Illinois Cereal Mills, Inc

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IN THE MATTER OF ILLINOIS CEREAL MILLS, INC.

CONSENT ORDER, ETC. , IN REGARD TO ALLGED VIOLATION OF SEC. 7 OF THE CLAYTON ACT AND SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket 9213. Complaint, June 30, 1988-Decision, March 1990 This consent order prohibits, among other things, a manufacturer and seller of industrial dry corn miling products from acquiring industrial dry corn miling assets in the U. , or any interest in a D. S industrial dry corn miling company, for a period of ten (10) years, without prior Commission approval. Appearances For the Commission: Joseph S. Brownman and Ronald B. Rowe. For the respondent: James Sneed, Steven P. Murphy, and Lizbeth R. Levinson, McDermott, Will Emery, Washington, D. C. Eugene J. Meigher, Joyce L. Bartoo and Randall J. Boe, Arent, Fox, Kitner Plotkin Kahn Washington, D. C. Dennis R. Rilinger, Watson, Ess Marshall Enggas Kansas City, MO. Kael B. Kennedy, Matrov Salzman, Madoff Gunn Chicago, IL.

COMPLAINT The Federal Trade Commission ("Commission ), having reason to believe that respondent Ilinois Cereal Mils, Inc., a corporation subject to the jurisdiction of the Commission, has entered into an agreement to acquire, took actions to implement the agreement to acquire, and did in fact acquire, certain assets from respondent Elders Grain, Inc. in violation of the provisions of Section 7 of the Clayton Act, as amended, 15 U. C. 18, and Section 5 of the Federal Trade Commission Act, 15 U. C. 45, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint pursuant to Section 11 of the Clayton Act, 15 U. C. 21 and Section 5(b) of the Federal Trade Commission Act, 15 U. C. 45 (b), stating its charges as follows: 1. DEFINITONS 1. For purposes of this complaint, the following definitions apply: g.

274 FEDERAL TRADE CO:.MISSION DECISIONS Complaint - 113 F.

a. lcm' means Ilinois Cereal Mils, Inc. , its subsidiaries, divisions and groups controlled by ICM and its directors, officers, employees agents and representatives, and their successors and assigns. b. Elders means Elders Grain, Inc. , its subsidiaries, divisions and groups controlled by Elders and its directors, officers, employees agents and representatives, and their successors and assigns. c. lndustrial dry corn milling means the milling process whereby degerminated, miled and sifted corn prime products are produced at large volume dry corn mills that are able to produce a variety of prime products required by buyers in several different product applications. Prime products include flaking grits, brewer grits, corn meal, corn flour, pregelatinized corn flour and corn-soymilk. Dry corn mils that produce milled corn products in small packages sold at retail to the consuming public are not industrial dry corn mils and the products they produce are generally not used for the same purposes.

d. Flaking grits are the largest size prime products or corn grits that are produced by the dry-milled process. They are used principally for the production of corn flakes by cereal manufacturers. Flaking grits are also referred to as number 4 grits. e. Brewer s grits the next largest size corn grits produced by the dry-miled process, are used principally as an adjunct in the brewing of beer.

f. Corn meal smaller in size than brewer s grits, is an ingredient in a wide variety of food uses, such as in snack foods, pancake mixes bakery mixes and in muffin and breading applications. Corn flour is the smallest size prime corn grits, ground to a fine consistency. Corn flour has a wide variety of food applications. h. Pregelatinized corn flour is corn flour that has been further processed by dry corn milers. It is generally used as a binder in the production of some cereals.

i. Corn-say-mille is a further processed, blended and vitaminenriched product consisting of corn grits, soy and milk. It is sold to the United States Department of Agriculture for donation to overseas relief organizations. Corn-soy-milk is also referred to as CSM. I1. THE PARTIES 2. Respondent 1CM is a Delaware Corporation with its principal place of business located in Paris, Ilinois. 3. Over the past several years, ICM has had annual net sales in excess of $100 million.

ILLNOIS CEREAL MILLS, INC. 275 273 Complaint 4. ICM is, and at all times relevant herein has been, engaged in commerce as the term "commerce" is defined in Section 1 of the Clayton Act, as amended, 15 U. C. 12, and is a corporation whose business is in or affecting commerce as "commerce" is defined in Section 4 of the Federal Trade Commission Act, 15 U. C. 44. 5. Respondent Elders is a subsidiary of Elders IXL Limited, a foreign corporation located in Australia. Elders' dry corn mil and Kansas, which itgrain elevator facilties are located in Atchison, operated as the Lincoln Grain Co.

6. Elders and its related companies have annual net sales and assets far in excess of $100 milion.

7. Elders is, and at all times relevant herein has been, engaged in commerce as the term "commerce" is defined. in Section 1 of the Clayton Act, as amended, 15 U. C. 12, and is a corporation whose business is in or affecting commerce as "commerce" is defined in Section 4 of the Federal Trade Commission Act, 15 U. C. 44. II. THE ACQUISITION 8. In or about May 1988, ICM entered into an agreement with Elders to purchase its dry corn miling assets. These assets had been operated by Elders through the Lincoln Grain Co. The transaction closed on June 5 , 1988.

9. The acquisition included a dry corn mil, approximately 91 rail cars, a lease for a portion of the grain elevator attached to the mil and a five-year option to purchase the grain elevator. IV. TRADE AND COMMERCE 10. The relevant lines of commerce in which to assess the effects of ICM' s acquisition of Elders' dry corn miling assets are (1) industrial dry corn millng for food use and (2) the specific prime products produced by dry corn mils for food use, such as flaking grts, brewer grts, corn meal, corn flour, pre gelatinized corn flour and corn-soymilk.

11. The relevant section of the country in which to assess the effects of ICM's acquisition of Elders' dry corn miling assets is the United States as a whole.

V. MARKET STRUCTURE 12. The production and sale of industrial dry corn miling products is highly concentrated, whether measured by the Herfindahl-Hirschmann indices or two-firm and four-firm concentration ratios. Decision and Order 113 F. V1. ENTRY CONDITIONS 13. Entry into the relevant markets is difficult or unlikely. VII. COMPETITION 14. ICM and Elders were (1) actual competitors in industrial dry corn miling and the production and sale of industrial dry corn milling products, (2) actual competitors in the production and sale of brewer grits, corn meal, corn flour and pregelatinized corn flour and (3) actual potential competitors in the production and sale of flaking grits and corn-soy-milk, in the United States.

VIII. EFFECTS 15. The effect of the acquisition may be substantially to lessen competition in each of the relevant lines of commerce in the United States, in the following ways, among others: a. By eliminating direct and actual competition between ICM and Elders;

b. By eliminating potential competition between ICM and Elders; and c. By increasing the likelihood of, or facilitating, actual or tacit collusion.

16. All of the above increase the likelihood that firms will increase prices and restrict output both in the near future and in the long term. IX. VIOLATIOKS CHARGED 17. The acquisition agreement between ICY! and Elders for Elders dry corn milling assets violates Section 5 of the Federal Trade Commission Act, 15 U. C. 45 , and the acquisition violates Section 7 of the Clayton Act, 15 U. C. 18, and Section 5 of the Federal Trade Commission Act, 15 U. C. 45.

DECISION A D ORDER The Commission having heretofore- issued its complaint charging respondent Ilinois Cereal Mils, Inc. ("Ilinois Cereal") with violations of Section 5 of the Federal Trade Commission Act, as amended, and Section 7 of the Clayton Act, as amended, and respondent Ilinois Cereal having been served with a copy of that complaint, together with a notice of contemplated relief; and Respondent Ilinois Cereal, its attorney, and counsel for the ILLNOIS CEREAL MILLS , INC. 277 273 Decision and Order Commission having thereafter executed an agreement containing a consent order, an admission by the respondent Ilinois Cereal of all the jurisdictional facts set forth in the complaint, a statement that the signing of said agreement is for settement purposes only and does not constitute an admission by respondent Ilinois Cereal that the law has been violated as alleged in such complaint, and waivers and oth provisions as required by the Commission s Rules; and The Secretary of the Commission having thereafter withdrawn this matter from adjudication in accordance with Section 3,25(c) of its Rules; and The Commission having considered the matter and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now, in further conformity with the procedure prescribed in Section 3.25 (f) of its Rules, the Commission hereby makes the following jurisdictional findings and enters the following order:

1. Respondent Ilinois Cereal Mils, Inc. is a corporation organized existing and doing business under and by virtue of the laws of the State of Delaware, with its offce and principal place of business located at 616 Jefferson Avenue, Paris, Ilinois. 2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of respondent Ilinois Cereal Mils, Inc. and the proceeding is in the public interest. ORDER 1. DEF1KITIONS lt is ordered That, for purposes of this order, the following definitions apply:

1. lndustrial dry corn milling industry means firms engaged in the United States in the dry miling of yellow corn whereby degermed miled and sifted grts of different sizes are produced for resale to food processors, brewers and industrial users. Dry corn mils that produce corn products in small packages solely for retail sale or in-the-home use are not in the industrial dry corn miling industry. 2. "lndustrial dry Corn milling assets mean dry corn mils equipment, machinery and rail hopper cars used to mil, sift or transport corn in connection with an industrial dry corn mil, and grain storage elevators that are owned or leased by the operator of an Decision and Order 113 F. industrial dry corn mill. Corn is not an industrial dry corn miling asset.

lnc. means Ilinois Cereal 3. "Respondent Ilinois Cereal Mills, Mils, Inc., its foreign and domestic parents, predecessors, subsidiaries, divisions, affiliates, partnerships and joint ventures controlled by Ilinois Cereal Mils, Inc. , and their respective directors, offiers employees, agents, and representatives, and their respective successors and assigns.

I1. PRIOR Approval FOR ACQUISITIONS lt is further ordered That respondent Ilinois Cereal Mils, Inc., for a period of ten (10) years from the date this order becomes final, shall not acquire or lease, directly or indirectly, without the prior approval of the Commission, industrial dry corn miling assets of any company in the industrial dry corn miling industry, or the whole or any part of the stock, share capital or equity interest of any company in the industrial dry corn miling industry;

Provided, however that prior approval is not required for the acquisition by respondent Ilinois Cereal Mils, Inc. of industrial dry corn miling assets that are either:

(1) Acquired from a single seller (including all parents, predecessors, subsidiaries, divisions, partnerships, joint ventures and affiiates thereof) if the total price of such assets acquired in any twelve-month period is less than one hundred thousand dollars ($100 000); or (2) Acquired from a single seller (including all parents, predecessors, subsidiaries, divisions, partnerships, joint ventures and affilates thereof) if the total price of such assets acquired is less than five hundred thousand dollars ($500 000), and thirty (30) days prior written notice of the details of the proposed transaction is given to the Commission. The prior notice shall include the following information: (a) a full description of the assets to be acquired, (b) an identification of the proposed seller, (c) copies of all management documents discussing the proposed acquisition, and (d) copies of all proposed acquisition agreements and all drafts thereof. In the event representatives of the Federal Trade Commission request additional documents or information in writing within the thirty (30) day waiting period respondent Ilinois Cereal Mils, Inc. shall not consummate the proposed acquisition until twenty (20) days after submitting the requested additional documents or information. Respondent Ilinois ILLINOIS CEREAL MILLS , INC. 279 273 Decision and Order Cereal Mils, Inc. may request early termination of either waiting period.

Il. OTHER OBLIGATIONS It is further ordered That respondent Ilinois Cereal Mils, Inc. shall notify the Commission at least thirty (30) days prior to any proposed change in the respondent such as dissolution, assignment or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries or any other change that may affect compliance obligations arising out of the order. It is further ordered That respondent Ilinois Cereal Mils, Inc. shall file with the Commission a verified report in writing within thirty (30) days after the date this order becomes final, setting forth in detail:

(1) The manner and form in which it has complied and is complying with this order; and (2) The manner and form in which it has complied with the rescission order of the United States District Court for the Northern District of Ilinois in Civil Action No. 88-2494. Commissioner Owen not participating.

Modifyng Order 113 F.