Case 1:21-cv-01482-RJL Document 1 Filed 06/01/21 Page 1 of 12
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`UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF COLUMBIA
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`Plaintiff,
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`UNITED STATES OF AMERICA,
`U.S. Department of Justice
`Antitrust Division
`450 Fifth Street, N.W., Suite 8000
`Washington, DC 20530
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`v.
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`ZEN-NOH GRAIN CORP.
`1127 Highway 190,
`East Service Road
`Covington, LA 70433
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`and
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`BUNGE NORTH AMERICA, INC.,
`1391 Timberland Manor Parkway
`Chesterfield, MO 63017
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`Defendants.
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` Civil Action No.:
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`COMPLAINT
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`The United States of America, acting under the direction of the Attorney General of the
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`United States, brings this civil antitrust action to prevent Zen-Noh Grain Corp. from acquiring
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`assets of Bunge North America, Inc. The United States alleges as follows:
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`I.
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`INTRODUCTION
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`1.
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`American farmers produce the crops that feed our nation and the world. The
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`United States’ primary crops are corn and soybeans (collectively referred to here as “grain”).
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`American farmers produced 14.2 billion bushels of corn and 4.14 billion bushels of soybeans in
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`2020, and roughly one-quarter of these grains were exported. In the United States, grain may
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`flow from the farm directly to end users like ethanol plants and feed mills, or farmers can sell
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`their grain to local grain elevators, where it is stored and aggregated, and later transported by
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`train or barge to more distant domestic end users or to port elevators for export. To earn a fair
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`return on their hard work and investments, farmers rely on vigorous competition between the
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`companies that purchase their grain for direct use or further resale.
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`2.
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`Zen-Noh Grain Corp. (“ZGC”) seeks to acquire 35 operating and 13 idled U.S.
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`grain elevators from Bunge North America, Inc. (“Bunge”). These elevators are located in nine
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`states, mainly along the Mississippi River and its tributaries. ZGC and Bunge are both grain
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`traders and exporters, each purchasing millions of tons of corn and soybeans annually from
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`farmers located across the United States’ agricultural regions, and through their networks
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`distributing the grain to customers throughout the United States and the rest of the world.
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`3.
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`Today, ZGC, along with its affiliate CGB Enterprises, Inc. (“CGB”), a 50-50 joint
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`venture between ZGC and Itochu Corporation, competes against Bunge to purchase corn and
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`soybeans at numerous U.S. grain elevators and at their port elevators. In particular, in some
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`areas along the Mississippi and Ohio Rivers where the Defendants operate competing river
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`elevators, farmers have few – if any – alternative purchasers for their grain. The acquisition will
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`eliminate competition between ZGC and Bunge in those locations; as a result, many U.S. farmers
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`are likely to receive lower prices and poorer quality service when seeking to sell their grain.
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`4.
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`In nine geographic areas, a Bunge elevator and a nearby ZGC or CGB elevator
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`represent two of only a small number of alternatives where area farmers can sell their grain. In
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`those nine areas, ZGC and Bunge currently compete aggressively to win farmers’ business by
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`offering better prices and more attractive amenities such faster grain drop-off services and better
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`grain grading. Faster drop-off services mean farmers can get back to their fields more quickly
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`and make better use of their trucks and employees, ultimately saving time and money. If one
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`elevator is grading grain more harshly or inconsistently, which may lead to a lower price paid to
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`a farmer for the grain, the farmer has the option of selling to a competing elevator which may
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`grade differently.
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`5.
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`If the proposed transaction proceeds in its current form, farmers located in these
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`areas are likely to receive lower prices and lower quality services, and have fewer choices for the
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`sale of their crops. The proposed transaction therefore is likely to lessen competition
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`substantially in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18, and the Court should
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`enjoin this unlawful transaction.
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`II.
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`JURISDICTION AND VENUE
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`6.
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`The United States brings this action pursuant to Section 15 of the Clayton Act, 15
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`U.S.C. § 25, to prevent and restrain Defendants from violating Section 7 of the Clayton Act, 15
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`U.S.C. § 18.
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`7.
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`Defendants are engaged in, and their activities substantially affect, interstate
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`commerce. ZGC and Bunge both purchase, store, and sell grain throughout the United States.
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`The Court has subject matter jurisdiction over this action pursuant to Section 15 of the Clayton
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`Act, 15 U.S.C. § 25, and 28 U.S.C. §§ 1331, 1337(a), and 1345.
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`8.
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`ZGC and Bunge have each consented to personal jurisdiction and venue in this
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`jurisdiction for purposes of this action. Venue is proper under 15 U.S.C. § 22, and 28 U.S.C. §
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`1391(b) and (c).
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`III. DEFENDANTS AND THE PROPOSED TRANSACTION
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`9.
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`This case arises from ZGC’s proposed acquisition of certain grain elevator assets
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`from Bunge for approximately $300 million pursuant to an Asset Purchase Agreement entered on
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`April 21, 2020.
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`10.
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`ZGC, headquartered in Covington, Louisiana, is a subsidiary of the National
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`Federation of Agricultural Cooperative Associations of Japan. ZGC owns and operates a state-
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`of-the-art export elevator located on the Mississippi River near Convent, Louisiana, from which
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`it trades and exports corn, soybeans, sorghum, wheat, and grain by-products. Recently expanded
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`in 2018 to handle up to 17 million tons of grain annually, ZGC’s Convent elevator is the largest
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`port elevator on the Mississippi. ZGC does not own any inland grain elevators and relies upon
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`its affiliate, CGB, to supply the majority of the massive quantities of corn and soybeans ZGC
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`exports annually from Convent. Post-acquisition, ZGC intends to lease the Bunge elevators to
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`CGB to operate through CGB’s wholly owned subsidiary, Consolidated Grain and Barge Co.
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`11.
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`CGB is a 50-50 joint venture between ZGC and Itochu Corporation, a global
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`trading company. CGB operates more than 100 elevators, many of which are located along the
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`Mississippi, Ohio, Arkansas, and Illinois Rivers. CGB is the fifth-largest grain company in the
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`United States by storage capacity. CGB’s grain merchandizers are in daily contact with
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`thousands of farmers, actively seeking to purchase grain from them. Currently, CGB sells
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`approximately 60% of the grain it purchases to ZGC.
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`12.
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`Bunge, headquartered in Chesterfield, Missouri, is the North American subsidiary
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`of Bunge Limited. Bunge is a large agribusiness and food ingredient company that owns and
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`operates grain elevators, oilseed processing plants, and edible oil refineries, as well as grain
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`export terminals. Bunge is the eighth-largest grain company in the United States by storage
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`capacity. Post-acquisition, Bunge will continue purchase grain in the United States via its export
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`elevator on the Mississippi River in Destrehan, Louisiana and its export terminal in Longview,
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`Washington (a joint venture with Itochu Corporation). In addition to the export terminals, Bunge
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`will retain ownership interests in eight elevators in Illinois and Indiana.
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`IV. THE RELEVANT MARKETS
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`13.
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`The livelihood of farmers depends on their ability to sell the corn and soybeans
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`they grow to purchasers who offer them the best price, net of transportation and other selling
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`costs that farmers incur. Ethanol plants and feed and crush mills purchase grain and process it
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`into usable products such as soymeal or fuel. Rail and river elevators also purchase grain and
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`store it until it is sold and transported to end users, in either domestic or export markets.
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`14.
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`For convenience, some farmers may sell their grain to smaller, “country”
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`elevators, located in closer proximity to the farmer than end users or rail and river elevators.
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`Such elevators serve as grain collection and buying points in rural communities, and may
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`provide other services like grain storage, drying, and conditioning services. Upon aggregating
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`sufficient quantities of grain, or when market prices are most attractive, country elevators
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`ultimately resell the grain to end users or to the larger rail or river elevators that can transport the
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`grain to end users or export elevators.
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`15. More than 45% of the grain exported from the U.S. is shipped out from port
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`elevator export terminals located at the mouth of the Mississippi River near the Gulf of Mexico.
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`The vast majority of this grain is sourced from river elevators located along the Mississippi and
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`its tributaries. These river elevators, found as far north as Minnesota, purchase grain from
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`surrounding farms, and load it onto barges for transport to the port elevators.
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`A.
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`16.
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` Relevant Product Markets
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`ZGC (mainly through CGB) and Bunge own grain elevators, primarily located at
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`rail terminals and along navigable rivers. They compete with other grain purchasers, including
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`ethanol processors, feed mills, and crush processors, to purchase corn and soybeans from U.S.
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`farmers, brokers and country elevators. Corn and soybeans are each distinct products without
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`reasonable substitutes, differing from other agricultural commodities and one another in their
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`physical characteristics, means of production, uses, and pricing. Because of the length of
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`growing seasons, and the suitability of corn and soybeans to certain climates and regions,
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`farmers of these crops would not switch to production of other agricultural commodities in
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`sufficient numbers to render unprofitable a small but significant decrease in price by a
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`hypothetical monopsonist of that crop. The purchase of corn and the purchase of soybeans for
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`end use or for sale to the export market each constitute a relevant product market and line of
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`commerce under Section 7 of the Clayton Act, 15 U.S.C. § 18.
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`B. Relevant Geographic Market
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`17.
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`Farmers typically haul grain by truck to nearby elevators or end users.
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`Transportation costs increase significantly with every mile the farmers must transport the grain to
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`reach a purchaser, reducing the farmers’ profits. Transporting grain also consumes farmers’ time.
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`For these reasons, a small change in price would not likely cause farmers to significantly expand
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`the distance they are willing to drive to sell their grain. The distance a farmer is willing to drive
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`is determined in large part by the second-closest potential purchaser, which is the best
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`competitive threat to the purchaser closest to the farmer.
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`18.
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`Rail or river elevators and other grain purchasing facilities, such as grain crush
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`plants and ethanol plants, typically purchase grain from within the facility’s draw area. “Draw
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`area” is an industry term that describes the locations of farms from which the facility expects to
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`acquire most of its grain. Each elevator or end user has a unique draw area due to characteristics
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`such as surrounding road conditions, crop output, local topography, and proximity of competing
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`purchasers. The draw area of a grain purchasing facility is determined by transportation time and
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`costs and so is usually very localized.
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`19.
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`The draw area of one grain facility frequently will overlap with that of another,
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`resulting in competition between the facilities to purchase grain from farmers. Some farming
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`areas of the country may be located such that they fall within the overlapping draw areas of only
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`a few competing grain purchasing facilities. In particular, in the following areas where the
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`Defendants’ river elevators have overlapping draw areas, there are only a small number of grain
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`purchasers competing to purchase farmers’ corn and soybeans:
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`(a) The overlapping draw areas of elevators in the vicinity of McGregor, Iowa;
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`(b) The overlapping draw areas of elevators in the vicinity of Albany/Fulton,
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`Illinois;
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`(c) The overlapping draw areas of elevators in the vicinity of Shawneetown,
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`Illinois;
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`(d) The overlapping draw areas of elevators in the vicinity of Caruthersville,
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`Missouri;
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`(e) The overlapping draw areas of elevators in the vicinity of Huffman, Arkansas;
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`(f) The overlapping draw areas of elevators in the vicinity of Osceola, Arkansas;
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`(g) The overlapping draws areas of elevators in the vicinity of Helena, Arkansas;
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`(h) The overlapping draw areas of elevators in the vicinity of Lake Providence,
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`Louisiana; and
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`(i) The overlapping draw areas of elevators in the vicinity of Lettsworth,
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`Louisiana.
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`20.
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`These geographic areas satisfy the hypothetical monopsonist test (a
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`“monopsonist” is a buyer that controls the purchases in a given market), the buyer-side
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`counterpart to the hypothetical monopolist test. A hypothetical monopsonist of the purchase of
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`corn or soybeans in each of these areas would impose at least a small but significant and non-
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`transitory decrease in the price paid to farmers. Such a price decrease for these products would
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`not be defeated by farmers selling to purchasers outside their local area due to the added costs of
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`transportation. As farmers in these areas have already determined the best use of their farmland,
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`a price decrease would also not be defeated by farmers’ switching to growing alternative crops.
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`Farmers currently growing corn or soybeans are unlikely convert to production of other
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`agricultural commodities in sufficient numbers to prevent a small but significant decrease in
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`price. Nor could area farmers thwart a post-transaction price decrease by selling instead to local
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`country elevators. Country elevators simply resell grain to river and rail elevators or to other end
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`users; if Defendants lower prices post-transaction, country elevators would be forced to lower
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`their own price to farmers to maintain profitability. Consequently, country elevators cannot
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`mitigate a price decrease resulting from this transaction. Therefore, each of the overlapping
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`draw areas above constitute a relevant geographic market within the meaning of Section 7 of the
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`Clayton Act, 15 U.S.C. § 18, for the purposes of analyzing this transaction.
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`V.
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`ZGC’S ACQUISITION OF CERTAIN GRAIN ELEVATORS FROM BUNGE IS
`LIKELY TO RESULT IN ANTICOMPETIVE EFFECTS
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`In each of the nine relevant geographic markets, ZGC (and its affiliate CGB) and
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`21.
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`Bunge are two of a very small number of grain purchasers competing to buy corn and soybeans;
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`in two of these markets, CGB and Bunge are the only elevators available to area farmers.
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`Famers located within these geographic areas depend on this competition to obtain a competitive
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`price for their grain. ZGC’s acquisition of Bunge’s elevators will substantially lessen
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`competition for the purchase of corn and soybeans in these markets, enabling it to unilaterally
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`depress prices paid to farmers for their crops.
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`22.
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`Because there are few alternative grain purchasers within these geographic areas,
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`purchases of grain are highly concentrated, with the Defendants accounting for a majority of
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`corn and/or soybean purchases in a given year. For example, in 2019, the Defendants purchased
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`upwards of 95% of the total corn and soybean output of farmers in Pemiscot County, Missouri;
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`Pemiscot County falls within the draw area of Bunge’s Caruthersville, Missouri river elevator,
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`and the draw areas of CGB’s Caruthersville and Cottonwood, Missouri river elevators.
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`23.
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`By eliminating head-to-head competition between ZGC (and its affiliate CGB)
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`and Bunge for grain purchases in these geographic markets, the proposed acquisition would
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`result in lower prices paid to farmers, lower quality of services offered to farmers at the grain
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`origination elevators, and reduced choice of outlets for farmers to sell their grain. The proposed
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`transaction would substantially lessen competition and harm the many farmers selling their crops
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`to river elevators along the Mississippi River and its tributaries.
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`VI. ABSENCE OF COUNTERVAILING FACTORS
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`24.
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`New entry and expansion by competitors likely will not be timely and sufficient
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`in scope to prevent the acquisition’s likely anticompetitive effects. New elevators are unlikely to
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`be constructed in these geographic markets because of the high cost of construction and the
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`difficulty of finding appropriate locations to build such a facility along the Mississippi or its
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`tributaries. Even assuming such a location could be found and regulatory and permitting
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`requirements could be fulfilled, constructing a river elevator would take approximately two years
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`to complete.
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`25.
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`The proposed acquisition is unlikely to generate verifiable, merger-specific
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`efficiencies sufficient to reverse or outweigh the anticompetitive effects likely to occur.
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`VII. VIOLATION ALLEGED
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`26.
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`The United States hereby incorporates the allegations of paragraphs 1 through 26
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`above as if set forth fully herein.
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`27.
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`ZGC’s proposed acquisition of the Bunge elevators is likely to substantially
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`lessen competition in the relevant markets, in violation of Section 7 of the Clayton Act, 15
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`U.S.C. § 18.
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`28.
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`Unless enjoined, the proposed acquisition would likely have the following
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`anticompetitive effects, among others:
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`(a)
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`eliminate present and future competition between ZGC (and affiliate
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`CGB) and Bunge in the each of the relevant geographic markets for the
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`purchase of corn and the purchase of soybeans;
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`(b)
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`cause prices paid to farmers for corn and soybeans to be lower than they
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`would be otherwise; and
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`(c)
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`reduce quality, service, and choice for American farmers.
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`VIII. REQUEST FOR RELIEF
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`29.
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`The United States requests that the Court:
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`(a)
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`adjudge ZGC’s acquisition of Bunge’s elevators to violate Section 7 of the
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`Clayton Act, 15 U.S.C. § 18;
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`(b)
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`permanently enjoin Defendants from consummating ZGC’s proposed
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`acquisition of Bunge’s elevators or from entering into or carrying out any
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`other agreement, understanding, or plan by which the assets or businesses
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`of ZGC and Bunge would be combined;
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`award the United States its costs of this action; and
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`grant the United States such other relief the Court deems just and proper.
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`(c)
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`(d)
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`Case 1:21-cv-01482-RJL Document 1 Filed 06/01/21 Page 12 of 12
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`Dated: June 1, 2021
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`Respectfully submitted,
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`FOR PLAINTIFF UNITED STATES:
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`
` /s/ Richard A. Powers
`RICHARD A. POWERS
`Acting Assistant Attorney General for
`Antitrust
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` /s/ Kathleen S. O’Neill
`KATHLEEN S. O’NEILL
`Senior Director of Investigations & Litigation
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` /s/ Robert A. Lepore
`ROBERT A. LEPORE
`Chief
`Transportation, Energy & Agriculture Section
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` /s/ Katherine A. Celeste
`KATHERINE A. CELESTE
`Assistant Chief
`Transportation, Energy & Agriculture Section
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` /s/ Jill Ptacek
`JILL PTACEK*
`MICHELE B. CANO
`JESSICA BUTLER-ARKOW (D.C. #43022)
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`Attorneys for the United States
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`U.S. Department of Justice
`Antitrust Division
`450 Fifth Street, NW, Suite 8000
`Washington, DC 20530
`Tel: (202) 307-6607
`Fax: (202) 616-2441
`Email: jill.ptacek@usdoj.gov
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`*LEAD ATTORNEY TO BE NOTICED
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