Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Flour milling joint venture modified to win U.S. approval, (May 21, 2014)

By Jeffrey May, J.D.

The Department of Justice Antitrust Division has approved a proposed joint Venture (JV) between ConAgra Foods, Cargill, and CHS to combine their North American flour milling businesses, subject to the divestiture of four flour mills. Yesterday, the Justice Department filed an antitrust lawsuit in the federal district court in Washington, D.C. to block the proposed joint venture. At the same time, a proposed consent decree was filed with the court that, if approved, would resolve the government's competitive concerns (U.S. v. ConAgra Foods, Inc., Case 1:14-cv-00823).

The Ardent Mills joint venture would combine the flour milling assets of ConAgra Mills, a subsidiary of ConAgra Foods, and Horizon Milling, a joint venture between Cargill and CHS.

In its complaint, the government alleged that the formation of Ardent Mills likely would lessen competition in violation of Section 7 of the Clayton Act and Section 1 of the Sherman Act. Specifically, it would substantially lessen competition for the provision of hard wheat flour (for crusty, chewy baked goods, such as bread, bagels, or pizza dough) to customers in Northern California, Southern California, Northern Texas, and the Upper Midwest, and soft wheat flour (for flakier baked goods, such as cakes, cookies, crackers, or pastries) to customers in Southern California and the Northern Texas.

Under the terms of the proposed final judgment, the defendants would be required to divest four flour mills located in Oakland, California; Los Angeles, California; Saginaw, Texas; and New Prague, Minnesota. The settlement also would prohibit Cargill, CHS, and ConAgra from disclosing to Ardent Mills certain non-public information relating to wheat sales to, and wheat use by, Cargill, CHS, and ConAgra wheat customers.

The companies anticipate Ardent Mills to begin operations on or about May 29. ConAgra Foods and Cargill will each own a 44 percent stake in Ardent Mills, with CHS owning a 12 percent interest.

ConAgra Foods and Cargill expect to complete the sale of four flour mills prior to May 29 to Miller Milling Company—a U.S.-based subsidiary of Tokyo-based Nisshin Flour Milling Inc. According to the Justice Department, Miller Milling has only a minimal presence in the regions of concern, and the company's acquisition of the divestiture assets will create a substantial, independent, and economically viable competitor in each relevant market.

American Antitrust Institute concerns. The Antitrust Division's blessing of the transaction came despite objections from the American Antitrust Institute (AAI) and Food & Water Watch (F&WW). Last February, in a letter to Bill Baer, Assistant Attorney General in charge of the Antitrust Division, the groups urged the Justice Department to block the deal. AAI and F&WW contended that the divestiture of four mills was an inadequate remedy.

“Together with the second largest miller, Archer Daniels Midland, the two entities will control more than 50 percent of wheat flour milling capacity in the United States if the JV is finalized,” AAI and F&WW warned.

Attorneys: Mark. J. Niefer for Department of Justice Antitrust Division. Kathryn M. Fenton and Kenneth W. Field (Jones Day) for ConAgra Foods, Inc. Scott A. Stempel and Harry T. Robins (Morgan Lewis & Bockius, LLP) for Cargill, Inc., Horizon Milling, and CHS Inc.

Companies: ConAgra Foods, Inc.; Cargill, Inc.; CHS Inc.; Nisshin Flour Milling Inc.; Miller Milling Co.

News: Antitrust AntitrustDivisionNews