuses and promotions in

the ordinary course of business, counter offers of employment from

distributors not engaged in the distribution of distilled spirits and

take action against its former officers for the unlawful disclosure of

trade secrets;

[D.] Making unsolicited offers of employment to any executive

employee [[Page 28177]] of any wholesaler with which a supplier has

entered into any arrangement to distribute its distilled spirits in the

Virgin Islands for two years following the opening for business of such

wholesaler, unless such employee has previously resigned from or been

terminated by such wholesaler;

[E.] Refusing to deal with any retailer because that retailer deals

with another wholesaler [or directly with a supplier];

[F.] Intentionally preventing, or attempting to prevent, any

wholesaler with which a supplier has entered into any arrangement to

distribute its distilled spirits in the Virgin Islands from obtaining

warehouse space for the distribution of distilled spirits. Topa may, in

the ordinary course of business, seek, retain and acquire warehouse

space to meet its ordinary and necessary business requirements;

[G.] Directly or indirectly merging or consolidating with, or

acquiring securities of, any other wholesaler without obtaining the

prior written consent of the Antitrust Division of the Department of

Justice; and

[H.] Acquiring, without obtaining the prior written consent of the

Antitrust Division of the Department of Justice, either any quantity in

excess of 5% of a wholesaler's assets, excluding inventory, applied to

the wholesale distribution of distilled spirits in the Virgin Islands,

or any quantity in excess of 30% of a wholesaler's inventory of

distilled spirits.

Within thirty days of the entry of this Final Judgment, Topa shall

cause to be delivered to all suppliers who have contracts then in

existence with Topa, written or otherwise, by certified letter or its

equivalent, a copy of this Final Judgment.

V

For the purpose of determining or securing compliance with this

Final Judgment and subject to any recognized privilege, from time to

time:

A. Duly authorized representatives of the Department of Justice

shall, upon written request by the Attorney General or by the Assistant

Attorney General in charge of the Antitrust Division, and on reasonable

written notice to defendant made to its principal office in Los

Angeles, California, be permitted:

1. Access during the office hours of defendent to inspect and copy

all books, ledgers, accounts, correspondence, memoranda, and other

records and documents in the possession or under the control of

defendant, which may have counsel present, relating to any of the

matters contained in the Final Judgment; and

2. Subject to the reasonable convenience of defendant and without

restraint or interference from it, to interview officers, employees and

agents of defendant, any of whom, together with defendant, may have

counsel present, regarding any such matters.

B. Upon written request by the Attorney General or the Assistant

Attorney General in charge of the Antitrust Division made to

defendant's principal office in Los Angeles, California, defendant

shall submit such written reports, under oath if requested, with

respect to any of the matters contained in this Final Judgment, as may

be requested.

C. No information obtained by the means provided in this Final

Judgment shall be divulged by any representative of the Department of

Justice to any person other than a duly authorized representative of

the Executive Branch of the United States, except in the course of

legal proceedings to which the United States is a party, or for the

purpose of securing compliance with this Final Judgment or as otherwise

required by law.

D. If at the time information or documents are furnished by

defendant to plaintiff, defendant represents and identifies in writing

the material in any such information or documents to be that to which a

claim of protection may be asserted under Rule 26(c)(7) of the Federal

Rules of Civil Procedure or as otherwise provided by statute, and the

defendant marks each pertinent page of such material, ``Subject to

Claim of Protection under Rule 26(c)(7) of the Federal Rules of Civil

Procedure,'' or as otherwise provided by statute, then ten days' notice

shall be given by the United States to defendant prior to divulging

such material in any legal proceeding (other than a grand jury

proceeding) to which defendant is not a party.

VI

Topa shall:

A. Establish and implement a plan for monitoring compliance by its

officers, directors, agents, managers and other employees with the

terms of the Final Judgment; and

B. File with this Court and serve upon plaintiff, within ninety

days after the date of entry of this Final Judgment, an affidavit as to

the fact and manner of its compliance with this Final Judgment.

VII

Jurisdiction is retained by this Court for the purpose of enabling

either of the parties to this Final Judgment to apply to this Court at

any time for such further orders and directions as may be necessary or

appropriate for the construction or modification of any of the

provisions hereof, for the enforcement of compliance herewith and for

the punishment of violations hereof.

VIII

This Final Judgment will expire on the [delete ``fifth''] [tenth]

anniversary of its date of entry.

IX

Entry of this Final Judgment is in the public interest.

Dated:

----------------------------------------------------------------------

United States District Judge, District of the Virgin Islands.

[FR Doc. 95-12561 Filed 5-26-95; 8:45 am]

BILLING CODE 4410-01-M