United States v. Suiza Foods Corporation and Broughton Foods Company; Proposed Final Judgment and Competitive Impact Statement

DEPARTMENT OF JUSTICE

Antitrust Division

United States v. Suiza Foods Corporation and Broughton Foods

Company; Proposed Final Judgment and Competitive Impact Statement

Notice is hereby given pursuant to the Antitrust Procedures and

Penalties Act, 15 U.S.C. Section 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 Eastern District of

Kentucky, London Division in United States of America v. Suiza Foods

Corporation and Broughton Foods Company, Civil Action No. 99-CV-130. On

March 18, 1999, the United States filed a Complaint alleging that the

proposed acquisition by Suiza Foods Corporation (``Suiza'') of the

stock of Broughton Foods Company (``Broughton''), would violate Section

7 of the Clayton Act, 15 U.S.C. 18. The proposed Final Judgment, filed

on April 22, 1999, requires Suiza to divest the Southern Belle plant

and related assets in Somerset, Kentucky, pursuant to the Final

Judgment. Copies of the Complaint, proposed Final Judgment and

Competitive Impact Statement are available for inspection at the

Department of Justice in Washington, D.C. in Room 200, 325 Seventh

Street, N.W., and at the Office of the Clerk of the United States

District Court for the District of the District of Columbia.

Public comment is invited within 60 days of the date of this

notice. Such comments, and responses thereto, will be published in the

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

to Craig W. Conrath, Chief, Merger Task Force, Antitrust Division,

Department of Justice, 1401 H St. N.W., Suite 4000, Washington, D.C.

20530 (telephone: (202) 307-0001).

Constance K. Robinson,

Director of Operations & Merger Enforcement.

United States of America, Plaintiff, vs. Suiza Foods

Corporation, d/b/a Louis Trauth Dairy, Land O'Sun Dairy, and Flav-O-

Rich Dairy, and Broughton Foods Company, d/b/a Southern Belle Dairy,

Defendants. Civil Action No. 99-CV-130.

Stipulation and Order

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

respective attorneys, as follows:

(1) The Court has jurisdiction over the subject matter of this

action and over each of the parties hereto, and venue of this action is

proper in the Eastern District of Kentucky, London Division.

(2) The parties stipulate that a Final Judgment in the form hereto

attached

[[Page 26783]]

may be filed and entered by the Court, upon the motion of any party or

upon the Court's own motion, at any time after compliance with the

requirements of the Antitrust Procedures Penalties Act (15 U.S.C. 16),

and without further notice to any party or other proceedings, provided

that the plaintiff has not withdrawn its consent, which it may do at

any time before the entry of the proposed Final Judgment by serving

notice thereof on defendant and by filing that notice with the Court.

(3) Defendants shall abide by and comply with the provisions of the

proposed Final Judgment pending entry of the Final Judgment, or until

expiration of the time for all appeals of any Court ruling declining

entry of the proposed Final Judgment, and shall, from the date of the

filing of this Stipulation, comply with all the terms and provisions of

the proposed Final judgment as though the same were in full force and

effect as an order of the Court.

(4) This Stipulation shall apply with equal force and effect to any

amended proposed Final Judgment agreed upon in writing by the parties

and submitted to the Court.

(5) Defendants shall prepare and deliver reports in the form

required by the provisions of paragraph B of Section VI of the proposed

Final Judgment commencing no later than twenty (20) calendar days after

the filing of this Stipulation, and every thirty (30) calendar days

thereafter pending entry of the Final Judgment.

(6) In the event the plaintiff withdraws its consent, as provided

in paragraph 2 above, or if the proposed Final Judgment is not entered

pursuant to this Stipulation, or the time has expired for all appeals

of any Court ruling declining entry of the proposed Final Judgment, and

the Court has not otherwise ordered continuing compliance with the

terms and provisions of the proposed Final Judgment, this Stipulation

shall be of no effect whatsoever, and the making of this Stipulation

shall be without prejudice to any party in this or any other

proceeding.

(7) Defendants represent that the divestiture ordered in the

proposed Final Judgment can and will be made, and that defendants will

raise no claim of hardship or difficulty as grounds for asking the

Court to modify any of the divestiture provisions contained therein.

(8) Upon entry of this Stipulation as an Order of the Court, and

consistent with this Stipulation, insofar as the defendants were

enjoined by Orders of the Court on March 18, 1999, and April 14, 1999,

from consummating their proposed transaction and from bringing their

operations under common ownership and control, such previous Orders

shall be vacated.

Respectfully submitted,

James K. Foster,

Attorney, U.S. Department of Justice, Antitrust division, 1401 H

Street, N.W., Room 4000, Washington, D.C. 20530, Telephone: (202) 514-

8362, Facsimile: (202) 307-5802.

Paul T. Denis,

Arnold & Porter, 555 Twelfth Street, N.W., Washington, DC 20004,

Telephone: (202) 942-5000, Facsimile: (202) 942-5999.

Attorney for Defendant Suiza Foods Corporation

Joseph L. Famularo,

United States Attorney, 110 W. Vine Street, Suite 4000, Lexington,

Kentucky 50407, Telephone: (606) 233-2666.

William J. Kolasky,

Wilmer, Cutler & Pickering, 2445 M Street, NW., Washington, DC 20037,

Telephone: (202) 663-6357, Facsimile: (202) 663-6363.

Attorney for Defendant Broughton Foods Company

So Ordered, this ____ day of ________. 1999.

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

United States District Judge

Final Judgment

Whereas plaintiff the United States of America (hereinafter

``United States''), having filed its Complaint herein, and defendants,

by their attorneys, having consented to the entry of this Final

Judgment without trial or adjudication of any issue of fact or law

herein, and without this Final Judgment constituting any evidence

against or an admission by any part with respect to any issue of law or

fact herein;

And whereas, the defendants have agreed to be bound by the

provisions of this Final Judgment pending its approval by the Court;

And whereas, prompt and certain divestiture of certain assets to a

third party is the essence of this agreement;

And whereas, plaintiff requires defendants to divest, as a viable

business, the Southern Belle Dairy so as to ensure, to the sole

satisfaction of the plaintiff, that the Acquirer will be to continue to

operate the Southern Belle Dairy as a viable, ongoing business;

And whereas, defendants have represented to plaintiff that the

divestiture required below can and will be made as provided in this

Final Judgment and that defendants will later raise no claims of

hardship or difficulty as grounds for asking the Court to modify any of

the divestiture provisions contained below;

Now, 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 hereto, it is hereby ordered, adjudged, and

decreed as follows:

I. Jurisdiction

This Court has jurisdiction over the subject matter of this action

and over each of the parties hereto. The Complaint states a claim upon

which relief may be granted against the defendant under Section 7 of

the Clayton Act, as amended (15 U.S.C. 18).

II. Definitions

As used in this Final Judgment:

A. ``Acquirer'' means the person(s) to whom defendants shall sell

the Southern Belle Dairy (as defined below).

B. ``Southern Belle Dairy'' means the entire milk processing plant

owned by Broughton Foods Company located in Pulaski County, Kentucky,

and all related assets, including all rights and interests in it,

including all property and contract rights, all existing inventory,

accounts receivable, pertinent correspondence and files, customer

lists, all related customer information, advertising materials,

contracts or other relationships with suppliers, customers and

distributors, any rights, contracts and licenses involving intellectual

property, trademarks, tradenames or brands, computers and other

physical assets and equipment used for production at, distribution

from, or associated with, Southern Belle Dairy or any of its

distribution branches and locations.

C. ``Suiza Foods Corporation'' means defendant Suiza Foods

Corporation and includes its successors and assigns, their

subsidiaries, divisions, groups, partnerships and joint ventures,

affiliates, directors, officers, managers, agents and employees.

D. ``Broughton Foods Company'' means defendant Broughton Foods

Company and includes its successors and assigns, their subsidiaries,

divisions, groups, partnerships and joint ventures, affiliates,

directors, officers, managers, agents and employees.

II. Applicability

A. The provisions of this Final Judgment apply to the defendants,

their successors and assigns, their subsidiaries, affiliates,

directors, officers, managers, agents, and employees, and 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.

[[Page 26784]]

B. Southern Belle Diary may not be sold to an Acquirer that has not

agreed to be bound by the provisions of this Final Judgment

IV. Divestitute of Assets

A. Suiza Foods Corporation is hereby ordered and directed, within

six (6) months from the date this Final Judgment is filed with the

Court, or five (5) calendar days after notice of the entry of this

Final Judgment by the Court, whichever is later, to divest the Southern

Belle Dairy to an Acquirer acceptable to the United States in its sole

discretion. The United States, in its sole discretion, may agree to an

extension of this time period of up to one (1) month, and shall notify

the Court in such circumstances.

B. Unless the United States consents in writing, the divestiture

pursuant to Section IV, or by trustee appointed pursuant to Section V

of this Final Judgment, shall include the entire Southern Belle Dairy

defined above. Divestiture shall be accomplished in such a way as to

satisfy the United States, in its sole discretion that the Southern

Belle Dairy can and will be operated by the Acquirer as a viable,

ongoing business. Divestiture of the Southern Belle Dairy, whether

pursuant to Section IV or Section V of this Final Judgment, shall be

made to a purchaser for whom it is demonstrated to the sole

satisfaction of the United States that (1) the purchase is for the

purpose of competing effectively in the dairy business, (2) the

Acquirer has the managerial, operational, and financial capability to

compete effectively in the dairy business; and (3) that none of the

terms of any agreement between the Acquirer and defendant give

defendant the ability unreasonably to raise the Acquirer's costs, to

lower the Acquirer's efficiency, or otherwise to interfere in the

ability of the Acquirer to compete effectively.

C. In accomplishing the divestiture ordered by this Final Judgment,

Suiza Foods Corporation shall make known, by usual and customary means,

the availability of the Southern Belle Dairy. Suiza Foods Corporation

shall provide any person making inquiry regarding a possible purchase a

copy of the Final Judgment. The defendants shall also offer to furnish

to any bona fide prospective purchaser, subject to customary

confidentiality assurance, all information regarding the Southern Belle

Dairy customarily provided in a due diligence process, except such

information subject to attorney-client privilege or attorney work

product privilege. Defendants shall make available such information to

the plaintiff at the same time that such information is made available

to any other person. Defendants shall permit bona fide prospective

purchasers of the Southern Belle Dairy to have access to personnel and

to make such inspection of physical facilities and any and all

financial, operational, or other documents and information customarily

provided as part of a due diligence process.

D. Defendants shall not interfere with any negotiations by the

Acquirer to employ any employee whose primary responsibility is the

production, sale, marketing, or distribution of products from the

Southern Belle Dairy.

E. Suiza Foods Corporation shall take all reasonable steps to

accomplish quickly the divestiture contemplated by this Final Judgment.

Defendants shall not take any action that will impede in any way the

operation of the Southern Belle Dairy other than in the ordinary course

of their other business.

V. Appointment of Trustee

A. In the event that Suiza Foods Corporation has not divested the

Southern Belle Dairy within the time period specified in Section IV.A.,

it shall notify the plaintiff of that fact in writing. In the event

that Suiza Foods Corporation has not divested the Southern Belle Dairy

within the time period specified in Section IV.A., and upon application

of the United States, the Court shall appoint a trustee selected by the

United States to effect the divestiture of the Southern Belle Dairy.

Unless the plaintiff otherwise consents in writing, the divestiture

shall be accomplished in such a way as to satisfy the United States, in

its sole discretion, that the Southern Belle Dairy can and will be

operated by the Acquirer as a viable on-going business.

B. After the appointment of a trustee becomes effectively, only the

trustee shall have the right to sell the Southern Belle Dairy. The

trustee shall have the power and authority to accomplish the

divestiture at the best price then obtainable upon a reasonable effort

by the trustee, subject to the provisions of Sections IV, V and VIII of

this Final Judgment, and shall have such other powers as the Court

shall deem appropriate. Subject to Section V.C. of this Final Judgment,

the trustee shall have the power and authority to hire at the cost and

expense of defendants any investment bankers, attorneys, or other

agents reasonably necessary in the judgment of the trustee to assist in

the divestiture, and such professionals and agents shall be solely

accountable to the trustee. The trustee shall have the power and

authority to accomplish the divestiture at the earliest possible time

to a purchaser acceptable to the United States, and shall have such

other powers as this Court shall deem appropriate. Defendants shall not

object to a sale by the trustee on any grounds other than the trustee's

malfeasance. Any such objections by defendants must be conveyed in

writing to the plaintiffs and the trustee within ten (10) calendar days

after the trustee has provided the notice required under Section VI.

C. The trustee shall serve at the cost and expense of Suiza Foods

Corporation, on such terms and conditions as the Court may prescribe,

and shall account for all monies derived from the sale of the assets

sold by the trustee and all costs and expenses so incurred. After

approval by the Court of the trustee's accounting, including fees for

its services and those of any professionals and agents retained by the

trustee, all remaining money shall be paid to Suiza Foods Corporation

and the trust shall then be terminated. The compensation of such

trustee and that of any professionals and agents retained by the

trustee shall be reasonable in light of the value of the Southern Belle

Dairy and based on a fee arrangement providing the trustee with an

incentive based on the price and terms of the divestiture and the speed

with which it is accomplished.

D. Suiza Foods Corporation shall use its best efforts to assist the

trustee in accomplishing the required divestiture. The trustee and any

consultants, accountants, attorneys, and other persons retained by the

trustee shall have full and complete access to the personnel, books,

records, and facilities of, and relating to, the Southern Belle Dairy,

and defendants shall develop financial or other information relevant to

such assets customarily provided in a due diligence process as the

trustee may reasonably request, subject to reasonable protection for

trade secret or other confidential research, development, or commercial

information. Defendants shall take no action to interfere with or to

impede the trustee's accomplishment of the divestiture. Defendants

shall permit prospective acquires of the assets to have reasonable

access to personnel and to make such inspection of physical facilities

and any and all financial, operational, or other documents and other

information as may be relevant to the divestiture required by this

Final Judgment.

E. After its appointment, the trustee shall file monthly reports

with the parties and the Court setting forth the trustee's efforts to

accomplish the divestiture ordered under this Final

[[Page 26785]]

Judgment; provided, however, that to the extent such reports contain

information that the trustee deems confidential, such reports shall not

be filed in the public docket of the Court. Such reports shall include

the name, address and telephone number of each person who, during the

preceding month, made an offer to acquire, expressed an interest in

acquiring, entered into negotiations to acquire, or was contacted or

made an inquiry about acquiring, any interest in the Southern Belle

Dairy, and shall describe in detail each contact with any such person

during that period. The trustee shall maintain full records of all

efforts made to divest the Southern Belle Dairy. If the trustee has not

accomplished such divestiture within six (6) months after its

appointment, the trustee shall thereupon promptly file with the Court a

report setting forth (1) the trustee's efforts to accomplish the

required divestiture, (2) the reasons, in the trustee's judgment, why

the required divestiture has not been accomplished, and (3) the

trustee's recommendations; provided, however, that to the extent such

reports contain information that the trustee deems confidential, such

reports shall not be filed in the public docket of the Court. The

trustee shall at the same time furnish such report to the parties, who

shall each have the right to be heard and to make additional

recommendations consistent with the purpose of the trust. The Court

shall thereafter enter such orders as it shall deem appropriate in

order to carry out the purpose of the Final Judgment, which may, if

necessary, include extending the trust and the term of the trustee's

appointment by a period requested by the United States.

VI. Notification

A. Within two (2) business days following execution of a definitive

agreement, Suiza Foods Corporation or the trustee, whichever is then

responsible for effecting the divestiture required herein, shall notify

the plaintiff of any proposed divestiture required by Section IV or V

of this Final Judgment. If the trustee is responsible, it shall

similarly notify Suiza Foods Corporation. The notice shall set forth

the details of the proposed transaction and list the name, address, and

telephone number of each person not previously identified who offered

to, or expressed an interest in or desire to, acquire any ownership

interest in the Southern Belle Dairy, together with full details of the

same. Within fifteen (15) calendar days after receipt of the notice,

the plaintiff may request from Suiza Foods Corporation, the proposed

purchaser, or any third party additional information concerning the

proposed divestiture, the proposed purchaser, and any other potential

purchaser. Suiza Foods Corporation or the trustee shall furnish the

additional information within fifteen (15) calendar days of the receipt

of the request. Within thirty (30) calendar days after receipt of the

notice or within twenty (20) calendar days after receipt of the

additional information by the United States, whichever is later, the

United States shall notify in writing Suiza Foods Corporation and the

trustee, if there is one, whether or not it objects to the proposed

divestiture. If the United States notifies in writing Suiza Foods

Corporation and the trustee, if there is one that it does not object,

then the divestiture may be consummated, subject only to Suiza Foods

Corporation's limited right to object to the sale under Section V.B.

Absent written notice that the United States does not object to the

proposed purchaser or upon objection by the United States, a

divestiture proposed under Section IV or V may not be consummated. Upon

objection by Suiza Foods Corporation under Section V.B., the proposed

divestiture under Section V shall not be accomplished unless approved

by the Court.

B. Twenty (20) calendar days from the date of the filing of this

Final Judgment, and every thirty (30) calendar days thereafter until

the divestiture has been completed under Section IV or V, Suiza Foods

Corporation shall deliver to the plaintiff a written affidavit as to

the fact and manner of compliance with Section IV or V of this Final

Judgment. Each such affidavit shall include, for each person who during

the preceding thirty (30) calendar days made an offer, expressed an

interest or desire to acquire, entered into negotiations to acquire, or

made an inquiry about acquiring any ownership interest in all or any

portion of the Southern Belle Dairy, the name, address, and telephone

number of that person and a detailed description of each contact with

that person during that period. Each such affidavit shall also include

a description of the efforts that Suiza Foods Corporation has taken to

solicit a buyer for the relevant assets and to provide required

information to prospective purchasers including the limitations, if

any, on such information. Assuming the information set forth in the

affidavit is true and complete, any objection by the United States to

the information provided by the defendant, including limitations on

information, shall be made within fourteen (14) calendar days of

receipt of such affidavit. Suiza Foods Corporation shall maintain full

records of all efforts made to divest all or any portion of the

Southern Belle Dairy.

VII. Financing

Suiza Foods Corporation shall not finance all or any part of any

purchase of the Southern Belle Dairy made pursuant to Sections IV or V

of this Final Judgment

VIII. Hold Separate Requirements

Unless otherwise indicated, from the date of filing of this

proposed Final Judgment with the Court and until the divestiture

required by Section IV.A. or V of the Final Judgment has been

accomplished:

A. Following consummation of Suiza Foods Corporation's acquisition

of Broughton Foods Company and until the divestiture required by

Section IV.A. or V of the Final Judgment has been accomplished, Suiza

Foods Corporation shall preserve, maintain, and operate the Southern

Belle Dairy as an independent competitor with management, production,

sales and operations held entirely separate, distinct and apart from

those of Suiza Foods Corporation. Suiza Foods Corporation shall not

coordinate the production, marketing or sale of products from Southern

Belle Dairy's business with the business that it will own as a result

of the acquisition of Broughton Foods Company.

B. Following consummation of Suiza Foods Corporation's acquisition

of Broughton Foods Company and until the divestiture required by

Section IV.A. or V of the Final Judgment has been accomplished, Suiza

Foods Corporation shall take all steps reasonably necessary to ensure

that the Southern Belle Dairy will be maintained and operated as an

independent, ongoing, economically viable and active competitor in the

production and sale of products; that the management of the Southern

Belle Dairy will not be influenced by Suiza Foods Corporation, and that

the books, records, competitively sensitive sales, marketing and

pricing information, and decision-making associated with the Southern

Belle Dairy will be kept separate and apart from the operations of

Suiza Foods Corporation. Suiza Foods Corporation's influence over the

Southern Belle Dairy shall be limited to that necessary to carry out

its obligations under the Final Judgment. Suiza Foods Corporation may

receive historical aggregate financial information (excluding capacity

or pricing information) relating to the Southern Belle Dairy to the

extent necessary to allow Suiza Foods

[[Page 26786]]

Corporation to prepare financial reports, tax returns, personnel

reports, and other necessary or legally required reports including

provision of due diligence information required to be made available

pursuant to this Final Judgment.

C. Following consummation of Suiza Foods Corporation's acquisition

of Broughton Foods Company and until the divestiture required by

Section IV.A. or V of the Final Judgment has been accomplished, Suiza

Foods Corporation shall use all reasonable efforts to maintain the

operations of the Southern Belle Dairy, and shall maintain at current

or previously approved levels, whichever are higher, internal funding,

promotional, advertising, sales, technical assistance, marketing and

merchandising support for the Southern Belle Dairy.

D. Following consummation of Suiza Foods Corporation's acquisition

of Broughton Foods Company and until the divestiture required by

Section IV.A. or V of the Final Judgment has been accomplished, Suiza

Foods Corporation shall provide and maintain sufficient working capital

to maintain the Southern Belle Dairy as an economically viable, ongoing

business.

E. Following consummation of Suiza Foods Corporation's acquisition

of Broughton Foods Company and until the divestiture required by

Section IV.A. or V of the Final Judgment has been accomplished, Suiza

Foods Corporation shall provide and maintain sufficient lines and

sources of credit to maintain the Southern Belle Dairy as an

economically viable, ongoing business.

F. Following consummation of Suiza Foods Corporation's acquisition

of Broughton Foods Company and until the divestiture required by

Section IV.A. or V of the Final Judgment has been accomplished, Suiza

Foods Corporation shall take all steps reasonably necessary to ensure

that the Southern Belle Dairy is fully maintained in operable condition

at no lower than its current rated capacity levels, and shall maintain

and adhere to normal repair and maintenance schedules for the Southern

Belle Dairy.

G. Suiza Foods Corporation shall not, except as part of a

divestiture approved by plaintiff, remove, sell, lease, assign,

transfer, pledge or otherwise dispose of or pledge as collateral for

loans, any assets of the Southern Belle Dairy.

H. The management of Southern Belle Dairy shall maintain, in

accordance with sound accounting principles, separate, true, accurate

and complete financial ledgers, books and records that report, on a

periodic basis, such as the last business day of every month,

consistent with past practices, the assets, liabilities, expenses,

revenues, income, profit and loss of the Southern Belle Dairy.

I. Except in the ordinary course of business or as is otherwise

consistent with this Final Judgment, Suiza Foods Corporation shall not

hire and shall not transfer or terminate, or alter, to the detriment of

any employee, any current employment or salary agreements for any

employees who on the date of the filing of this proposed Final Judgment

work at the Southern Belle Dairy, unless such individual has a written

offer of employment from a third party for a like position.

J. Until such time as the Southern Belle Dairy is divested, it

shall be managed by Martin Shearer. Mr. Shearer shall have complete

managerial responsibility for the Southern Belle Dairy, subject to the

provisions of the Final Judgment. Following consummation of Suiza Foods

Corporation's acquisition of Broughton Foods Company and until the

divestiture required by Section IV.A. or V of the Final Judgment has

been accomplished, and in the event that Mr. Shearer is unwilling or

unable to perform these duties, Suiza Foods Corporation shall appoint,

subject to plaintiffs approval, a replacement acceptable to plaintiff

within ten (10) working days. Should Suiza Foods Corporation fail to

appoint a replacement acceptable to plaintiff within ten (10) working

days, plaintiff shall appoint a replacement.

K. Suiza Foods Corporation shall take no action that would

interfere with the ability of any trustee appointed pursuant to the

Final Judgment to complete the divestiture pursuant to the Final

Judgment to a suitable purchaser.

L. Within twenty (20) calendar days of the filing of this Final

Judgment, Suiza Foods Corporation shall deliver to the United States an

affidavit which describes in detail all actions Suiza Foods Corporation

has taken and all steps Suiza Foods Corporation has implemented on an

on-going basis to preserve the Southern Belle Dairy pursuant to Section

VIII of this Final Judgment. The affidavit also shall describe, but not

be limited to, Suiza Foods Corporation's efforts to maintain and

operate the Southern Belle Dairy as an active competitor, maintain the

independent management, staffing, sales, marketing, and pricing of the

Southern Belle Dairy and maintain the Southern Belle Dairy in operable

condition at current capacity levels. Suiza Foods Corporation shall

deliver to the United States an affidavit describing any changes to the

efforts and actions outlined in Suiza Foods Corporation's earlier

affidavit(s) filed pursuant to this Section within fifteen (15)

calendar days after the change is implemented.

IX. Compliance Inspection

For the purpose of determining or securing compliance with this

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

time to time:

A. Duly authorized representatives of the plaintiff, including

consultants and other persons retained by the United States, shall,

upon the written request of the Assistant Attorney General in charge of

the Antitrust Division, and on reasonable notice to Suiza Foods

Corporation or Broughton Foods Company made to their principal offices,

be permitted:

1. access during office hours to inspect and copy all books,

ledgers, accounts, correspondence, memoranda, and other records and

documents in the possession or under the control of defendants, which

may have counsel present, relating to any matters contained in this

Final Judgment; and

2. subject to the reasonable convenience of defendants and without

restraint or interference from them, to interview either informally or

on the record, directors, officers, employees, and agents of

defendants, which may have counsel present, regarding any such matters.

B. Upon the written request of the Assistant Attorney General in

charge of the Antitrust Division, made to defendants at their principal

offices, defendants shall submit 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 nor any documents obtained by the means provided

in Sections VIII or IX shall be divulged by any representative of the

plaintiffs 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 plaintiff is a party (including grand

jury proceedings), 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 the plaintiff, such defendant represents and identifies in

writing the material in any such information or documents for 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

[[Page 26787]]

Civil Procedure,'' then the plaintiff shall give ten (10) calendar

days' notice to defendant prior to divulging such material in any legal

proceeding (other than a grand jury proceeding) to which defendant is

not a party.

X. Retention of Jurisdiction

Jurisdiction is retained by this 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 and directions as may be necessary or

appropriate for the construction, implementation, or modification of

any of the provisions of this Final Judgment, for the enforcement of

compliance herewith, and for the punishment of any violations hereof.

XI. Termination of Provisions

Unless this Court grants an extension, this Final Judgment will

expire on the tenth anniversary of the date of its entry.

XII. Public Interest

Entry of this Final Judgment is in the public interest.

Dated:-----------------------------------------------------------------

Court approval subject to procedures of Antitrust Procedures and

Penalties Act, 15 U.S.C. 16.

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

United States District Judge

Competitive Impact Statement

Plaintiff, the United States of America, pursuant to Section 2(b)

of the Antitrust Procedures and Penalties Act (``APPA''), 15 U.S.C.

16(b)-(h), files this Competitive Impact Statement relating to the

proposed Final Judgment submitted for entry in this civil antitrust

proceeding.

I. Nature and Purpose of the Proceeding

Plaintiff filed a civil antitrust Complaint on March 18, 1999, in

United States District Court for the Eastern District of Kentucky,

London Division, alleging that the proposed acquisition of Broughton

Foods Company (``Broughton'') by Suiza Foods Corporation (``Suiza '')

would violate Section 7 of the Clayton Act, 15 U.S.C. 18. The Complaint

alleges that Suiza and Broughton compete head-to-head to sell milk to

school districts, and that in 55 of those school districts located in

South Central Kentucky, the acquisition is likely to substantially

lessen competition in the sale of school milk, and that therefore

school districts and students would likely pay higher school milk

prices or experience lower school milk quality and service.

The prayer for relief seeks: (a) an adjudication that the proposed

transaction described in the Complaint would violate Section 7 of the

Clayton Act; (b) preliminary and permanent injunctive relief preventing

the consummation of the transaction; (c) an award to the United States

of the costs of this action; and (d) such other relief as is proper.

After this suit was filed, a proposed settlement was reached that

permits Suiza to complete its acquisition of Broughton, yet preserves

competition in the South Central Kentucky school districts where the

transaction raises significant competitive concerns. A Stipulation and

proposed Final Judgment embodying the settlement have been filed with

the Court.

The proposed Final Judgment orders Suiza to divest the entire

Southern Belle Dairy plant based in Pulaski County, Kentucky, and all

related assets. Unless the plaintiff grants a time extension, Suiza

must divest the Southern Belle Dairy and related assets within six (6)

months after the filing of the Complaint in this action or within five

(5) business days after notice of entry of the Final Judgment,

whichever is later. If Suiza does not divest the Southern Belle Dairy

and related assets within the divestiture period, the Court, upon

plaintiff's application, is to appoint a trustee to sell the assets.

The proposed Final Judgment also requires that, until the divestiture

mandated by the Final Judgment has been accomplished, Suiza and

Broughton shall take all steps necessary to maintain and operate the

Southern Belle Dairy as an active competitor, such that the sale and

marketing of its products shall be conducted separate from, and in

competition with, all of Suiza's products, maintain sufficient

management and staffing, and maintain the Southern Belle Dairy in

operable condition at current capacity configurations.

The plaintiff and the defendants have stipulated that the proposed

Final Judgment may be entered after compliance with the APPA. Entry of

the proposed Final Judgment would terminate this action, except that

the Court would retain jurisdiction to construe, modify, or enforce the

provisions of the proposed Final Judgment and to punish violations

thereof.

II. The Alleged Violations

A. The Defendants

Suiza, a large nationwide operator of milk processing plants, is a

Delaware corporation headquartered in Dallas, Texas. Suiza had sales of

approximately $1.8 billion in 1997. Using the Flav-O-Rich, PET and

Trauth names, Suiza distributes its products to Kentucky grocery

stores, convenience stores, schools, and institutions from its dairies

located in London and Newport, Kentucky; and Bristol and Kingsport,

Tennessee.

Broughton is an Ohio corporation with its headquarters in Marietta,

Ohio. Broughton had sales of approximately $87.2 million in 1997. In

Kentucky, Broughton, using the Southern Belle and Broughton's names,

distributes its products to grocery stores, convenience stores,

independent distributors, schools, and institutions from its dairies in

Somerset, Kentucky and Marietta, Ohio.

B. Description of the Events Giving Rise to the Alleged Violations

On September 10, 1998, Suiza and Broughton entered into an

agreement and plan of merger, pursuant to which Suiza intends to

purchase all of the stock of Broughton for $109.7 million and assume

Broughton liabilities of $13 million. The statutory waiting period

during which the firms were prohibited from completing their proposed

acquisition expired March 19, 1999, 15 U.S.C. 18a(e)(2). The Complaint

was filed on March 18, 1999, together with a Motion For Preliminary

injunction. On April 9, 1999, the defendants agreed to not complete

their proposed acquisition pending trial and the Motion For Preliminary

Injunction was withdrawn. On April 29, 1999, the Stipulation and

Proposed Final Judgment to resolve the suit was filed with the Court in

London, Kentucky.

C. Anticompetitive Consequences of the Proposed Transaction

The Complaint alleges that the sale of school milk constitutes a

relevant product market and a line of interstate commerce. Milk is a

product that has special nutritional characteristics and no practical

substitutes, and dairies sell milk to schools with special services,

including storage coolers, daily or every-other-day delivery to each

school, limited hours delivery, constant rotation of old milk and

replacement of expired milk. Moreover, school districts must provide

milk in order to receive substantial funds under federal school meal

subsidy programs. The Complaint defines the sale of milk together with

its delivery services as the product ``school milk.'' There are no

other products that school districts would substitute for school milk

in the event of a small but significant price increase. If the price of

school milk rose by a small but significant amount, school districts

would be forced to pay the increase.

[[Page 26788]]

The Complaint alleges that the relevant geographic market in which

to assess the competitive effects of the proposed acquisition is a 39-

county area of Kentucky (``South Central Kentucky''), and narrower

markets contained therein, including each of the 55 listed school

districts likely to be affected by the acquisition (``South Central

Kentucky School Districts''). As a practical matter, South Central

Kentucky School Districts would be unable to turn to additional school

milk producers not currently bidding or not currently intending to bid

for school milk contracts within South Central Kentucky School

Districts to supply them with school milk if the price of school milk

were to increase by a small but significant amount.

The Complaint alleges that Suiza's proposed acquisition of

Broughton would lessen competition substantially in the sale of school

milk in each of the South Central Kentucky School Districts. In 32 of

the listed school districts, only two competitors would likely remain

after the acquisition. Because dairies bid on each school milk contract

separately, where the acquisition would reduce the number of bidders on

these contracts from three to two, the likelihood that the remaining

bidders will bid less aggressively against each other on both price and

service terms is significantly increased.

In 23 of the listed school districts, the effect of the proposed

acquisition would be to establish a monopoly. In these counties, the

proposed acquisition would give the post-acquisition firm the power

unilaterally to raise prices or to decrease the level or quality of

service provided to these school districts.

The Complaint also alleges that entry by other dairies or

distributors would not be timely, likely or sufficient to deter any

anticompetitive effect caused by the acquisition. Dairies or

distributors would be unlikely to decide that it has become profitable

to compete for this low margin, low volume, seasonal business as a

result of a small but significant increase in school milk prices.

The Complaint also alleges, in support of its allegations

concerning relevant product market, likely competitive effects, and

entry, the existence of an admitted school milk bid-rigging conspiracy

between Southern Belle Dairy and Flav-O-Rich Dairy continuing from the

late 1970s through 1989, in 23 of the 39 counties likely to be affected

by the acquisition. Although the dairies involved in the conspiracy

were later purchased by Broughton (Southern Belle) and Suiza (Flav-O-

Rich), the history of school milk bid rigging in South Central Kentucky

indicates that school milk markets there are conducive to collusion.

The proposed acquisition would likely increase the danger of tacit or

overt collusion in those school districts where the acquisition would

reduce the number of competing firms from three to two, and in

districts with no remaining competition, the proposed acquisition would

recreate the harmful effects of the criminal bid-rigging conspiracy.

For all of these reasons, plaintiff concludes that the proposed

transaction is likely to lessen competition substantially in the sale

of school milk in South Central Kentucky, and result in increased

prices and/or reduced quality and services, all in violation of Section

7 of the Clayton Act.

III. Explanation of the Proposed Final Judgment

The proposed Final Judgment would preserve existing competition in

the sale of school milk in South Central Kentucky. It requires the

divestiture of all of the Southern Belle Dairy operation. This relief

maintains the level of competition that existed premerger and ensures

that the affected markets will suffer no reduction in competition as a

result of the merger, and the South Central Kentucky School Districts

will continue to have alternatives to Suiza/Flav-O-Rich in purchasing

school milk.

Unless plaintiff grants an extension of time, the divestiture must

be completed within six (6) months after the filing of the Complaint in

this matter or within five (5) business days after notice of entry of

this Final Judgment by the Court, whichever is later. The proposed

Final Judgment also requires that, until the divestiture mandated by

the Final Judgment has been accomplished, Suiza and Broughton shall

take all steps necessary to maintain and operate the Southern Belle

Dairy as an active competitor, such that the sale and marketing of its

products shall be conducted separate from, and in competition with, all

of Suiza's products; maintain sufficient management and staffing, and

maintain the Southern Belle Dairy in operable condition at current

capacity configurations.

The divestiture must be to a purchaser or purchasers acceptable to

the plaintiff in its sole discretion. Unless plaintiff otherwise

consents in writing, the divesture shall include all the assets of the

Southern Belle Dairy being divested, and shall be accomplished in such

a way as to satisfy plaintiff, in its sole discretion, that such assets

can and will be used as a viable, ongoing business. In addition, the

purchaser must intend in good faith to continue the operations of the

Southern Belle Dairy business that were in place prior to the filing of

the Complaint, unless any significant change in the operations planned

by a purchaser is accepted by the plaintiff in its sole discretion.

This provision is intended to ensure that the business to be divested

remains competitive with Suiza in South Central Kentucky.

If defendants fail to divest the Southern Belle Dairy within the

time period specified in the Final Judgment, the Court, upon

plaintiff's application, is to appoint a trustee nominated by plaintiff

to effect the divestiture. If a trustee is appointed, the proposed

Final Judgment provides that defendants will pay all costs and expenses

of the trustee and any professionals and agents retained by the

trustee. The compensation paid to the trustee and any persons retained

by the trustee shall be both reasonable in light of the value of the

Southern Belle Dairy, and based on a fee arrangement providing the

trustee with an incentive based on the price and terms of the

divestiture and the speed with which its is accomplished. After

appointment, the trustee will file monthly reports with the plaintiff,

defendants and the Court, setting forth the trustee's efforts to

accomplish the divestiture ordered under the proposed Final Judgment.

If the trustee has not accomplished the divestiture within six (6)

months after its appointment, the trustee shall promptly file with the

Court a report setting forth (1) the trustee's efforts to accomplish

the required divestiture, (2) the reasons, in the trustee's judgment,

why the required divestiture has not been accomplished and (3) the

trustee's recommendations. At the same time the trustee will furnish

such report to the plaintiff and defendants, who will each have the

right to be heard and to make additional recommendations.

The relief in the proposed Final Judgment is intended to remedy

only the likely anticompetitive effects of Suiza's proposed acquisition

of Broughton in South Central Kentucky. Nothing in this Final Judgment

is intended to limit the plaintiff's ability to investigate or to bring

actions, where appropriate, challenging other past or future activities

of the defendants.

IV. Remedies Available to Potential Private Litigants

Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any

person who has been injured as a result of conduct prohibited by the

antitrust laws may bring suit in federal court to recover

[[Page 26789]]

three times the damages the person has suffered, as well as costs and

reasonable attorneys' fees. Entry of the proposed Final Judgment will

neither impair nor assist the bringing of any private antitrust damage

action. Under the provisions of Section 5(a) of the Clayton Act, 15

U.S.C. 16(a), the proposed Final Judgment has no prima facie effect in

any subsequent private lawsuit that may be brought against defendants.

V. Procedures Available for Modification of the Proposed Final Judgment

The plaintiff and the defendants have stipulated that the proposed

Final Judgment may be entered by the Court after compliance with the

provisions of the APPA, provided that the plaintiff has not withdrawn

its consent. The APPA conditions entry upon the Court's determination

that the proposed Final Judgment is in the public interest.

The APPA provides a period of at least sixty (60) days preceding

the effective date of the proposed Final Judgment within which any

person may submit to the plaintiff written comments regarding the

proposed Final Judgment. Any person who wishes to comment should do so

within sixty (60) days of the date of publication of this Competitive

Impact Statement in the Federal Register. The plaintiff will evaluate

and respond to the comments. All comments will be given due

consideration by the Department of Justice, which remains free to

withdrawn its consent to the proposed Final Judgment at any time prior

to entry. The comments and the response of the plaintiff will be filed

with the Court and published in the Federal Register.

Written comments should be submitted to: Craig W. Conrath, Chief,

Merger Task Force, Antitrust Division, United States Department of

Justice, 1401 H Street, NW; Suite 4000, Washington, DC 20530.

The proposed Final Judgment provides that the Court retains

jurisdiction over this action, and that the parties may apply to the

Court for any order necessary or appropriate for the modifications,

interpretation or enforcement of the Final Judgment.

VI. Alternatives to the Proposed Final Judgment

Plaintiff considered, as an alternative to the proposed Final

Judgment, a full trial on the merits of its Complaint against the

defendants. Plaintiff is satisfied, however, that the divestiture

contained in the proposed Final Judgment will preserve competition in

the sale of school milk in South Central Kentucky as it was prior to

the proposed acquisition, and that the proposed Final Judgment would

achieve all the relief the government would have obtained through

litigation, but merely avoids the time and expense of a trial.

VII. Standard of Review Under the APPA for Proposed Final Judgment

The APPA requires that proposed consent judgments in antitrust

cases brought by the United States be subject to a sixty (60) day

comment period, after which the Court shall determine whether entry of

the proposed Final Judgment ``is in the public interest.'' In making

that determination, the Court may consider--

(1) The competition impact of such judgment, including

termination of alleged violations, provisions for enforcement and

modification, duration or relief sought, anticipated effects of

alternative remedies actually considered and any other

considerations bearing upon the adequacy of such judgment;

(2) The impact of entry of such judgment upon the public

generally and individuals alleging specific injury from the

violations set forth in the complaint including consideration of the

public benefit, if any, to be derived from a determination of the

issues at trial.

15 U.S.C. 16(e).

As the United States Court of Appeals for the D.C. Circuit held,

this statute permits a court to consider, among other things, the

relationship between the remedy secured and the specific allegations

set forth in the government's complaint, whether the decree is

sufficiently clear, whether enforcement mechanisms are sufficient and

whether the decree may positively harm third parties. See United States

v. Microsoft, 56 F.3d 1448, 1461-62 (D.C. Cir. 1995).

In conducting this inquiry, ``[t]he Court is nowhere compelled to

go to trial or to engage in extended proceedings which might have the

effect of vitiating the benefits of prompt and less costly settlement

through the consent decree process.'' \1\

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\1\ 119 Cong. Rec. 24598 (1973). See United States v. Gillette

Co., 406 F. Supp. 713, 715 (D. Mass. 1975). A ``public interest''

determination can be made properly on the basis of the Competitive

Impact Statement and Response to Comments filed pursuant to the

APPA. Although the APPA authorizes the use of additional procedures,

15 U.S.C. 16(f), those procedures are discretionary. A court need

not invoke any of them unless it believes that the comments have

raised significant issues and that further proceedings would aid the

court in resolving those issues. See H.R. Rep. 93-1463, 93rd Cong.

2d Sess. 8-9 (1974), reprinted in U.S.C.C.A.N. 6535, 6538.

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Rather,

[a]bsent a showing of corrupt failure of the government to discharge

its duty, the Court, in making its public interest finding, should *

* * carefully consider the explanations of the government in the

competitive impact statement and its responses to comments in order

to determine whether those explanations are reasonable under the

circumstances.

United States v. Mid-America Dairymen, Inc., 1977-1 Trade Cas. para.

61,508, at 71,980 (W.D. Mo. 1977).

Accordingly, with respect to the adequacy of the relief secured by

the decree, a court may not ``engage in an unrestricted evaluation of

what relief would best serve the public.'' United States v. BNS, Inc.,

858 F.2d 456, 462 (9th Cir. 1988), citing United States v. Bechtel

Corp., 648 F.2d 660, 666 (9th Cir.), cert. denied, 454 U.S. 1083

(1981); see also Microsoft, 56 F.3d at 1460-62. Precedent requires that

the 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. The court's

role in protecting the public interest is one of insuring that the

government has not breached its duty to the public in consenting to

the decree. 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.'' More elaborate requirements might undermine the

effectiveness of antitrust enforcement by consent decree.\2\

\2\ Bechtel, 648 F.2d at 666 (citations omitted) (emphasis

added); see BNS, 858 F.2d at 463; United States v. National

Broadcasting Co. 449 F. Supp. 1127, 1143 (C.D. Cal. 1978);

Gillette, 406 F. Supp. at 716 See also Microsoft, 56 F.3d at 1461

(whether ``the remedies [obtained in the decree are] so inconsonant

with the allegations charged as to fall outside of the reaches of

the public interest'') (citations omitted).

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The proposed Final Judgment, therefore, should not be reviewed

under a standard of whether it is certain to eliminate every

anticompetitive effect of a particular practice or whether it mandates

certainty of free competition in the future. Court approval of a final

judgment requires a standard more flexible and less strict than the

standard required for a finding of liability. ``[A] proposed decree

must be approved even if it falls short of the remedy the court would

impose on its own, as long as it falls within the range of

acceptability or is `within the reaches of public interest.' '' \3\

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\3\ United States v. American Tel. and Tel. Co., 552 F. Supp.

131, 151 (D.D.C. 1982), aff'd. sub nom. Maryland v. United States,

460 U.S. 1001 (1983), quoting Gillette, 406 F. Supp. at 716

(citations omitted); United States v. Alcan Aluminum, Ltd., 605 F.

Supp. 619, 622 (W.D. Ky. 1985).

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The relief obtained in this case is strong and effective relief

that should fully address the competitive harm posed by the proposed

transaction.

[[Page 26790]]

VIII. Determination Documents

There are not determinative materials or documents within the

meaning of the APPA that were considered by the plaintiff in

formulating the proposed Final Judgment.

Dated April 28, 1999.

Respectfully submitted,

James K. Foster,

Merger Task Force, U.S. Department of Justice, Antitrust Division, 1401

H Street, NW; Suite 4000, Washington, DC 20530, (202) 307-0001.

Certificate of Service

I, James K. Foster, hereby certify that, on April 28, 1999, I

caused the foregoing document to be served on defendants Suiza Foods

Corporation and Broughton Foods Company, by facsimile and first-class

mail, postage prepaid, to:

Paul Denis, Esq.,

Arnold & Porter, 555 12th Street, NW, Washington DC 20004-1202, Counsel

for Suiza Foods Corporation.

William Kolasky,

Wilmer, Cutler, & Pickering, 2445 M Street, NW, Washington, DC 20037,

Counsel for Broughton Foods Company.

James K. Foster

[FR Doc. 99-12340 Filed 5-14-99; 8:45 am]

BILLING CODE 4410-11-M