The long-running tuna price-fixing case took an ugly turn on Monday with the announcement by the US Department of Justice (DOJ) that Bumble Bee Foods -- one of the 'Big three' canned tuna producers -- pleaded guilty to collusion, agreeing to pay a $25 million (€27.3 million) fine for its part in a conspiracy to fix prices between 2011-2013.
It's a stunning admission, and indicates there are more pleas or convictions to come: Collusion doesn't happen without other companies, after all. So Starkist (owned by Korean giant Dongwon) and Thai Union -- at least one of them -- is most likely next to make the DOJ's greatest hits list.
More troubling to Starkist and Thai Union should be the simple fact that you don't get a plea deal unless you have something good to leverage.
"It's a huge sign that the government has a strong case," Diana Moss, president of Washington, DC-based think tank the American Antitrust Institute (AAI), told me Monday.
The evidence could be anything from video to wiretapping to emails -- but more than just hearsay.
Ironically, Moss said, it's more than likely that Thai Union's $1.5 billion (€1.4 billion attempt to acquire Bumble Bee in 2014 is what set the entire investigation off.
"This was high-profile for the DOJ, and I think that was because the companies were bold enough to propose a merger when there were just three major players," Moss said. "This was a shot across the bow."
Moss -- whose non-partisan, independent advocacy group promotes competition to protect consumers and businesses -- said 30 years of lax regulations on mergers and acquisitions have led to the oligarchic industry structures similar to the one in the tuna sector, bringing with it a range of problems to consumers, including fertile ground for collusion.
Companies pushed through mergers that should not have been approved with promises of improving the industries they were consolidating.
"But none of it happened," Moss said. "Companies are not required to prove the benefits they said they were bringing consumers."
And in fact, the opposite has tended to occur.
"Lower quality, lower service, less variety and of course less choice for consumers are all the result," Moss said.
The DOJ had become more aggressive in recent years under President Barack Obama, in AAI's estimation.
"We are seeing a pretty vigorous enforcement," Moss said.
Most telling is in the fine the DOJ leveraged: while $25 million (€22.9 million) is the amount Bumble Bee is on the hook for, the company faces up to $81.5 million (€74.7 million) in fines if and when it is sold, based on "certain terms and conditions."
That, essentially, is the DOJ telling the tuna giants considering merging, "don't try that again."
That's bad news for private equity owner Lion Capital, who reportedly has been looking for an escape hatch from Bumble Bee for a long, long time. The DOJ plea just winnowed down the list of potential bidders dramatically.
Worse, Moss said, that $25 million (€22.9 million) may end up looking small by the time private lawsuits settle out (and incidentally, attorneys in those collusion cases were rubbing their hands together Monday; their odds of winning just got dramatically better).
The canned tuna sector needed a shakeup: low margins, minimal innovation, a mercury PR cloud it can't seem to escape. Tuna consumption isn't likely to recover to what it once was anytime soon.
So if and when the collusion fallout is behind it, might this shakeup lead to a renaissance of innovation, variety and quality? Don't count on it, Moss said.
"I don't think we have any good cases where there's been a major turnaround in a sector [following antitrust actions]," she said. What's more, she noted, "this is a troubled industry."
That's an understatement, indeed. Bumble Bee's stunning admission shows tuna's troubles are just beginning.
Feedback? Contact:drew.cherry@intrafish.com
Follow me on Twitter:@drewcherry
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