Meat + Poultry - February 2010 - 12

Business Notes

The MeatIndustry
Software
Experts

Smithfield settles with Dept. of
Justice over PSF acquisition
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Smithfield Foods Inc. announced on Jan. 21 it had reached a $900,000 settlement to resolve a U.S. Dept. of Justice case relating to the Premium Standard
Farms (PSF) acquisition in 2007. The DOJ alleged Smithfield prematurely
assumed operational control of PSF, which violated the Hart-Scott-Rodino
(HSR) Act. The DOJ did not allege that Smithfield violated the substantive
antitrust law (the Sherman Act) or caused any competitive harm.
"The DOJ cleared Smithfield's acquisition of PSF more than two years
ago and the action taken by the DOJ now in no way affects that clearance or
calls into question the legality of the transaction," Smithfield said in a statement. "The company stated that it reached a settlement with the DOJ to
avoid the potential for costly and protracted litigation."
According to a DOJ press release, the settlement
requires the companies to pay a total of $900,000 in
civil penalties for violating pre-merger waiting period
requirements. The DOJ's antitrust division filed a civil
antitrust lawsuit in U.S. District Court for the District
of Columbia, along with the proposed settlement that,
if approved by the court, would resolve the lawsuit.
According to the DOJ complaint, after Smithfield and PSF announced
their proposed merger in September 2006, Smithfield exercised operational control over a significant segment of PSF's business without observing
the pre-merger waiting period requirement in violation of federal antitrust
law. Such conduct, commonly known as "gun jumping", violates the HartScott-Rodino (HSR) Act of 1976, according to the DOJ.
The complaint claims that after entering into the merger agreement, PSF
stopped exercising its independent business judgment with respect to hog
procurement. Instead, it sought Smithfield's consent for all of the hog procurement contracts that arose during the waiting period, providing Smithfield with the contract terms, including price, quantity and duration.
According to the DOJ, the hog-procurement contracts were necessary
to PSF's ongoing business and were entered into in the ordinary course.
Requiring a buyer's approval of the seller's ordinary course contracts can
prematurely transfer operational control, violating pre-merger notification
requirements, the DOJ said. ■

12 * Meat&Poultry * February 2010 * www.MeatPoultry.com

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Meat + Poultry - February 2010

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