Rice Growers Co-op Ordered to Sell Mill
The state’s largest rice cooperative must sell the Woodland milling operation that it bought last summer for $12 million because the acquisition “substantially” lessens competition by giving the Rice Growers Assn. of California control of more than 60% of the state’s crop, a federal judge in Sacramento has ruled.
U.S. District Judge Edward Garcia issued a brief “memorandum of decision” late Wednesday and promised to release the full text of his decision later. Garcia ordered the Justice Department, which had challenged the acquisition, to submit a proposed divestiture plan within 60 days.
The Rice Growers Assn., based in West Sacramento, is a cooperative owned by growers who last year produced nearly half of the state’s rice crop. It bought Pacific International Rice Mills Inc., or PIRMI, last July, triggering immediate scrutiny by the Justice Department, which filed an antitrust lawsuit last August.
More Than 95% of Milling
The purchase left California with just two other major millers--Farmers’ Rice Cooperative and Comet Rice Inc.--which, with the RGA, account for more than 95% of the milling of California-grown rice.
Comet dropped plans to acquire PIRMI several years ago after the Justice Department expressed concern that the purchase would unfairly enhance Comet’s 10% share of the state rice market.
The RGA’s attorneys, led by Joseph L. Alioto of San Francisco, argued that its growers account for only 10% of the national crop, asserting: “There’s no reason to distinguish the rice from California from any other rice.” (California’s 1984 rice production was second only to Arkansas, followed by Louisiana, Texas, Mississippi and Missouri.)
The RGA’s executive vice president, James Errecarte, defended the acquisition of the labor-efficient PIRMI mill in an interview late last year, arguing that “it fit the domestic sales plans of the co-op.”
Building an equivalent mill would cost more than twice the $12-million purchase price, he said then, adding: “If we prevail, we will have a tremendous facility. If we fail, we can divest at no risk, or at a profit.”
‘Bold Attempt’ That Failed
Errecarte, who has announced his intention to leave the RGA this summer, was reported to be in Puerto Rico on Thursday and couldn’t be reached for comment on Garcia’s decision.
The state’s second-largest cooperative, Farmers’ Rice, disputed Errecarte’s contention that PIRMI’s chief value was its mill, however. “I believe RGA’s real motive all along was to buy a major share of the branded rice business in the Western United States,” President Ralph Newman Jr. said in a statement. PIRMI markets several well-established commercial brands of rice.
“It was a bold attempt at market control which failed,” Newman asserted.
Newman said it is important now to restore PIRMI as an independent, “viable rice-milling operation” as quickly as possible. PIRMI’s previous owners said when they sold out to the RGA that they planned to quit the rice business. Wednesday’s court action released the $12-million purchase price, which had been frozen and kept separate as the mill continued operations pending resolution of the lawsuit.
With the state’s cooperatives effectively out of the running to buy PIRMI, the major question Thursday was to whom the RGA could sell the plant in order to recoup its investment. Some independent growers recently announced plans to build a small mill in Colusa County, however, and could find it more cost effective to acquire the larger PIRMI operation instead.
Separately, the RGA announced settlement of its 5-year-old lawsuit against Transamerica DeLaval, a wholly owned subsidiary of Transamerica Corp., over liability for faulty engines installed in the tug/barge Calrice Transport, which hauls rice from the Port of Sacramento to San Juan, Puerto Rico. A San Francisco Superior Court jury originally awarded the RGA damages of $39.2 million, a sum later slashed to $4.8 million.
