Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Seafood firm’s acquisition of processor allegedly would increase monopoly power, (Jan 23, 2015)

By Linda O’Brien, J.D., LL.M.

A multi-state seafood processing, sale, and distribution business and its owner will increase their existing monopoly power in the West Coast markets for trawl-caught groundfish, Pacific whiting, and Pacific coldwater shrimp through the acquisition of the largest seafood processing plant on the West Coast, according to a complaint filed in the federal district court of Medford, Oregon by a group of commercial fishermen. If allowed to proceed, the acquisition allegedly would cause irreparable harm to the fishermen in the form of decreased competition and lower prices for the sale of their seafood commodities (Boardman v. Pacific Seafood Group, January 22, 2015).

Pacific Seafood Group is the assumed business name for 55 entities, controlled by Frank Dulcich, that engage in a multi-state business of processing, sale, and distribution of seafood and have gross sales in excess of $1 billion. Jeff Boardman, Dennis Rankin, Robert Seitz, Todd L. Whaley, and Lloyd D. Whaley are commercial fishermen and operate fishing vessels that participate in numerous fisheries on the West Coast of the United States.

The complaint alleges that Ocean Gold Seafoods owns and operates the largest and most modern seafood processing plant on the West Coast. Pacific Seafood Group controls virtually all of the business operations of Ocean Gold Seafoods through a comprehensive, exclusive long-term marketing contract that expires in February 2016.

In 2010, a group of commercial fishermen filed a class action lawsuit against Pacific Seafood Group, which was resolved by a comprehensive settlement agreement. The settlement provided that the exclusive marketing contract between Pacific Seafood and Ocean Gold Seafoods, which granted Pacific Seafood complete control over the sales and marketing of any seafood product produced by Ocean Gold Seafoods, would not be renewed at the end of its term in February 2016.

After the signing of the class action settlement agreement, Pacific Seafood and Ocean Gold Seafoods conspired to suppress the ex vessel prices paid to fishermen and allocate individual fishing vessel suppliers in the seafood market. Since 1983, Pacific Seafood has purchased 18 seafood processing plants in Northern California, Oregon, and Washington, has become the sole buyer of seafood in seven coastal cities, assembled its own fishing fleet by purchasing 13 vessels active in the West Coast market and seafood harvest permits. Dulcich also owns over 31 percent of the stock in Ocean Gold Seafoods. Pacific Seafood now seeks to close a deal in which it would obtain a 90 percent stake in Ocean Gold Seafoods. This planned acquisition of Ocean Gold Seafoods would violate the class action settlement agreement.

Since 2005, Pacific Seafood has possessed monopoly power in the following relevant seafood markets: 53 percent market share for processed trawl-caught groundfish, 65 percent for Pacific onshore whiting, and 71 percent for Pacific coldwater shrimp. Its monopoly power has been protected by substantial barriers to entry and expansion, which include (1) the inelastic character of the supply; (2) the uncertain prospects for future supply as a result of intensive government regulation; (3) Pacific Seafood’s cost advantages over competing processors; (4) the economies of scale and vertical integration; and (5) the limited number of waterfront locations zoned and suitable for seafood processing plant operations.

The plaintiffs assert claims for monopolization and attempted monopolization in violation of Section 2 of the Sherman Act. The action seeks declaratory and injunctive relief, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 1:15-cv-00108-CL.

Attorneys: Michael E. Haglund, Michael K. Kelley, and Shay S. Scott (Haglund Kelley LLP) for Jeff Boardman, Dennis Rankin, Robert Seitz, Todd L. Whaley, Lloyd D. Whaley, South Bay Wild, Inc., Miss Sarah, LLC, and My Fisheries, Inc.

Companies: South Bay Wild, Inc.; Miss Sarah, LLC; My Fisheries, Inc.; Pacific Seafood Group.

News: Antitrust OregonNews