view current print edition




Justice Department showing interest in produce industry

by By Tad Thompson | November 03, 2009
PHILADELPHIA -- The fact that U.S. Department of Justice served subpoenas on leaders of the South African and Australian citrus industries in Anaheim, CA, as the Produce Marketing Association convention was underway is an indication that these are days for the U.S. produce industry to be mindful of its trade activity.

David Holzworth, general counsel in the United States representing Asociaci?n de Exportadores de Chile, the Chilean Fruit Exporters Association in Santiago, Chile, spoke at a Chilean preseason fruit import meeting Oct. 30, here, and indicated that the subpoenas were distributed at PMA. Mr. Holzworth would not specify who received subpoenas or how many were served, either in his presentation or in subsequent interviews with The Produce News. Those receiving subpoenas are advised not to discuss them publicly, so receiving details on them is a challenging task.

On Nov. 3, a spokesman for South Africa's Western Cape Citrus Producers Forum released a statement to The Produce News, saying, "The Western Cape Citrus Producers Forum has received a request for documents from the U.S. Department of Justice as part of an ongoing investigation regarding the citrus industry. The Forum is cooperating fully with this request."

Mr. Holzworth, who is partner-in-charge of the Washington, DC, office of the law firm Adorno & Yoss LLP, has extensive experience dealing with matters like these. With this, Mr. Holzworth has worked in Washington for many years and provided insight on the broader scheme of what is happening with antitrust enforcement.

He said that patterns in government activity can resemble seismic activity serving notice of a coming major earthquake.

The first tremor came in January 2007, when the U.S. Department of Justice investigated three citrus import firms for questions about possible trade violations between the United States, South Africa and Australia. On Nov. 3, an official for one of those firms declined to comment on the event other than to say that after a Jan. 18, 2007, visit by FBI investigators, nothing ever happened.

On Nov. 3, Mr. Holzworth said the 2007 event came about because of a whistle blower. It meant that someone was cut out of the deal. Was citrus coming in and that person wasnt getting any portion? he speculated. He said it could be a classic case of exclusion from the market, which is an antitrust violation. If it is a situation where suppliers try to control volume and also price, it is a scenario that would certainly cause the DOJ to investigate. If it turns out to be a violation, it is a much more complex process.

Mr. Holzworth said the fact that the 2007 investigation has been apparently dormant for almost three years is a mystery only the DOJ could shed light on. The investigations typically go on for years. Its not unusual for there to be a three-year delay.

The dropping of the case could be as simple as budget cuts at DOJ. So, there may not have been the legal staff to follow-up on the 2007 investigation into the citrus industry.

Now, much greater tremors are being felt regarding antitrust investigations of agriculture, Mr. Holzworth noted.

He said that the Bush administration tended to be anti-antitrust. The policy was more or less: 'Let businesses take care of themselves, and enforcement was at a relatively low level.

By contrast, the Obama administration upon taking office took that policy from a relatively low level to one that is clearly intended to be much higher than the Bush administration approach and could still be quite a bit higher. Typically, that happens when there is a change in party. There are swings of the pendulum back and forth. Now we are in an era of more aggressive antitrust enforcement.

Mr. Holzworth continued, What we know is that almost as soon as President Obama took office, there was a statement that there was going to be a change in stance within the Antitrust Division at the Justice Department and with the Federal Trade Commission that there will be a more aggressive posture. I believe their budgets also had a substantial increase, Mr. Holzworth told The Produce News. It is not at all surprising that the investigations that were going at a slower pace or were dormant became reactivated early this year.

Mr. Holzworth said that a player in this is the American Antitrust Institute, which is a Washington-based group that is very aggressive in encouraging antitrust enforcement.

Mr. Holzworth related a statement that President Obama shared in July with the AAI: My administration will take aggressive action to curb the growth of international cartels, working alone and with other jurisdictions to ensure that firms, wherever located, that collude to harm American consumers are brought to justice.

This July statement foreshadowed an announcement in the Aug. 27 Federal Register (Vol. 74, No. 165, pages 43725-43726) in which the notice Agriculture and Antitrust Enforcement Issues in Our 21st Century Economy opens with the position: The Antitrust Division of the U.S. Department of Justice (DOJ) and the United States Department of Agriculture (USDA) strongly believe that a competitive agriculture sector is vitally important to producers and consumers alike.

The DOJ and USDA, with the participation of state Attorneys General, intend to hold a series of public workshops to explore competition issues affecting the agricultural sector in the 21st century and the appropriate role for antitrust and regulatory enforcement in that sector. This work is to begin in early 2010.

Mr. Holzworth said: This announcement shows an increased focus on potential antitrust violations in agriculture. The subpoenas issued in early October in Anaheim were the next step in the policy, he added.

Although these subpoenas were served, it is not clear that anyone did anything wrong, he said. The part that is important for the industry -- regardless of if anything was actually wrong - is that they have to be more aware than usual of the rules to govern business.

He said that the workshops announced in the Federal Register are to make people aware that there are rules that affect how they do business. Here is a way to assure that people understand the rules of the game. If they follow these going forward, there will not be a problem.

Mr. Holzworth said that industry salesmen drawing contracts need to protect themselves by knowing the rules. They should talk to company lawyers and go to workshops. They should know the rules if they want stay in business and not get caught up in other things that are going on, or that were going on four or five years ago. That is someone elses problem, so be smart and go about doing business appropriately.

Mr. Holzworth added, Any time there is an antitrust policy initiative in play in an industry, it has a tendency to affect everyone in that industry, even if it is focused on only one thing. He re-emphasized that the focus on the South Africa and Australia citrus industries doesnt necessarily mean there was any misconduct. It just triggered an investigation.

The investigation may bring the industry more subpoenas for witnesses. Those witnesses may not be targets of the investigation.

It is difficult to have a clear-cut view of current DOJ investigations, Mr. Holzworth said, noting, It is hard to take a clear picture of a fuzzy object.