Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Seafood processor allegedly interfered with competitor to maintain monopoly, (Aug 10, 2016)

By Linda O’Brien, J.D., LL.M.

A multi-state seafood processing, sale, and distribution business and its owner have illegally interfered with a competing seafood processor in order to maintain their existing monopoly in the West Coast market for Dungeness crab, according to a complaint filed in the federal district court of Eugene, Oregon (Seawater Seafoods Company v. Dulcich, August 9, 2016).

Seawater Seafoods Company, owned by Bret Hamrick, is in the business of purchasing and processing Dungeness crab for export to foreign markets. Front Street Marine LLC owns waterfront property which it leases to Seawater.

Pacific Seafood Group (PSG) is the assumed business name for more than 50 entities controlled by Frank Dulcich, which engage in a multi-state business of processing, sale, and distribution of seafood.

The complaint alleges that PSG is a commercial network that possesses monopoly power in certain seafood input markets along the West Coast and controls market shares of 53, 65, and 71 percent in the trawl caught groundfish, Pacific onshore whiting, and Pacific coldwater shrimp markets, respectively. PSG’s monopoly power has been protected by significant barriers to entry, inelastic supply, the capital intensive nature of seafood processing, and the limited availability of waterfront locations zoned for industry. PSG has maintained its monopoly power through several predatory tactics, including acquiring competing processors; consolidation of processing capacity, fishing vessels, and harvest permits; suppression of ex vessel prices; and using exclusive dealing arrangements with fishermen.

The waterfront property leased to Seawater is sandwiched between lots owned by PSG. Shortly after Seawater took possession of the property and throughout the 2014-2015 crab season, the complaint claims, PSG engaged in illegal tactics to extinguish competition in the Dungeness crab market. Specifically, PSG relentlessly harassed Seawater, intimidated its suppliers, obstructed its access to public waterways, and allowed its property to be damaged by wild animals and noxious chemicals.

After Seawater moved for a preliminary injunction to halt PSG’s illegal conduct, Seawater and PSG entered into a stipulation that required the parties to cooperate with unreasonable interference by PSG. During the 2015-2016 crab season, the stipulation achieved its desired effect and PSG did not obstruct fishing vessels from delivering their catch at Seawater’s facility and Seawater was able to operate without hindrance. However, after Seawater began to expand the scope of its business to the squid, coldwater shrimp, and trawl-caught groundfish, PSG reverted to harassment and anticompetitive conduct, the complaint alleges.

The complaint also alleges that PSG has signaled its intent to interfere with Seawater’s business by building a hoist for the offloading of products at the edge of PSG’s property, which is immediately adjacent to Seawater’s facility. PSG selected the location for the purpose of creating artificial congestion and disrupting Seawater’s operations. The use of a hoist on the edge of property that is immediately adjacent to Seawater’s facility will put Seawater out of business by eliminating its suppliers’ ability to offload their catch. That result has always been PSG’s intent, the complaint claims.

The plaintiffs assert claims for tortious interference with business relations, trespass, negligence, as well as monopolization and attempted monopolization in violation of Section 2 of the Sherman 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. 6:16-cv-01607-MC.

Attorneys: Michael E. Haglund, Michael K. Kelley, and Eric J. Brickenstein (Haglund Kelley LLP) for Seawater Seafoods Company, Bret Hamrick, and Front St. Marine LLC.

Companies: Seawater Seafoods Company; Front St. Marine LLC; Pacific Seafood Group

News: Antitrust OregonNews