United States of America v. United States Sugar Corporation

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_______________
No. 22-2806
_______________
UNITED STATES OF AMERICA,
Appellant
v.
UNITED STATES SUGAR CORPORATION; IMPERIAL
SUGAR COMPANY; LOUIS DREYFUS COMPANY LLC;
UNITED SUGARS CORPORATION
_______________
On Appeal from the United States District Court
for the District of Delaware
(D.C. Civil No. 1:21-cv-01644)
District Judge: Honorable Maryellen Noreika
_______________
Argued: January 18, 2023
Before: AMBRO*, PORTER, and FREEMAN,
Circuit Judges.
* Judge Ambro assumed senior status on February 6, 2023.

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(Filed: July 13, 2023)
_______________
Melissa Arbus Sherry [ARGUED]
Amanda P. Reeves
Lindsey S. Champlin
David L. Johnson
Charles S. Dameron
Latham & Watkins LLP
555 Eleventh Street, NW
Suite 1000
Washington, DC 20004
Lawrence E. Buterman
Latham & Watkins LLP
1271 Avenue of the Americas
New York, NY 10020
Christopher S. Yates
Latham & Watkins LLP
505 Montgomery Street
Suite 2000
San Francisco, CA 94111
Jack B. Blumenfeld
Brian P. Egan
Morris, Nichols, Arshit & Tunnell LLP
1201 North Market Street
P.O. Box 1347
Wilmington, DE 19899
Counsel for Defendant-Appellee United States Sugar Corp.

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Timothy G. Cameron
Peter T. Barbur
David R. Marriott
Daniel K. Zach
Michael K. Zaken
Lindsey J. Timlin
Hannah L. Dwyer
Cravath, Swaine & Moore LLP
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Amanda L. Wait
Norton Rose Fulbright US LLP
799 9th Street, NW
Suite 1000
Washington, DC 20001
Kelly E. Farnan
Richards, Layton & Finger, P.A.
920 N. King Street
Wilmington, DE 19801
Counsel for Defendant-Appellee Imperial Sugar
Company and Louis Dreyfus Company LLC
Peter J. Schwingler
Stinson LLP
50 South Sixth Street
Suite 2600
Minneapolis, MN 55402

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Daniel K. Hogan
Hogan McDaniel
1311 Delaware Avenue
Wilmington, DE 19806
Counsel for Defendant-Appellee United Sugar
Corporation
Jonathan S. Kanter
Doha Mekki
Maggie Goodlander
David B. Lawrence
Daniel E. Haar
Nikolai G. Levin
Peter M. Bozzo [ARGUED]
U.S. Department of Justice
Antitrust Division
950 Pennsylvania Avenue, NW
Room 3224
Washington, DC 20530-0001
Brian Hanna
Jonathan Y. Mincer
U.S. Department of Justice
Antitrust Division
450 5th Street, NW
Suite 800
Washington, DC 20530-0001
Counsel for Plaintiff-Appellant United States
Lee Hepner
140 San Carlos Street

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San Francisco, CA 94110
Katherine Van Dyck
American Economic Liberties Project
2001 Pennsylvania Avenue NW
Suite 540
Washington, DC 20006
Counsel for Amicus Appellant American Economic
Liberties Project
______________
OPINION OF THE COURT
______________
PORTER, Circuit Judge.
The government appeals the denial of its motion to
permanently enjoin the acquisition of Imperial Sugar by United
States Sugar Corporation. The District Court found that the
government failed to identify the relevant product and
geographic markets and thus failed to establish a prima facie
case under Section 7 of the Clayton Act. 15 U.S.C. § 18. It
concluded that the government overlooked the procompetitive
effects of distributors in the market for refined sugar,
erroneously lumped together heterogeneous wholesale
customers, and defined the relevant geographic market without
regard for the high mobility of sugar throughout the country.
Because the District Court’s rejection of the government’s
proposed product market is not clearly erroneous, we will
affirm.
I

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Georgia-based Imperial Sugar Company has been in
financial distress for years. It went bankrupt in 2001 and
suffered a costly accident at its plant in 2008, prompting its
owners to put it up for sale. Purchased by the Louis Dreyfus
Company, Imperial has since received from Louis Dreyfus
only a subsistence level of investment to keep its operation safe
and environmentally sound. Imperial’s internal reports
describe it as an “import-based, price-uncompetitive sugar
refinery” that is “structurally uncompetitive” and suffers from
a shrinking customer base, losing roughly ten percent of its
customers from 2021 to 2022. For more than five years, Louis
Dreyfus has been trying to sell it.
Enter United States Sugar Corporation, a large Florida-
based sugar refiner that agreed to purchase Imperial. The
government contends that U.S. Sugar’s acquisition should be
blocked because it would have anticompetitive effects in the
market for refined sugar. The government alleges that the
transaction would leave only two entities in control of 75% of
refined sugar sales in the southeastern United States. It proffers
an application of the hypothetical monopolist test (HMT) and
argues that the results of that test demonstrate the validity of
its proposed product and geographic markets.
U.S. Sugar answers first that it does not even sell its own
sugar but rather participates with three other producers in a
Capper-Volstead agricultural cooperative, United Sugar, that
markets and sells the firms’ output collectively but exercises
no control over the quantities that its members produce.1 Even
if operated at capacity, it argues, Imperial’s facility could
1 Capper-Volstead cooperatives are agricultural cooperatives
exempted from certain antitrust scrutiny. See 7 U.S.C. §§ 291–
92.

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produce only about seven percent of national output—an
insufficient share either to invoke a per se presumption of
anticompetitiveness or to merit an injunction under a rule-of-
reason analysis. Second, U.S. Sugar argues that sugar
distributors constitute a crucial competitive check on producer-
refiners that would undermine any attempt to increase prices.
This effect, it argues, goes unappreciated in the government’s
HMT analysis and undermines the government’s product
market definition. Finally, it argues, evidence of the high
mobility of refined sugar throughout the country renders the
government’s proposed regional markets vacuous and
unrepresentative.
After an expedited trial, the District Court denied the
government’s plea for an injunction. It determined the
credibility of the expert witnesses and carefully weighed the
evidence. As to product market definition, the Court concluded
that U.S. Sugar was right to extoll the effects of sugar
distributors, who account for approximately 25% of sales of
refined sugar in the U.S. It rejected the government’s proposed
product market, concluding that any proposed product market
must include sales of refined sugar sold by distributors if it is
to be relevant. Turning to the proposed geographic market, the
Court recounted considerable evidence presented at trial of
sugar’s high geographic mobility and the ease with which
producers and distributors could avail themselves of arbitrage
by selling to out-of-region buyers. It concluded that the
government’s analysis failed to account for this mobility,
making its proposed markets too narrow to be relevant. The
government timely appealed.
II

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The District Court had jurisdiction under 15 U.S.C. § 25
(“district courts of the United States are invested with
jurisdiction to prevent and restrain violations of [the Clayton]
Act”). It entered final judgment on September 23, 2022. The
government filed a notice of appeal on September 26, 2022.
This Court has jurisdiction under 28 U.S.C. § 1291.
On appeal from a Rule 52 ruling, we review “findings
of fact for clear error” and “conclusions of law de novo.” See
FTC v. Penn State Hershey Med. Ctr., 838 F.3d 327, 335 (3d
Cir. 2016) (“Hershey”).2 As for the specific issues on appeal,
“the determination of a relevant market is composed of the
articulation of a legal test which is then applied to the factual
circumstances of each case.” Id. (quoting White & White, Inc.
v. Am. Hosp. Supply Corp., 723 F.2d 495, 499 (6th Cir. 1983)).
Thus, “while a district court’s conclusion concerning what
constitutes the relevant market is subject to the clearly
erroneous standard of review, the district court’s formulation
of the market tests may be freely reviewed on appeal as a
matter of law.” Worldwide Basketball & Sport Tours, Inc. v.
Nat’l Collegiate Athletic Ass’n., 388 F.3d 955, 960 (6th Cir.
2004). A court’s conclusion concerning what constitutes the
relevant market is a finding of fact that is “clearly erroneous”
only if it is “completely devoid of minimum evidentiary
support displaying some hue of credibility or bears no rational
relationship to the supportive evidentiary data.” Berg Chilling
Sys., Inc. v. Hull Corp., 369 F.3d 745, 754 (3d Cir. 2004). “[S]o
2 U.S. Sugar suggests, that, by arguing only in terms of plenary
review, the government has forfeited a clear error challenge.
But “[a] party cannot waive, concede, or abandon the
applicable standard of review,” so we reject this contention.
United States v. Escobar, 866 F.3d 333, 339 (5th Cir. 2017)
(per curiam).

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we review for clear error.” FTC v. Hackensack Meridian
Health, Inc., 30 F.4th 160, 167 (3d Cir. 2022).3 However,
“where a district court applies an incomplete economic
analysis or an erroneous economic theory to those facts that
make up the relevant geographic market, it has committed legal
error subject to plenary review.” Hershey, 838 F.3d at 336.
III
A. The District Court did not clearly err in rejecting the
government’s product market definition.
1. The relevant product market is the market for
refined sugar.
A claim arising under the Clayton Act, § 7, is evaluated
under a three-part burden-shifting framework. Hackensack, 30
F.4th at 166. First, the government must establish a prima facie
case that the merger is anticompetitive. Id. To do so, it must
“propose the proper relevant market and . . . show that the
effect of the merger in that market is likely to be
anticompetitive.” Id. Second, the burden to produce evidence
3 Though the government characterizes the District Court’s
product market holding as “legal error” and urges us to review
the question de novo, to do so would create inconsistency:
market definition inquiries such as this rely heavily upon the
testimony of expert witnesses who are prohibited from
rendering legal opinions. M.S. ex rel. Hall v. Susquehanna
Twp. Sch. Dist., 969 F.3d 120, 129 (3d Cir. 2020) (noting that
“an expert cannot testify to [a] legal conclusion”). Therefore,
the history of Section 7 litigation and reliance upon expert
witnesses necessitates an understanding of product market
definition as a factual inquiry.

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to rebut the government’s prima facie case shifts to the
defendant. See, e.g., United States v. Baker Hughes Inc., 908
F.2d 981, 982–83 (D.C. Cir. 1990). Third, “[i]f the defendant
successfully rebuts the presumption, the burden of producing
additional evidence of anticompetitive effect shifts to the
government, and merges with the ultimate burden of
persuasion, which remains with the government at all times.”
Id. at 983.
This appeal concerns only the first prong of the first part
of that analysis: identification of the relevant market. The
government argues that, in defining a product market under
Section 7, the District Court clearly erred by treating
distributors as separate sources of refined sugar capable of
undercutting efforts by a hypothetical monopolist to restrict
output and increase price.
The government contends that the HMT, the test
“commonly used in antitrust actions to define the relevant
market,” FTC v. Sanford Health, 926 F.3d 959, 963 (8th Cir.
2019), requires courts to adhere to a stratified model of the
market in which refiners sell to distributors, which then sell to
wholesalers, which then sell to retailers, which then sell to
consumers. In this abstract, stratified model, a distributor
would have no source of refined sugar beyond the refiners in
its (properly defined) geographic market. Therefore, the
government argues, a court cannot take cognizance of
distributors or alternate sugar sources as potential checks on
refiners’ market power.
This case is somewhat atypical among product-market-
definition disputes, as it is not a dispute about defining the
product. Notably, in United States v. E.I. du Pont de Nemours
& Co., the Supreme Court was pressed to answer whether

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DuPont’s patent on cellophane created a monopoly or whether
the relevant product market should be more broadly conceived
of as “flexible wrapping materials,” of which cellophane was
just one kind. 351 U.S. at 396–400. Similarly, in Erie Sand &
Gravel Co. v. FTC, we were asked to decide whether “lake
sand” used to make concrete was its own product or whether
sand from a pit or sand from a bank could fairly be included
with it. 291 F.2d 279, 281 (3d Cir. 1961). These cases typify
the standard product-market-definition inquiry.
Here, all are agreed: the product is refined sugar. The
dispute is over defining the product market as either that for
the sale of refined sugar or for the “production and sale” of
refined sugar, Appellant’s Br. 2, the latter of which excludes
parties who sell but do not produce—i.e., distributors and
wholesalers. The government contends that a proper
application of the HMT requires us to limit our focus to only
those firms that both produce and sell refined sugar and to
exclude sellers who do not themselves refine sugar. It reasons
that even if, arguendo, distributors can bring sugar to market
from other regions of the country or from overseas in response
to higher local prices, all refined sugar must begin with a
refiner, so under the HMT, distributors are customers, not
suppliers, and should be treated as such under a proper
application of the test. It therefore maintains that the District
Court erred in considering distributors who could counteract
monopolistic restrictions by releasing their own supplies.
U.S. Sugar, in turn, citing our decision in Allen-Myland
Inc. v. IBM Corp., 33 F.3d 194 (3d Cir. 1994), argues that
where, as a matter of fact, independent distributors in this
industry already are and will remain competitors,
acknowledging them as such is entirely consistent with our
case law. There, we addressed allegations against IBM of

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unlawful tying in violation of the Sherman Act. Id. at 200. In
defining the relevant market, the question arose whether leases
of computer mainframes competed with computer
manufacturers’ sales to end users. Id. at 202. Reversing the
district court, we held that
to the extent that leasing companies deal in used, non-
IBM mainframes that have not already been counted in
the sales market, these machines belong in the relevant
market for large-scale mainframe computers. Unlike
IBM, there is no allegation that the manufacturers of
these computers possess the market power to control
prices, much less that they would do so in concert with
IBM. When these computers are placed in service by
leasing companies, they provide an alternative that
limits IBM’s power in the market.
Id. at 203 (footnotes omitted).
Allen-Myland thus makes clear that resellers may serve
as competitive checks on a seller-manufacturer. The
government offers a different interpretation. In its telling, the
Allen-Myland Court “reversed because manufacturers’ market
shares would already include new large-scale mainframe
computers sold by manufacturers to leasing companies,” and
to add the products in again when end-users leased them from
leasing companies would lead to double-counting “because the
leasing companies themselves ‘do nothing to increase the
supply of new machines.’” Appellant’s Br. 26 (quoting Allen-
Myland, 33 F.3d at 202) (cleaned up).
While the government’s quoted language from the
Allen-Myland opinion is accurate, it lacks context. The Allen-
Myland Court did say that leasing companies themselves did

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“nothing to increase the supply of new machines” when the
machines in question were IBM machines. 33 F.3d at 202. But
“to the extent that leasing companies deal in used, non-IBM
mainframes that have not already been counted in the sales
market,” “they provide an alternative that limits IBM’s power
in the market.” Id. at 203. So when the product is defined by
its source, e.g., “IBM computers” or “U.S. Sugar refined
sugar,” then aftermarket sales or leases of that product “do
nothing to increase the supply” thereof. Id. at 202. But when
an ostensible downstream party—a leasing company or
wholesaler—has alternative sources for the same kind of
product, e.g., computers or refined sugar, and places them in
the stream of commerce, they impose a competitive check
upon that source’s power in the market. And this is more likely
to be true the more homogeneous the product: customers
generally place less value upon the question of who
manufactured the product when the product is a commodity,
like sugar, rather than a branded piece of technology, like a
computer. See George Stigler, A Theory of Oligopoly, 72
JOURN. POL. ECON. 44, 49 (1964) (“From the viewpoint of any
one buyer . . . [t]he costs of shifting among suppliers will be
smaller the more homogeneous the goods[.]”).
The government’s focus on “production and sale” is a
red herring. The proper product market definition here is the
market for refined sugar, much as it was the market for
“flexible packaging material” in E.I. du Pont, 351 U.S. at 400,
or for concrete-grade sand in Erie Sand & Gravel, 291 F.2d at
281. The District Court noted that the “Government introduced
no evidence at trial that purchasers care whether their sugar
supplier is a refiner producer, a marketing entity, a cooperative
or a distributor.” J.A. 36, ¶ 85. So defining the product market
to include production and sale is irrelevant to consumer

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welfare and a purely self-serving description by the
government.
2. The District Court’s analysis, based in practical
indicia, was valid.
There is some ambiguity regarding the extent to which
the District Court relied upon HMT analysis in making its
decision. It mentioned the HMT only once, in the section of its
opinion analyzing the government’s proposed geographic
market. In defining the product market, it instead focused on
the “practical indicia” of “industry or public recognition of the
submarket as a separate economic entity, the product’s peculiar
characteristics and uses, unique production facilities, distinct
customers, distinct prices, sensitivity to price changes, and
specialized vendors.” J.A. 46–47 (quoting Brown Shoe Co.,
Inc. v. United States, 370 U.S. 294, 325 (1962)). And it
properly defined its inquiry as one of interchangeability and
cross-elasticity in order “to recognize where competition
exists.” J.A. 47.
The District Court did not err by considering facts on
the ground rather than relying upon HMT analysis. Our
precedent makes this clear. Cf. Hershey, 838 F.3d at 345 (“We
are not suggesting that the hypothetical monopolist test is the
only test that the district courts may use.”). The government
cites no authority for its contrary view that “the hypothetical
monopolist test . . . governs market definition.” Appellant’s Br.
22 (emphasis added). The District Court permissibly
considered the “highly factual issue” of cross-elasticity of
demand and the “[s]pecial characteristics of the relevant
industry [that] may influence market definition.” Tunis Bros.
Co., Inc. v. Ford Motor Co., 952 F.2d 715, 723 (3d Cir. 1991).

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That factual inquiry was well-founded and not clearly
erroneous. The District Court found that “[d]istributors have
the ability to purchase large quantities of refined sugar from
many different sources, including foreign competitors, and this
allows distributors to price resales competitively.” J.A. 33, ¶
79. It also found that “[d]istributors account for approximately
25% of sales of refined sugar in the U.S.,” id. at 34, ¶ 80, and
noted that “[a]t trial, there were many examples of customers
purchasing large quantities of sugar from distributors,” id., ¶
81, with distributors “compet[ing] for sales to wholesale
customers of all sizes, including large industrial customers,”
J.A. 35, ¶ 83.
It found that “distributors are the primary importers of
refined [sugar] imports,” tending “to purchase the majority of
foreign-produced refined sugar imports” in the United States,
J.A. 33–34, ¶ 79. And U.S. Sugar’s expert witness, Dr. Hill,
testified “that distributors buy from a variety of sources, which
gives them independence and the ability to compete with
refiners in the market.” Id. Based on sufficient evidence and
weighing the testimony of the parties’ expert witnesses, the
District Court thus rejected, in this industry, the government’s
preferred rigid hierarchy of refiners, distributors, wholesalers,
retailers, and consumers, with each only buying from the
source above it.
The District Court’s factual findings are extensive and
carefully noted. It considered the government’s proposed
market, the objections thereto, and other factors on which it
was free to rely to inform its view of the situation. The
government would prefer that the HMT be deemed to “govern”
the field at Stage I and that its own construction of the HMT
be accepted without scrutiny. The law does not require the

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District Court to do either, and its decision as to product-
market definition evinces no clear error.
3. The District Court was not required to accept a
market encompassing “widely divergent
customers.”
The government contends that the District Court
committed “legal error” by “requiring” the government to
“further subdivide the market and differentiate between refined
sugar sales to industrial customers and refined sugar sales to
retail customers.” Appellant’s Br. 27 (cleaned up). It proposed
a product market in which wholesale customers include
industrial food and beverage manufacturers, retailers, food
service companies, and distributors. J.A. 37, ¶ 87. The District
Court found that, in advocating for this proposed market, the
government’s expert failed to differentiate between refined
sugar sales to industrial customers and those to retail customers
and that he “made no attempt to consider whether industrial
consumers have the same competitive alternatives as other
customers.” Id.
“Defining a relevant product market is . . . a factual
question,” and the District Court treated it as such. Polypore
Intern., Inc. v. FTC, 686 F.3d 1208, 1217 (11th Cir. 2012). It
looked to the facts, considered expert witness testimony, made
credibility determinations, and concluded that the government
witness was less credible and his testimony less helpful than
that of the defendant’s witness. This is not “a matter of law,”
as the government styles it, but a matter of fact. Appellant’s Br.
27; see SmithKline Corp. v. Eli Lilly & Co., 575 F.2d 1056,
1062 (3d Cir. 1978).

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The government asserts that “the Supreme Court has
repeatedly confirmed[] there is no legal requirement that
plaintiffs divide a broadly defined market into submarkets.”
Appellant’s Br. 27. Its references meant to support the
argument are not on point. Appellant’s Br. 28 (citing Brown
Shoe, 370 U.S. at 327; United States v. Phillipsburg Nat’l Bank
& Tr. Co., 399 U.S. 350, 360 (1970); United States v. Greater
Buffalo Press, Inc., 402 U.S. 549, 553 (1971); United States v.
Cont’l Can Co., 378 U.S. 441, 457–58 (1964)). In Brown Shoe,
the Court held that a district court was not “required to employ
finer[] distinctions” or pursue “[f]urther division” of the
market where such “division does not aid [the court] in
analyzing the effects of [a] merger.” 370 U.S. at 327. To say
that finer distinctions are not “required” does not mean that
they are prohibited. Id. The standard is what “aid[s]” a district
court in analyzing the facts. Id. And the government’s other
cases stand for the mere proposition that a court should not let
the existence of submarkets persuade it to “disregard a broader
line of commerce that has economic significance.”
Phillipsburg Nat’l Bank, 399 U.S. at 360. Here, the District
Court did not disregard the broader line of commerce in refined
sugar; it simply determined that distinguishing between
industrial and retail sales more accurately described the reality
of the market.
Contrary to the government’s portrayal, the District
Court did not make any categorical statements about a need to
always subdivide markets. It simply recognized that when
defining a market, courts may draw distinctions as necessary
to understand a merger’s effects on consumers. That factual
determination was not clearly erroneous.
To establish its prima facie case, the government must
propose the proper relevant market, “includ[ing] both a product

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market and a geographic market.” Hackensack, 30 F.4th at 166.
As it has failed to articulate a relevant product market, we do
not consider its argument as to a proposed geographic market.
B. The District Court’s consideration of USDA responses
as a remedy for antitrust harm was error, but it is not
material.
The District Court offered one further argument against
the government’s case: that “even if U.S. Sugar’s acquisition
of Imperial were likely to have any anticompetitive effects, the
Court believes that the USDA has the ability to counteract
those effects” by “increas[ing] the amount of low- or no-duty
sugar that can be imported into the U.S.” J.A. 63. “Doing so,”
it reasoned, “would increase the available sugar for sale in the
U.S., thereby bringing prices back down.” Id. In particular, the
Court highlighted the USDA’s “discretionary ability to
increase the amounts imported under the TRQ [tariff-rate
quota] system and U.S.-Mexico Suspension Agreements in
order to maintain reasonable prices.” Id.
The government is correct to describe this line of
reasoning as improper. “Repeals of the antitrust laws by
implication from a regulatory statute are strongly disfavored,
and have only been found in cases of plain repugnancy between
the antitrust and regulatory provisions.” United States v. Phila.
Nat’l Bank, 374 U.S. 321, 350 (1963) (citations omitted). A
finding of implied repeal “can be justified only by a convincing
showing of clear repugnancy between the antitrust laws” and
an alternative “regulatory system.” United States v. Nat’l Ass’n
of Sec. Dealers, 422 U.S. 694, 719 (1975). And in this case,
there is no argument presented that any statutory provision
immunizes the sugar industry against antitrust challenge. The
government’s simultaneous efforts to keep sugar prices high

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through USDA policy and to lower them through antitrust suits
may seem contradictory, but it is not unlawful for the
government to pursue contradictory aims, and price supports
do not create immunity from antitrust.
That said, as the District Court’s reasoning on USDA
price supports did not alter the outcome of its opinion,
reversing it would not salvage the government’s case. The
Court’s analysis of market definition stands unaffected by
those portions of its opinion on USDA policy.
* * *
Defining a relevant market depends in equal parts upon
defining the product market and the geographic market, and a
failure to do either is dispositive. The District Court concluded
that the government failed to define a relevant product market.
Its analysis is not clearly erroneous. We will affirm.

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