Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Mitsubishi allegedly used exclusive agreements to suppress competition in Mexican solar sea salt market, (Apr 11, 2016)

By Linda O’Brien, J.D., LL.M.

Japanese business enterprise Mitsubishi Corporation and Mexican salt producer ESSA engaged in a conspiracy to suppress competition in the salt market by making Mitsubishi the exclusive distributor of ESSA solar sea salt in the United States, according to a complaint filed in the federal district court in Los Angeles (Sea Breeze Salt, Inc. v. Mitsubishi Corporation, April 6, 2016).

Sea Breeze Salt, Inc. is a distributor of Mexican solar sea salt to retailers in the United States. Based in Guadalajara, Mexico, Innofood, S.A. de C.V. is a wholesaler that does business with distributors in California. Sea Breeze and Innofood entered into a contract for the distribution of salt within California.

Formed in 1976, ESSA is a joint venture between the Mexican government and Mitsubishi Corporation, which has grown to become a major producer and exporter of salt products throughout the world. ESSA is known for producing some of the purest solar sea salt in the world.

According to the complaint, being a shareholder of ESSA, Mitsubishi has exercised substantial control over ESSA. Mitsubishi employees sit on ESSA’s board of directors, provide all of ESSA’s market research, oversee the quality of the salt, and establish working relationships with buyers of its products in Japan. Mitsubishi and its subsidiaries hold 100 percent of the distribution rights of ESSA-produced salt.

A new general director of ESSA took office and began developing contracts with other companies for the purchase of ESSA’s solar sea salt. In February 2014, ESSA and Innofood entered into an agreement for the sale and distribution of solar sea salt. Under the agreement, the price that Innofood paid for the salt was linked to the basic price that Mitsubishi paid, plus an extra 8 percent. Additionally, Innofood was required to pay certain fees directly to Mitsubishi, the complaint alleges.

Despite the price discrimination in the ESSA-Innofood contract, Mitsubishi attempted to eliminate competitors from the market entirely, the complaint charges. In late 2014, Mitsubishi arranged for the termination of the general director and, in February 2015, ESSA’s alleged refusal to sell any further solar sea salt to Innofood. As a result of ESSA’s alleged failure to comply with the 2014 agreement, Innofood was prevented from fulfilling its purchase orders from Sea Breeze and was forced to cancel its distribution agreement with Sea Breeze. Because ESSA accounts for 90 percent of the Mexican salt production, Innofood had no commercially reasonable and interchangeable alternative sources from which to obtain solar sea salt.

The complaint also states that Mitsubishi and ESSA have entered into agreements with ESSA for the exclusive distribution of all salt produced by ESSA. Innofood has lost $100 million in profit as a result of ESSA’s and Mitsubishi’s concerted efforts to deny competitors access to solar sea salt. Similarly, Sea Breeze allegedly lost hundreds of millions of dollars in profits due to its lost sales as a consequence of the defendants’ conduct.

The plaintiffs assert claims for intentional interference with contractual relations; intentional interference with prospective economic advantage; and illegal restraint of trade and unlawful exclusive agreement in violation of Section 1 of the Sherman Act, Section 3 of the Clayton Act, and California’s Cartwright Act. The action seeks declaratory and injunctive relief, damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 2:16-cv-02345-DMG-AGR.

Attorneys: G. Jill Basinger, Rory S. Miller, and Louis D. Nutt (Glaser Weil Fink Howard Avchen & Shapiro LLP) for Sea Breeze Salt, Inc. and Innofood, S.A. de C.V.

Companies: Sea Breeze Salt, Inc.; Innofood, S.A. de C.V.; Mitsubishi Corporation; Exportadora de Sal, S.A. de C.V

News: Antitrust CaliforniaNews