United States v. Tom Paige Catering, Inc. and Valley Foods Inc., Proposed Final Judgment and Competitive Impact Statement

DEPARTMENT OF JUSTICE

Antitrust Division

United States v. Tom Paige Catering, Inc. and Valley Foods Inc.,

Proposed Final Judgment and Competitive Impact Statement

Notice is hereby given pursuant to the Antitrust Procedures and

Penalties Act, 15 U.S.C. 16(b) through (h), that a proposed Final

Judgment, Stipulation, and Competitive Impact Statement have been filed

with the United States District Court for the Northern District of Ohio

in United States v. Tom Paige Catering, Inc. and Valley Foods Inc.,

Civil Action No. 1:97CV3268.

The Complaint in this case alleges that the defendants formed a

joint venture in order to lessen and eliminate competition for food

service contracts with the Cleveland, Ohio, Head Start program, in

violation of Section 1 of the Sherman Act, 15 U.S.C. 1.

The proposed Final Judgment orders the defendants to dissolve their

joint venture and enjoins them from (A) agreeing with any other food

service contractor to fix prices on food service contracts; (B)

participating in future discussions or communications about the prices

they quote on food service contracts; (C) agreeing with other food

service contractors on the customers or territories they bid for or

serve; (D) entering into any agreement with any non-defendant food

service contractor before notifying the plaintiff. Each defendant is

also required to appoint an antitrust compliance officer and establish

an antitrust compliance program with specified requirements. Public

comment is invited within the statutory 60-day comment period. Such

comments, and responses thereto, will be published in the Federal

Register and filed with the Court. Comments should be directed to

William J. Oberdick, Acting Chief, Great Lakes Field Office, Antitrust

Division, Department of Justice, Plaza 9 Building, 55 Erieview Plaza,

Suite 700, Cleveland OH 44114 (Telephone: 216/522-4074).

Rebecca P. Dick,

Director, Civil Non-Merger Enforcement.

Stipulation

It is stipulated by and between the undersigned parties, by their

respective attorneys, that:

(1) The parties consent that a final judgment in the form hereto

attached may be filed and entered by the Court at any time after the

expiration of the sixty (60) day period for public comment provided by

the Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b)-(h),

without further notice to any party or other proceedings, either upon

the motion of any party or upon the Court's own motion, provided that

plaintiff has not withdrawn its consent as provided herein;

(2) The plaintiff may withdraw its consent hereto at any time

within said period of sixty (60) days by serving notice thereof upon

the other party

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hereto and filing said notice with the Court;

(3) In the event the plaintiff withdraws its consent hereto, this

stipulation shall be of no effect whatever in this or any other

proceeding and the making of this stipulation shall not in any manner

prejudice any consenting party to any subsequent proceedings.

Dated:

Respectfully submitted,

For the Plaintiff:

Joel I. Klein,

Assistant Attorney General.

A. Douglas Melamed,

Principal Deputy Assistant Attorney General.

Rebecca P. Dick,

Deputy Director of Operations.

Donald M. Lyon, (19207-WA).

William J. Oberdick, (2235703-NY)

Acting Chief, Great Lakes Office.

Attorneys, Antitrust Division, U.S. Department of Justice, Great Lakes

Office, 55 Erieview Plaza, Suite 700, Cleveland, Ohio 44114, Telephone:

(216) 522-4080.

For the Defendants:

Jerome Emoff, Esq.

Tom Paige Catering Co., Inc.

Dennis Haines, Esq.,

Valley Foods, Inc.

Final Judgment

Plaintiff, the United States of America, filed its complaint on

December 16, 1997. Plaintiff and defendants 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 be evidence against or an

admission by any party to any issue of fact or law. Defendants have

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 herein, and upon consent of

the parties, it is hereby ordered, adjudged, and decreed as follows:

I. Jurisdiction

This Court has jurisdiction of the subject matter of this action

and of the parties consenting hereto. The complaint states a claim upon

which relief may be granted against defendants under Section 1 of the

Sherman Act (15 U.S.C. Sec. 1).

II. Definitions

As used in this Final Judgment:

A. ``Bid'' means an offer, proposal, or quotation, formal or

informal, oral or written, to a potential buyer or its agent.

B. ``Food service contract'' means any agreement to provide meals

to a customer for a period of time, but is not intended to include

contracts for the routine purchase of ordinary supplies by the

defendants.

C. ``Food service contractor'' means anyone engaged in the business

of soliciting and performing food service contracts.

D. ``Person'' means any natural person; public or private

corporation, whether or not organized for profit; governmental entity;

partnership; association; cooperative; sole proprietorship; or other

business or legal entity.

III. Applicability

A. This Final Judgment applies to defendants and to each of their

officers, directors, agents, employees, subsidiaries, successors, and

assigns, and to all other persons in active concert or participation

with any of them who shall have received actual notice of this Final

Judgment by personal service or otherwise.

B. Each defendant shall require, as a condition of the sale or

other disposition of all or substantially all of its assets or stock,

that any acquiring party agrees to be bound by the provisions of this

Final Judgment and that such agreement be filed with the Court.

IV. Dissolution of Joint Venture

The defendants are hereby ordered and directed to dissolve the

joint venture formed by them on April 1, 1994, within seventy five (75)

days of the entry of this Final Judgment, and are enjoined and

restrained from entering into future joint ventures together for the

purpose of bidding on food service contracts.

V. Other Prohibited Conduct

A. Each defendant is hereby enjoined and restrained from agreeing

with any other food service contractor to fix, establish, raise,

stabilize or maintain prices quoted on food service contracts.

B. Each defendant is further enjoined and restrained from

participating in any future discussion with or in the future

communicating with any other food service contractor concerning prices

quoted on food service contracts.

C. Each defendant is further enjoined and restrained from agreeing

with any other food service contractor on customers or territories to

be bid for or served.

D. Each defendant is further enjoined and restrained from entering

into any agreement with any non-defendant food service contractor

regarding food service contracts before notifying the plaintiff.

VI. Compliance Program

Each defendant is ordered to establish and maintain an antitrust

compliance program that shall include designating, within thirty (30)

days of entry of this Final Judgment, an Antitrust Compliance Officer

with responsibility for implementing the antitrust compliance program

and achieving full compliance with this Final Judgment. The Antitrust

Compliance Officer shall, on a continuing basis, be responsible for the

following:

A. Furnishing a copy of this Final Judgment within thirty (30) days

of entry of the Final Judgment to each of defendant's officers and

directors and each of its employees, salespersons, sales

representatives, or agents whose duties include supervisory or direct

responsibility for determining the bid prices submitted on food service

contracts except for employees whose functions are purely clerical;

B. Distributing in a timely manner a copy of this Final Judgment to

any owner, officer, employee or agent who succeeds to a position

described in Section VI(A);

C. Providing each person designated in Sections VI(A) or (B) with a

written explanation in plain language of this Final Judgment, with

examples of conduct prohibited by the Final Judgment, and with

instructions that each person designated in Section VI(A) and (B) shall

report any known violation of the Final Judgment to the Antitrust

Compliance Officer;

D. Arranging for an annual oral briefing to each person designated

in Sections VI (A) or (B) on the meaning and requirements of this Final

Judgment and the antitrust laws, including the advice that such

defendant will make legal advice available to such person regarding any

compliance questions or problems, accompanied by a written explanation

of the type described in Section VI(C);

E. Obtaining from each person designated in Sections VI(A) or (B)

certification that he or she:

(1) has read, understands and agrees to abide by the terms of this

Final Judgment;

(2) has been advised of and understands defendant's policy with

respect to compliance with the Sherman Act and the Final Judgment;

(3) has been advised and understands that his or her non-compliance

with the Final Judgment may result in conviction for criminal contempt

of court and imprisonment, a fine, or both; and

(4) is not aware of any violation of the Final Judgment that has

not been reported to the Antitrust Compliance Officer.

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F. Maintaining (1) a record of all certifications received pursuant

to Section VI(E); (2) a file of all documents related to any alleged

violation of this Final Judgment; and (3) a record of all

communications related to any such violation, that shall identify the

date and place of the communication, the person involved, the subject

matter of the communication, and the results of any related

investigation.

VII. Certification

A. Within seventy five (75) days of the entry of this Final

Judgment, each defendant shall certify to plaintiff whether such

defendant has (1) designated an Antitrust Compliance Officer; (2) has

distributed the Final Judgment in accordance with Section VI(A) and (B)

above; and (3) has provided the explanation and instructions in

accordance Section VI above.

B. For ten years after the entry of this Final Judgment, on or

before its anniversary date, each defendant shall file with the

plaintiff an annual statement as to the fact and manner of its

compliance with the provisions of Section V and VI.

C. If a defendant's Antitrust Compliance Officer learns of any

violation of any of the terms and conditions contained in this Final

Judgment, defendant shall immediately notify the plaintiff and

forthwith take appropriate action to terminate or modify the activity

so as to comply with this Final Judgment.

VIII. Inspection and Compliance

A. For the purpose of determining or securing compliance with this

Final Judgment, and for no other purpose, duly authorized

representatives of plaintiff, upon written request of the Attorney

General or the Assistant Attorney General in charge of the Antitrust

Division, and on reasonable notice to a defendant, shall be permitted,

subject to any legally recognized privilege:

1. Access during that defendant's office hours to inspect and copy

all records and documents in the possession or under the control of

that defendant, which may have counsel present, relating to any matters

contained in this Final Judgment; and

2. To interview that defendant's officers, employees, and agents,

who may have counsel present, regarding any such matters. The

interviews shall be subject to defendant's reasonable convenience.

B. Upon the written request of the Attorney General or the

Assistant Attorney General in charge of the Antitrust Division made to

a defendant at its principal office, defendant shall submit such

written reports, under other if requested, with respect to any of the

matters contained in this Final Judgment as may be requested, subject

to any legally recognized privilege.

C. No information or documents obtained by the means provided in

this Section VIII 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 a

defendant to plaintiff, defendant represents and identifies in writing

the material in any such information or documents to which a claim of

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

Civil Procedure, and 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,'' then ten (10) days' notice shall be

given by plaintiff to defendant prior to divulging such material in any

legal proceeding (other than a grand jury proceeding), so that

defendant shall have an opportunity to apply to this Court for

protection pursuant to Rule 26(c)(7) of the Federal Rules of Civil

Procedure.

E. Nothing set forth in this Final Judgment shall prevent the

Antitrust Division from utilizing other investigative alternatives,

such as Civil Investigative Demand process provided by 15 U.S.C. 1311-

1314 or a federal grand jury, to determine if a defendant has complied

with this Final Judgment.

IX. Ten-Year Expiration

This Final Judgment will expire on the tenth anniversary of its

date of entry.

X. Construction, Enforcement, Modification and Compliance

Jurisdiction is retained by the Court for the purpose of enabling

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

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

appropriate for the construction or carrying out of this Final

Judgment, for the modification of any of its provisions, for its

enforcement or compliance, and for the punishment of any violation of

its provisions.

XI. Public Interest

Entry of this Final Judgment is in the public interest.

Dated: ______.

United States District Judge.

Competitive Impact Statement

Pursuant to Section 2 of the Antitrust Procedures and Penalties Act

(``APPA''), 15 U.S.C. 16(b), the United States files this Competitive

Impact Statement relating to the proposed final judgment in United

States v. Tom Paige Catering Co. and Valley Foods, Inc., submitted for

entry in this civil antitrust proceeding.

I. Nature and Purpose of the Proceedings

On December 16, 1997 the United States filed a civil antitrust

complaint under Section 4 of the Sherman Act, as amended, 15 U.S.C. 4,

alleging that the above-named defendants combined and conspired to

lessen and eliminate competition on food service contracts with the

Cleveland, Ohio, Head Start program, in violation of Section 1 of the

Sherman Act, 15 U.S.C. 1.

The complaint seeks a judgment by the Court declaring that the

defendants engaged in an unlawful combination in restraint of trade in

violation of the Sherman Act. It also seeks an order by the Court to

enjoin the defendants from any such activities or other activities

having a similar purpose or effect in the future.

The United States and defendants have stipulated that the proposed

final judgment may be entered after compliance with the APPA, unless

the United States withdraws its consent.

The Court's entry of the proposed final judgment will terminate

this civil action against these defendants, except that the Court will

retain jurisdiction over the matter for possible further proceedings to

construe, modify or enforce the judgment, or to punish violations of

any of its provisions.

II. Description of the Practices Giving Rise to the Alleged

Violations of the Antitrust Laws

Tom Paige Catering (``Paige'') is an Ohio corporation doing

business in greater Cleveland, Ohio. Valley Foods, Inc. (``Valley'') is

a Ohio corporation with its principal place of business in Youngstown,

Ohio. Both Paige and Valley have been engaged in the business of

preparing and serving meals on a contract basis.

Since at least 1991, Paige and Valley have bid on contracts for

meals to children enrolled in the Cleveland Head Start program. Head

Start is a program which provides comprehensive developmental services

for low-income, pre-school children, ages three to five, and social

services for their families.

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The meals for the children enrolled in the program are funded entirely

by the federal government through the United States Department of

Agriculture. The funds are administered by the State of Ohio's

Department of Education and managed, locally, by sponsoring

organizations. The Cleveland Head Start program is sponsored by the

Council for Economic Opportunity in Greater Cleveland (``CEOGC''), a

not for profit organization. The GEOGC solicits bids on contracts for

breakfasts, lunches, and snacks for the Head Start program in

accordance with regulations promulgated by the United States Department

of Agriculture and the State of Ohio. The annual value of these

contracts has ranged in recent years from around $300,000 to over

$500,000.

Since at least September 1992, Paige and Valley have been the only

bidders on the meal contracts with Head Start. Beginning in September

of 1994, Paige and Valley bid as a joint venture. The purpose of their

joint venture was to illegally end competition between them. This joint

venture suppressed and eliminated competition among the defendants in

the provision of food service contracts to Head Start and deprived tax

payers of free and open competition in the sale of food contracting

services to Head Start. After the joint venture began, the cost of

meals to Head Start did in fact increase. By way of example, Valley's

winning bid in September 1993 included a bid of $1.01 per meal for cold

lunches. In 1994, the joint venture obtained $1.70 per meal for cold

lunches. It is likely that at least part of the increase in prices was

due to lack of competition between Paige and Valley. Paige and Valley's

joint venture is a contract, combination, or conspiracy in restraint of

trade in violation of 15 U.S.C. 1.

III. Explanation of the Proposed Final Judgment

The United States and the defendants have stipulated that a final

judgment, in the form filed with the Court, may be entered by the Court

at any time after compliance with the APPA, 15 U.S.C. 16(b)-(h). The

proposed final judgment provides that the entry of the final judgment

does not constitute any evidence against or an admission by any party

with respect to any issue of fact or law. Under the provisions of

Section 2(e) of the APPA, entry of the proposed final judgment is

conditioned upon the Court finding that its entry will be in the public

interest.

The proposed final judgment contains three principal forms of

relief. First, the defendants are ordered to dissolve the joint venture

formed by them on April 1, 1994. Second, the defendants are enjoined

from engaging in conduct, either among themselves or with other

competitors, that could have similar anticompetitive effects. Third,

the proposed final judgment places affirmative obligations on the

defendants to pursue a compliance program directed toward avoiding a

repetition of their anticompetitive behavior.

A. Prohibited Conduct

Section IV of the proposed final judgment orders the dissolution of

the defendants' joint venture. Section V broadly enjoins each defendant

from agreeing with other food service contractors to fix prices on food

service contracts (V(A)); from participating in any future discussions

or communications with other food service contractors regarding the

prices quoted on food service contracts (V(B); from entering into

territorial or customer allocation agreements with other food service

contractors (V(C)); and from entering into any agreements regarding

food service contracts with any non-defendant without notifying the

United States (V(D)).

B. Defendants' Affirmative Obligations

Section VI requires that within thirty (30) days of entry of the

final judgment, each defendant adopt an affirmative compliance program

directed toward ensuring that its employees comply with the antitrust

laws. More specifically, the program must include the designation of an

Antitrust Compliance Officer responsible for compliance with the final

judgment, and reporting any violations of its terms. It further

requires that each defendant furnish a copy of the final judgment,

within sixty (60) days of the date of its entry, to each of its

officers and directors and each of its employees who is engaged in or

has responsibility for or authority over pricing of food service

contracts and to certify within seventy-five (75) days that it has

distributed those copies and designated an Antitrust Compliance

Officer. Copies of the final judgment also must be distributed to

anyone who becomes such an officer, director or employee within thirty

(30) days of holding that position and to all such individuals

annually.

Furthermore, Section IV requires each defendant to brief each

officer, director and employee engaged in or having responsibility over

pricing of food service contracts as to the defendant's policy

regarding compliance with the Sherman Act and with the final judgment,

including the advice that his or her violation of the final judgment

could result in a conviction for contempt of court and imprisonment or

fine and that the defendant will make legal advice available to such

persons regarding compliance questions or problems.

Section VII requires each defendant provide annual certification to

the plaintiff of the fact and manner of its compliance. Each defendant

annually must obtain (and maintain) certifications from the persons

designated in Section VI. Each such person must certify that the

aforementioned briefing, advice and copy of the final judgment were

received and understood and that he or she is not aware of any

violation of the final judgment that has not been reported to the

Antitrust Compliance officer.

Under Section VIII of the final judgment, the Justice Department

will have access, upon reasonable notice, to each defendant's records

and personnel in order to determine compliance with the judgment.

D. Scope of the Proposed Judgment

(1) Persons Bound by the Judgment

The proposed judgment expressly provides in Section III that its

provisions apply to each of the defendants, to each of its officers,

directors, agents and employees, to each of its subsidiaries,

successors and assigns, and to all other persons who receive actual

notice of the terms of judgment.

In addition, section III of the judgment prohibits each of the

defendants from selling or transferring all or substantially all of its

stock or assets unless the acquiring party files with the Court its

consent to be bound by the provisions of the judgment.

(2) Duration of the Judgment

Section IX provides that the judgment will expire on the tenth

anniversary of its entry.

E. Effect of the Proposed Judgment on Competition

The prohibition terms of Section IV and Section V of the judgment

are designed to ensure that each defendant will act independently in

determining the prices, and terms and conditions at which it will enter

into food service contracts, and that there will be no conspiratorial

restraints on the competition for food service contracts. The

affirmative obligations of Sections VI and VII are designed to insure

that each corporate defendant's employees are aware of their

obligations under the

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decree in order to avoid a repetition of behavior that occurred

limiting competition for food service contracts. Compliance with the

proposed judgment will prevent joint ventures that illegally restrict

competition or foster price collusion and allocation of sales, markets,

and customers by the defendants with each other or between them and

other food service contractors.

IV. Remedies Available to Potential Private Plaintiffs

After entry of the proposed final judgment, any potential plaintiff

who might have been damaged by the alleged violation will retain the

same right to sue for monetary damages and any other legal and

equitable remedies which that person may have had if the proposed

judgment had not been entered. The proposed judgment may not be used,

however, as prima facie evidence in litigation, pursuant to Section

5(a) of the Clayton Act, as amended, 15 U.S.C. 16(a).

V. Procedures Available for Modification of the Proposed Final

Judgment

The proposed final judgment is subject to a stipulation between the

government and the defendants which provides that the government may

withdraw its consent to the proposed judgment any time before the Court

has found that entry of the proposed judgment is in the public

interest. By its terms, the proposed judgment provides for the Court's

retention of jurisdiction of this action in order to permit any of the

parties to apply to the Court for such orders as may be necessary or

appropriate for the modification of the final judgment.

As provided by the APPA (15 U.S.C. 16), any person wishing to

comment upon the proposed judgment may, for a sixty-day (60) period

subsequent to the publishing of this document in the Federal Register,

submit written comments to the United States Department of Justice,

Antitrust Division, Attention: William J. Oberdick, Acting Chief, Great

Lakes Office, Plaza 9 Building; 55 Erieview Plaza, Suite 700;

Cleveland, Ohio 44114-1816. Such comments and the government's response

to them will be filed with the Court and published in the Federal

Register. The government will evaluate all such comments to determine

whether there is any reason for withdrawal of its consent to the

proposed judgment.

VI. Alternative to the Proposed Final Judgment

The alternative to the proposed final judgment considered by the

Antitrust Division will a full trial of the issues on the merits and on

relief. The Division considers the substantive language of the proposed

judgment to be of sufficient scope and effectiveness to make litigation

on the issues unnecessary, as the judgment provides appropriate relief

against the violations alleged in the complaint.

VII. Determinative Materials and Documents

No materials or documents were considered determinative by the

United States in formulating the proposed Final Judgment. Therefore,

none are being filed pursuant to the APPA, 15 U.S.C. 16(b).

Respectfully submitted,

Donald M. Lyon (19207-WA)

William J. Oberdick (2235703-NY)

Acting Chief, Great Lakes Office.

Attorneys, Antitrust Division, U.S. Department of Justice, Great Lakes

Office, 55 Erieview Plaza, Suite 700, Cleveland, Ohio 44114, Telephone:

(216) 552-4080.

[FR Doc. 97-33820 Filed 12-29-97; 8:45 am]

BILLING CODE 4410-11-M