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A Fresh Take

Insights on M&A, litigation, and corporate governance in the US.

| 3 minutes read

A Sweet Deal: US Sugar’s Acquisition of Imperial Sugar Allowed to Close

Over the last year, the US antitrust agencies’ new leadership has announced a series of policy reforms to advance the Biden Administration’s ambitious enforcement agenda. In the merger control context, the agencies have openly cast doubt on traditional consumer welfare analysis and pushed for a less “technocratic” (read: economics-based) approach to assessing competitive effects that accounts for “the realities of our economy.” The agencies have made clear that they intend to litigate in order to help move the law in that direction.

In this pursuit, the US Department of Justice (DOJ) last November sued to block United States Sugar Corporation’s (US Sugar’s) proposed acquisition of Imperial Sugar Company (Imperial). The transaction would integrate US Sugar’s sugar cane farming operations with Imperial’s refining capabilities. The merging firms argued that the acquisition would enhance competition, allowing US Sugar to increase its domestic sugar production and pass on cost savings to customers. The DOJ disagreed, arguing that the acquisition would leave roughly 75% of refined sugar sales in the Southeast United States in the hands of only two producers, putting consumers at the mercy of duopoly. Following a four-day bench trial, a Delaware federal court declined to enjoin the transaction. Carefully evaluating both the facts and the expert testimony presented at trial, the district court concluded that the government had failed to identify a relevant antitrust product or geographic market. The court also found that even if the government had been able to show that the deal was likely to raise refined sugar prices, the US Department of Agriculture (USDA), with its power to control the supply of sugar in the US, could safeguard against any potential anticompetitive effects.

The DOJ filed a notice of appeal, but both the district court and the Third Circuit Court of Appeals denied the government’s request for an emergency injunction. Although the appeals court has set an expedited briefing schedule, the parties were free to close the transaction as of October 3, 2022. While the outcome of the appeal is yet to be decided, the district court’s opinion contains helpful insights for parties facing the increasingly litigious US competition agencies.  

Legal Precedent Is More Powerful Than Political Rhetoric

In an April 2022 speech, Assistant Attorney General (AAG) Jonathan Kanter, head of the DOJ’s Antitrust Division, stated that the government will seek to use litigation, rather than settlements, to enforce the antitrust laws. As part of the rationale for this, he expressed a concern that “over-reliance on settlement would leave us governed by yesterday’s law” and emphasized the agency’s goal of “ensuring that the law catches up to market realities.” The practical effect of this more litigious strategy is that the agencies will have to bring tough cases that challenge existing legal precedent. This approach was (and is) almost certain to result in some losses for the agencies.

Battles of the Experts Are Still Relevant

In his April speech, AAG Kanter lamented the high degree of reliance on economic experts in merger litigation. While the Delaware district court referenced testimony from a number of fact witnesses in its opinion, the court also placed significant weight on the findings and credibility (or lack thereof) of the experts who testified at trial.

Market Definition Remains a Dispositive Factor

The district court found that the government’s proposed product and geographic markets “ignore the commercial realities of sugar supply in the US.” Based on the testimony of both fact and expert witnesses, the district court refused to accept the DOJ’s argument that distributors do not compete with sugar refiners and cooperatives. The court also rejected the DOJ’s “Southeast” and “Georgia Plus” geographic markets as too narrow, particularly in light of the fact that sugar is easy and inexpensive to transport long distances.

Broader Regulatory Context Matters

The USDA’s official stance was that it had no position on the competitive impact of the transaction. Nevertheless, the merging parties called an experienced USDA economist to testify in her personal capacity about the USDA’s ability to regulate sugar supply. The district court found her testimony sufficiently compelling to conclude that the United States government itself – via the USDA – could counteract any potential anticompetitive effects from the transaction.

Bottom Line Takeaways from the District Court’s Opinion

Under the Biden Administration, the antitrust agencies have issued bold statements reflecting a more aggressive stance toward merger enforcement, but the federal courts deciding actual litigated cases so far have continued to follow well-established legal precedent. The Delaware district court’s opinion highlights a few areas in which underlying facts and strong advocacy can help merging parties achieve success:

  • Despite efforts by the DOJ and FTC to move away from heavy reliance on economic analysis and toward a more holistic approach, battles of the economic experts have not disappeared when it comes to litigation.
  • Market definition continues to be a key area of dispute in merger challenges.
  • Don’t forget to consider the broader regulatory context and the tools the government may have at its disposal to impact pricing or supply in highly regulated industries.
  • Parties can use litigation to close transactions, even over agency objections.


antitrust and competition, m&a