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Fishermen sue Pacific Seafood

Posted: Wednesday, Jun 23rd, 2010

Complaints allege that group is monopolizing four markets

A class action lawsuit filed Tuesday morning in federal court by two fishermen from Brookings alleges that processing giant Pacific Seafood Group has persistently violated federal antitrust laws by using “an integrated combination of anti-competitive strategies to achieve and maintain monopoly power over four West Coast seafood input markets.”

Filed by a Portland-based firm on behalf of long-time Brookings-based fishermen Todd Whaley and Lloyd Whaley and “similarly situated fishermen and fishing vessel owners,” the lawsuit focuses on the Dungeness crab, grounding, Pacific whiting, and Pacific coldwater shrimp fisheries. Calling those fisheries “competitively crippled markets,” the 34-page complaint seeks “a broad package” of injunctions against CEO Frank Dulcich, Pacific Seafood Group (PSG), and “its 54-entity network of commercial enterprises.”

The complaint alleges that since at least 2005, PSG “has possessed monopoly power in the relevant seafood input markets” for Dungeness crab, groundfish, Pacific onshore whiting, and Pacific coldwater shrimp. PSG, it notes, has controlled market shares of about 65 percent, 70 percent, more than 50 percent, and about 60 percent in those respective fisheries.

The complaint also alleges that PSG has protected its monopoly power “by substantial barriers to entry and expansion,” including the inelastic character of supply in each of the four seafood commodity input markets; uncertain prospects for future supply due to intensive regulation; PSG’s reputation for “exclusionary conduct” as the dominant purchaser of those specified commodities during the past decade; the substantial capital investment required to enter the seafood processing industry; PSG’s “absolute cost advantages” over processing competitors; the economies of scale and vertical integration that foster PSG’s maintenance and expansion of monopoly power over those four markets; and the limited number of waterfront locations zoned and suitable for operating a seafood processing plant.

The complaint outlines what it claims are the means PSG uses: vertically integrated acquisitions, multiple tactics to set and enforce ex-vessel prices, exclusive dealing and tying arrangements, restrictions on output, “theft of seafood commodities” from fishermen, “fraudulent representations” to public agencies, and “miscellaneous dirty tricks.”

The lawsuit requests a trial by jury and asks the court, among other things, to declare PSG’s conduct illegal, and award the fishermen and fishing vessel owners a class judgment of $131.5 million to $173.5 million for actual damages, and to triple those damages to between $394 million and $520 million “as a result of the antitrust violations.”

Pacific Seafood Group issued a media statement Tuesday evening just before the News-Times went to press. Craig Urness, PSG’s general counsel, said the claims “are completely without merit,” and the lawsuit contains “gross misinterpretations.”

Launched in 1941 as a small, fresh seafood retail operation, PSG has since expanded “to meet customer needs and a growing market to include all operations from dock to dinner table.” The group’s holdings include Pacific shrimp in Newport, added to the PSG fold in 1996.

“We plan to aggressively defend against the allegations,” Urness noted. “Pacific Seafood has a long history on the Oregon coast. For more than 25 years, we’ve prided ourselves on providing value, service and jobs on the Oregon coast to our partners in the fishing and seafood industries. We will continue this commitment into the future.”

Terry Dillman is the assistant editor of the News-Times. Contact him at 541-265-8571, ext 225, or terrydillman@newportnewstimes.com.

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