Del Monte Foods Company, et al.; Proposed Consent Agreement With Analysis to Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 921-0071]

Del Monte Foods Company, et al.; Proposed Consent Agreement With

Analysis to Aid Public Comment

agency: Federal Trade Commission.

action: Proposed consent agreement.

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summary: In settlement of alleged violations of federal law prohibiting

unfair acts and practices and unfair methods of competition, this

consent agreement, accepted subject to final Commission approval, would

require, among other things, the California-based corporations to

obtain, for ten years, Commission approval before acquiring any stock

or assets of a United States canned fruit manufacturer, and before

entering into a variety of marketing, packing, or other agreements with

competitors.

dates: Comments must be received on or before March 28, 1995.

addresses: Comments should be directed to: FTC/Office of the Secretary,

Room 159, 6th Street and Pennsylvania Avenue, NW., Washington, DC

20580.

for further information contact: Ronald Rowe, FTC/S-2105, Washington,

DC 20580. (202) 326-2610.

supplementary information: Pursuant to Section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of

the Commission's Rules of Practice (16 CFR 2.34), notice is hereby

given that the following consent agreement containing a consent order

to cease and desist, having been filed with and accepted, subject to

final approval, by the Commission, has been placed on the public record

for a period of sixty (60) days. Public comment is invited. Such

comments or views will be considered by the Commission and will be

available for inspection and copying at its principal office in

accordance with Section 4.9(b)(6)(ii) of the Commission's Rules of

Practice (16 CFR 4.9(b)(6)(ii).

In the Matter of DEL MONTE FOODS COMPANY, a corporation; DEL

MONTE CORPORATION, a corporation; and PACIFIC COAST PRODUCERS, a

corporation, File No. 921-0071.

Agreement Containing Consent Order

The Federal Trade Commission (``Commission'') having initiated an

investigation of certain agreements entered into by Del Monte

Corporation, a wholly-owned subsidiary of Del Monte Foods Company

(hereinafter collectively referred to as ``Del Monte''), and Pacific

Coast Producers (``PCP''), and it now appearing that Del Monte and PCP,

hereinafter sometimes referred to as ``proposed respondents,'' are

willing to enter into an agreement containing an order (``Agreement'')

to terminate such agreements between Del Monte and PCP, to cease and

desist from certain acts, and to provide for certain other relief,

It is hereby agreed by and among proposed respondents, by their

duly authorized officers and attorneys, and counsel for the Federal

Trade Commission that:

1. Proposed respondent Del Monte Corporation, a wholly-owned

subsidiary of Del Monte Foods Company, is a corporation organized,

existing, and doing business under and by virtue of the laws of the

State of New York, with its office and principal place of business

located at One Market Plaza, San Francisco, California 94119.

2. Proposed respondent Del Monte Foods Company is a corporation

organized, existing, and doing business under and by virtue of the laws

of the State of Maryland, with its office and principal place of

business at One Market Plaza, San Francisco, California 94119.

3. Proposed respondent Pacific Coast Producers is a corporation

organized, existing, and doing business under and by virtue of the laws

of the State of California, with its office and principal place of

business at 631 N. Cluff Avenue, Lodi, California 95240.

4. Proposed respondents admit all the jurisdictional facts set

forth in the draft of complaint.

5. Proposed respondents waive:

a. any further procedural steps;

b. the requirement that the Commission's decision contain a

[[Page 5398]] statement of findings of fact and conclusions of law;

c. all rights to seek judicial review or otherwise to challenge or

contest the validity of the order entered pursuant to this Agreement;

and

d. any claim under the Equal Access to Justice Act.

6. This Agreement shall not become part of the public record of the

proceeding unless and until it is accepted by the Commission. If this

Agreement is accepted by the Commission it, together with the draft of

complaint contemplated thereby, will be placed on the public record for

a period of sixty (60) days and information in respect thereto publicly

released. The Commission thereafter may either withdraw its acceptance

of this Agreement and so notify the proposed respondents, in which

event it will take such action as it may consider appropriate, or issue

and serve its complaint (in such form as the circumstances may require)

and decision, in disposition of the proceeding.

7. This Agreement is for settlement purposes only and does not

constitute an admission by the proposed respondents that the law has

been violated as alleged in the draft of the complaint, or that the

facts as alleged in the draft complaint, other than jurisdictional

facts, are true.

8. This Agreement contemplates that, if it is accepted by the

Commission, and if such acceptance is not subsequently withdrawn by the

Commission pursuant to the provisions of Section 2.34 of the

Commission's Rules, the Commission may, without further notice to the

proposed respondents, (1) issue its complaint corresponding in form and

substance with the draft of complaint and its decision containing the

following order to terminate certain agreements entered into between

Del Monte and PCP and to cease and desist in disposition of the

proceeding, and (2) make information public with respect thereto. When

so entered, the order shall have the same force and effect and may be

altered, modified, or set aside in the same time provided by statute

for other orders. The order shall become final upon service. Delivery

by the United States Postal Service of the complaint and decision

containing the agreed-to order to proposed respondents' addresses as

stated in this Agreement shall constitute service. Proposed respondents

waive any right they may have to any other manner of service. The

complaint may be used in construing the terms of the order, and no

agreement, understanding, representation, or interpretation not

contained in the order or the Agreement may be used to vary or

contradict the terms of the order.

9. Proposed respondents have read the proposed complaint and order

contemplated hereby. Proposed respondents understand that once the

order has been issued, they will be required to file verified written

reports showing they have fully complied with the order. Proposed

respondents further understand that they may be liable for civil

penalties in the amount provided by law for each violation of the order

after it becomes final.

Order

I

It is ordered that, as used in this order, the following

definitions shall apply.

A. ``Del Monte Corporation'' means Del Monte Corporation, its

predecessors, subsidiaries, divisions, groups and affiliates controlled

by Del Monte Corporation, and their respective directors, officers,

employees, agents, and their respective successors and assigns.

B. ``Del Monte`` means Del Monte Foods Company, its predecessors,

subsidiaries (including Del Monte Corporation), divisions, groups and

affiliates controlled by Del Monte Foods Company, and their respective

directors, officers, employees, agents, and their respective successors

and assigns.

C. ``PCP'' means Pacific Coast Producers, its predecessors,

subsidiaries, divisions, groups and affiliates controlled by Pacific

Coast Producers, and their respective directors, officers, employees,

members, agents, and their respective successors and assigns.

D. ``Respondents'' means PCP and Del Monte (including Del Monte

Corporation).

E. ``Commission'' means the Federal Trade Commission.

F. ``Canned Fruit'' means peaches, pears, fruit cocktail, and fruit

mix, which consists primarily of diced peaches and diced pears, that

are processed and canned.

G. ``Option Agreement'' means the Option Agreement between Del

Monte Corporation and Pacific Coast Producers entered into on May 4,

1992, pursuant to which Del Monte acquired and PCP conveyed an

exclusive and irrevocable option to purchase certain rights in, and

title to, certain assets of PCP, including long term contracts with

growers.

H. ``Supply Agreement'' means the Supply Agreement between Del

Monte Corporation and Pacific Coast Producers entered into on May 4,

1992, pursuant to which Del Monte agreed to purchase virtually all of

PCP's output of Canned Fruit, canned tomatoes, and canned apricots.

I. ``Spot Market'' means ad hoc inter-canner transactions for

Canned Fruit placed on an irregular basis where all Canned Fruit

ordered under such an arrangement is delivered within nine weeks of

placing the order.

J. ``Tri Valley Growers'' means Tri Valley Growers, its

predecessors, subsidiaries, divisions, groups and affiliates controlled

by Tri Valley Growers, and their respective directors, officers,

employees, members, agents, and their respective successors and

assigns.

II

It is further ordered that:

A. Within three (3) days after the date this order becomes final,

Respondents shall terminate the Option Agreement;

B. Within three (3) days after the date this order becomes final,

Respondents shall declare null and void the following paragraphs of the

Supply Agreement: Paragraph 2, subparagraphs (b), (c), (e), and (f),

Paragraph 23, Paragraph 24, and Paragraph 25 as it relates to the

budget for canning after June 30, 1995; and

C. On or before June 30, 1995, Respondents shall absolutely and in

good faith terminate the Supply Agreement.

III

It is further ordered that, for a period of ten (10) years from the

date this order becomes final, Del Monte shall not, without the prior

approval of the Commission, directly or indirectly, through

subsidiaries, partnerships, or otherwise:

A. Acquire any stock, share capital, equity, or other interest in

any concern, corporate or non-corporate, engaged, at the time of such

acquisition or within the two years preceding such acquisition, in the

manufacture of any type of Canned Fruit in the United States; provided,

however, that an acquisition shall be exempt from the requirements of

this paragraph if it is solely for the purpose of investment and Del

Monte will not hold more than one percent of the shares of any publicly

traded class of security; or

B. Acquire any assets, other than in the ordinary course of

business, used for or used anytime within the two years preceding such

acquisition for (and still suitable for use for) the manufacture of any

type of Canned Fruit in the United States; provided, however, that an

acquisition of assets will be exempt from the requirements of this

paragraph [[Page 5399]] if the purchase price of the assets-to-be-

acquired does not exceed $1,500,000.00, and the purchase price of all

assets used for, or previously used for (and still suitable for use

for) the manufacture of any type of Canned Fruit in the United States

that Del Monte has acquired from the same person (as that term is

defined in the premerger notification rules, 16 C.F.R.

Sec. 801.1(a)(1)) in the twelve-month period preceding the proposed

acquisition, when aggregated with the purchase price of the to-be-

acquired assets, does not exceed $1,500,000.

IV

It is further ordered that, for a period of ten (10) years from the

date this order becomes final, unless Del Monte is required to seek

prior approval from the Commission pursuant to Paragraph III, and

unless Del Monte has obtained such prior approval, Del Monte shall not,

without providing advance written notification to the Commission,

directly or indirectly, through subsidiaries, partnerships, or

otherwise, acquire any assets, other than in the ordinary course of

business, used for or used anytime within the two years preceding such

acquisition for (and still suitable for use for) the manufacture of any

type of Canned Fruit in the United States.

The notification required by this paragraph shall be provided to

the Commission at least thirty (30) days prior to the acquisition. Such

notification shall include a description of the assets to be acquired,

the purchase price, the name of the person from whom the assets are to

be acquired, including the name of the individual employed by such

person that is most knowledgeable about the proposed acquisition, Del

Monte's purpose in acquiring the assets from such person, and the use

to which Del Monte intends to put such assets. Del Monte shall comply

with reasonable requests from Commission staff for additional

information within ten (10) days of service of such requests.

V

It is further ordered that, for a period of ten (10) years from the

date this order becomes final, Del Monte shall not, without the prior

approval of the Commission, directly or indirectly, through

subsidiaries, partnerships, or otherwise:

A. Except with respect to agreements covered by Paragraphs V.B, VI,

VII, and VIII, enter into any agreement or other arrangement to

purchase or market any type of Canned Fruit with any corporate or non-

corporate entity, engaged, at the time of entering into such agreement

or other arrangement or within two years preceding entering into such

agreement or other arrangement, in the manufacture of any type of

Canned Fruit in the United States; provided, however, that entering

into such an agreement or other arrangement will be exempt from the

requirements of this paragraph if the agreement or other arrangement is

for the purchase of Canned Fruit on the Spot Market; or

B. Enter into any agreement or other arrangement with Tri Valley

Growers to have any type of Canned Fruit manufactured on Del Monte's

behalf.

VI

It is further ordered that:

A. for a period of five (5) years from the date this order becomes

final, Del Monte shall not, without the prior approval of the

Commission, directly or indirectly, through subsidiaries, partnerships,

or otherwise, except with respect to agreements covered by Paragraphs

V, VII, and VIII, enter into any agreement or other arrangement to have

any type of Canned Fruit manufactured on Del Monte's behalf (``co-pack

agreement'') with any corporate or non-corporate entity, engaged, at

the time of entering into such co-pack agreement or within the two

years preceding entering into such co-pack agreement, in the

manufacture of any type of Canned Fruit in the United States;

B. For a period beginning on the fifth anniversary of the date this

order becomes final until ten years from the date this order becomes

final, Del Monte shall not, without providing advance written

notification to the Commission, directly or indirectly, through

subsidiaries, partnerships, or otherwise, except with respect to

agreements covered by Paragraphs V, VII, and VIII, enter into any

agreement or other arrangement to have any type of Canned Fruit

manufactured on Del Monte's behalf (``co-pack agreement'') with any

corporate or non-corporate entity, engaged, at the time of entering

into such co-pack agreement or within the two years preceding entering

into such co-pack agreement, in the manufacture of any type of Canned

Fruit in the United States. Said notification shall be provided to the

Commission by Del Monte thirty (30) days before the entity begins

manufacturing the Canned Fruit pursuant to such co-pack agreement. Said

notification shall include a copy of the proposed co-pack agreement and

all schedules and attachments. Del Monte shall comply with reasonable

requests from Commission staff for additional information concerning

such co-pack agreements within ten (10) days of service of such

requests.

VII

It is further ordered that, for a period of ten (10) years from the

date this order becomes final, Respondents shall not, without the prior

approval of the Commission, directly or indirectly, through

subsidiaries, partnerships, or otherwise, enter into an agreement

requiring PCP to manufacture any type of Canned Fruit on behalf of Del

Monte (``co-pack agreement''); provided, however, that such a co-pack

agreement between Del Monte and PCP will be exempt from the

requirements of this paragraph if the aggregate of all co-pack

agreements entered into in any calendar year meet all of the following

criteria: 1) the amount of retail sizes (net weight under two pounds)

does not exceed ten percent of PCP's output of Canned Fruit, measured

in basic cases (24 2\1/2\ can sizes), manufactured in the same year as

the Canned Fruit manufactured pursuant to the co-pack agreements; 2)

the amount of peaches grown by PCP used for the co-pack agreements does

not exceed 8,000 tons in any year and none of PCP's peaches is used for

retail sizes manufactured pursuant to the co-pack agreements, and 3)

the total amount of the Canned Fruit manufactured pursuant to the co-

pack agreements a) in each of the years 1995 and 1996 constitutes forty

(40) percent or less of PCP's output of Canned Fruit manufactured in

each of those years, measured in basic cases; and b) in each year

thereafter constitutes thirty (30) percent or less of PCP's output of

Canned Fruit manufactured in that year, measured in basic cases.

VIII

It is further ordered that, for a period of ten (10) years from the

date this order becomes final, unless Respondents are required to seek

prior approval from the Commission pursuant to Paragraph VI, and unless

Respondents have obtained such prior approval, Respondents shall not,

without providing advance written notification to the Commission,

directly or indirectly, through subsidiaries, partnerships, or

otherwise, enter into a co-pack agreement with each other. Said

notification shall be provided to the Commission by PCP on or before

March 1 of each year in which Del Monte and PCP plan to enter into a

co-pack agreement. Said notification shall include a copy of the

proposed co-pack agreement, all schedules and attachments, the amount

of the planned co-pack stated in basic areas (24 2\1/2\ can sizes) and

the amount, stated in basic cases, for PCP's planned production of

Canned Fruit for the same year. [[Page 5400]]

IX

It is further ordered that:

A. Within thirty (30) days after the date this order becomes final

and every sixty (60) days thereafter until the Supply Agreement is

terminated, Respondents shall submit to the Commission a verified

written report setting forth in detail the steps taken to comply with

Paragraph II of the order; and

B. One year (1) from the date this order becomes final, annually

for the next nine (9) years on the anniversary of the date this order

becomes final, and at such other times as the Commission may require,

Respondents shall file a verified written report with the Commission

setting forth in detail the manner and form in which each has complied

and is complying with the provisions of this order.

X

It is further ordered that each of the Respondents shall notify the

Commission at least thirty (30) days prior to any proposed change in

such Respondent such as dissolution, assignment, or sale resulting in

the emergence of a successor corporation, or the creation or

dissolution of subsidiaries or any other change in such Respondent that

may affect compliance obligations arising out of the order.

XI

It is further ordered that, for the purpose of determining or

securing compliance with this order, and subject to any legally

recognized privilege, upon written request and on reasonable notice to

Respondents, each of the Respondents shall permit any duly authorized

representative of the Commission.

A. Access, during office hours and in the presence of counsel, to

inspect and copy all books, ledgers, accounts, correspondence,

memoranda and other records and documents in the possession or under

the control of such Respondent relating to any matters contained in

this order; and

B. Upon five days' notice to such Respondent and without restraint

or interference from it, to interview officers, directors, or employees

of such Respondent, who may have counsel present, regarding such

matters.

Analysis To Aid Public Comment on the Provisionally Accepted Consent

Order

The Federal Trade Commission (``the Commission'') has accepted for

public comment from Del Monte Foods Company, Del Monte Corporation

(``Del Monte''), and Pacific Coast Producers (``PCP'') and agreement

containing consent order. This agreement has been placed on the public

record for sixty days for reception of comments from interested

persons.

Comments received during this period will become part of the public

record. After sixty days, the Commission will again review the

agreement and the comments received and will decide whether it should

withdraw from the agreement or make final the agreement's order.

The Commission's investigation of this matter concerns a supply

agreement between Del Monte and PCP that commenced in July of 1992. The

effect of the supply agreement was that Del Monte acquired the business

of PCP, and PCP was no longer a competitor in the market for canned

peaches, pears, fruit cocktail, and fruit mix (``canned fruit''). The

supply agreement also contained an option agreement by which Del Monte

had the right to purchase PCP outright. The agreement containing

consent order would, if finally accepted by the Commission, settle

charges alleged in the Commission's complaint that the supply agreement

and option agreement substantially lessened competition in the sale of

canned fruit in the United States and that Del Monte entered into such

agreements with the effect of restraining, lessening, or eliminating

competition, or acquiring or maintaining market power in the same

market. The Commission's complaint further alleges that such agreements

had and will have anticompetitive effects and that, in entering into

such agreements, respondents violated Section 7 of the Clayton Act and

Section 5 of the Federal Trade Commission Act.

The order accepted for public comment contains provisions that

would require that Del Monte and PCP terminate the supply agreement in

June of 1995 and terminate the option agreement and certain provisions

of the supply agreement within three days after the date the order

becomes final. The provisions of the supply agreement that would

require termination within three days relate to planning for the 1995

canning season. The purpose of the delay in terminating the entire

supply agreement is to assure the orderly return of PCP to the market

as a viable operation engaged in the sale of canned fruit in the United

States. The delay permits PCP time to plan for the manufacture of fruit

for the 1995 canning season and obtain customers for that fruit,

without the pressure of marketing last year's inventory.

For a period of ten years from the date the order becomes final,

the order would also prohibit Del Monte from acquiring, without prior

Commission approval, stock in or assets of an entity engaged in the

manufacture of any type of canned fruit in the United States.

Acquisitions, for investment purposes only, of less than 1% of the

outstanding stock of a publicly-traded company would be exempt from the

prior approval provision.

Acquisitions of certain assets valued at less than $1.5 million

would also be exempt from the prior approval provision, but the order

would require that Del Monte give 30 days' notice to the Commission

before consummating the acquisition.

For a period of ten years from the date the order becomes final,

the order would also prohibit Del Monte, without obtaining prior

Commission approval, from entering into an agreement to buy canned

fruit from, or market canned fruit for, a person engaged in the

manufacture of canned fruit in the United States. Del Monte would not,

however, have to obtain prior Commission approval for purchases made on

the spot market.

For a period of ten years from the date the order becomes final,

the order would also prohibit Del Monte, without obtaining prior

Commission approval, from having canned fruit packed on Del Monte's

behalf (``co-pack'') by Tri Valley Growers or PCP. Tri Valley Growers

is a large manufacturer of canned fruit. Del Monte and PCP may enter

into a co-pack agreement for canned fruit, without obtaining prior

Commission approval, if the following conditions are met: (1) The

amount of PCP's peaches used in the co-pack for Del Monte does not

exceed 8,000 tons in any year; (2) the amount or retail sizes packed

under the co-pack does not exceed 10% of PCP's output; (3) the total

amount of the co-pack does not exceed 40% of PCP's output in each of

the first two years after the order becomes final and 30% of PCP's

output in each year thereafter. Prior to entering into the supply

agreement that is the subject of this compliant, PCP co-packed canned

fruit for Del Monte.

For a period of five years from the date the order becomes final,

the order would also prohibit Del Monte, without obtaining prior

Commission approval, from having canned fruit packed on Del Monte's

behalf (``co-pack'') by any entity engaged in the manufacture of canned

fruit. In years six through ten, Del Monte would have to provide prior

notice to the Commission of such a co-pack, but would not need to

obtain prior approval.

The purpose of this analysis is to invite public comment concerning

the consent order and any other aspect of [[Page 5401]] this matter.

This analysis is not intended to constitute an official interpretation

of the agreement and order or to modify its terms in any way.

Donald S. Clark,

Secretary.

Concurring Statement of Commissioner Roscoe B. Starek, III

In the Matter of Del Monte Foods Company/Pacific Coast

Producers, File No. 921 0071.

In voting to accept the agreement containing consent order in

this matter, I have overcome my reluctance to support an order that

at first blush appeared to contain certain inordinately regulatory

provisions. As a general proposition, I prefer clear, simple, easily

enforceable cease-and-desist language over orders that establish

complex metes and bounds for permissible conduct.

Some provisions of the present order--Paragraph VII is the

extreme example--seem to prescribe the behavior of Del Monte and

Pacific Coast Producers (``PCP'') with an unfortunate degree of

detail. Despite the detailed nature of those provisions, however,

the order is unlikely to place undue constraints on the parties'

operations. In particular, the ``regulatory''-looking proviso to

Paragraph VII clearly constitutes a substantial accommodation--i.e.,

an exception to what would otherwise be a moratorium on co-pack

arrangements between Del Monte and PCP--designed to allow the

parties to realize efficiencies. To the extent that the parties need

even more latitude than that proviso affords, Paragraph VII allows

them to seek the Commission's approval for a more extensive co-pack

arrangement. Thus, if the parties wish to expand their co-pack

agreement beyond what the proviso to Paragraph VII contemplates, the

paragraph operates as it should: it puts on the parties the burden

of establishing that a more extensive arrangement will yield net

efficiencies.

[FR Doc. 95-2058 Filed 1-26-95; 8:45 am]

BILLING CODE 6750-01-M