Heublein, Inc

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IN THE MA1 fer m' HEUBLEIN, INC.

Docket 890 - Order, Nov. !J7.

Granting of joint motion to withdraw matter from adjudication for settement purposes.

Appenrances For the Commission: William A. Arbitman, Nelson M. Ishiyarna and Jeffrey Klurfeld.

For the respondents: Ralph J. Savarese, John D. Wintrol, J. Wallace Adair and Robert E. Hebda, Howrey, Simon, Baker Murchison Wash., D. C. George J. Casper Secretary and General Counsel Hartford, Conn. and McCutchen, Doyle, Brown Enevsen San Francisco, Calif.

ORDi'R GRANTING JOINT MOTION To WITHDRAW MATTER "ROM ADJUDICATION The administrative law judge has certified a joint motion to withdraw this matter from adjudication for settlement purposes (Rules of Practice, Section 3.25(b)). The motion is opposed by Alled Grape Growers, whom we allowed to participate in these proceedings on the limited issue of relief by our order of June 26, 1973 (82 F. C. 1826). The complaint alleged that on or about Feb. 21 , 1969, respondent Heublein acquired a controlling interest in United Vintners, Inc. , a wholly-owned production and marketing subsidiary of Alled. United is now a wholly-owned subsidiary of Heublein Alled Vintners, Inc., in which Heublein has an 82 percent interest and Alled the remainder. The acquisition was alleged to have violated Section 7 of the Clayton Act. The notice order would require divestiture, within nine months from the date the order becomes final, of all assets acquired by Heublein and would allow individuals or groups of individuals who were 1090 Order members of Allied on Aug. 31 , 1968, first option to purchase the divested property.

The proposed consent order, agreed to by complaint counsel and counsel for respondent Heublein, would exclude from divestiture certain trademarks ' properties and equipment and does not provide that members of Allied will have a first option.' The proposed order requires that divestiture be accomplished within two years from the date the order becomes final subject to the following proviso: That the running of the period W"thin which respondent must divest shall be suspended until the effect of this consent agreement and the obligations imposed on Heublein by this consent agreement on the rights and obligations of Heublein, United and Allied Grape Growers ("Alled") relating to the grape supply contract executed by said firms on February 19, 1969, and the legality of said supply contract are finally adjudicated or resolved and Provided, junker however, that the divestiture period wil not be suspended unless a proceeding to resolve any unresolved issues with respect to the effect of this consent agreement upon said rights and obligations and the legality of said supply contract is instituted no later than sixty (60) days after this order becomes final. The grape supply contract purports to grant AHied the right to supply United's grape requirements for up to 80 years as well as much of Heublein s California grape requirements for the same period. The contract also provides that AHied would have a first option to purchase United' s capital stock.

The proposed consent order makes no further reference to the supply contract. However, Exhibit A to the joint motion provides that in the event the current supply agreement is held to be ilegal or inoperative, alternative supply agreements for shorter periods of time and smaller percentages of requirements would become effective. The Commission granted Allied leave to participate in these proceedings with respect to the issue of relief "either at a special hearing devoted to the issue of relief, or during such parts of the trial as may relate to the issue of relief* * *" (82 F. C. 1826, 1828). The Commission, in granting AHied limited participation, recognized "that in selling 82 percent of its marketing arm to Heublein, Allied intended thereby to retain sufficient contractual rights so that United would remain a large purchaser of grapes produced by AHied's growermembers:' Allied now sees the rights and expectations with which it entered into its joint venture threatened by the Commission complaint." (82 r' C. at 1828).

Although the instant motion was opposed by AHied, the law judge , Jngl no"k, Anni "n Sprinl! J. Swann anrl any trademark owned by r"spondent for a n'f",'shment wine produd Respondent has, however, iodicated a willing-ne!\!\ tn add to the propm'erj eoo "nt urder" pruvi,ionl!anting Anie a right uf first refusal , Heublein a,sets that tl,,' s..apply ""ntractnot "on ration fllr the acquisition. "o",!'ver, whcth"r "'. oul il wa. eon iderati"n the impurtal't point i that Allied daims that it, clmtrad right" cnuld bl' jeopardi7.coj liy" divl, titorp order Order 86 F.

concluded that the motion was "unopposed" within the meaning of Section 3.25(b) of the rules of practice, and that he was, accordingly, required to certify the motion to the Commission. The law judge however, included in his certification a recommendation that the joint motion be denied.

We agree with the law judge s determination that he was required to certify the joint motion to the Commission. We also concur in his conclusion that the opposition of a non-party participant does not necessarily preclude acceptance of a consent order. Non-parties are permitted to participat.e in our proceedings upon a determination that they wil make a sufficiently important contribution to our understanding of one or more issues to outweigh any delays and other added costs resulting from their participation. We see no reason why non-party participants should be afforded a right to veto a proposed agreement. We disagree, however, with the law judge s recommendation that the joint motion be denied. The judge recommended that we deny the motion for the following reasons:

1. The number of issues and the prolonged hearings that may be required preliminary to acceptance of the consent agreement and the possibility that the consent agreement may then not be accepted, in which event the entire case would stil have to be tried anew, but would be substantially delayed by virtue of the interim proceedings; 2. The apparent reliance of complaint counsel and respondent in agreeing upon the consent order upon the mistaken belief that an order allowing the transfer of the property back to Allied under right of first refusal would per 8e violate the principles of the antitrust laws;

3. The inappropriateness of submission of a consent order where the meaning and effect thereof on interested parties requires ;ubsequent adjudication with provision for delay in implementing that order of two years following finality of that subsequent adjudication. A consent order should be intrinsicaUy clear as to its meaning and intent. This comment is particularly applicable to complaint counsel who recognize, but take no position on, jssues that have been raised;

4. The approach of determining private rights as between parties as a condition precedent to considering the consent order-as opposed to considering the consent order but taking into account private rights and equities as appropriate; 5. The determination of contractual rights and obligations between Heublein and Alled as to property proposed to be kept by Heublein, and a rewriting of the contractual obligations between Heublein and Alled as to such property. These appear to be individual rights and obligations not appropriate for Commission determination. We disagree that any hearings, prolonged or otherwse, would be required preliminary to provisional acceptance of the consent agreement. The first step in our consideration of a consent agreement is our determination whether the proposed consent order is adequate to protect the public interest. In the event that the Commission determines that the proposed order is inadequate, the agreement will be rejected and there wil, of course, be no need to hear Alled' objections to the agreement.

In case the agreement is provisionally accepted, it wil be placed on 1093 Order the public record, and members of the public, including Allied, wil have an opportunity to raise any and all objections to the agreement. At that time Alled would have an opportunity to argue that hearings were required on its claim that the proposed order is inconsistent with its rights and interests.

Other questions raised by the law judge and Alled about the merits of the consent agreement can best be considered by the Commission in connection with its determination whether to provisionally accept the agreement. Accordingly, It is ordered That the joint motion to withdraw this matter from adjudication be, and it hereby is, granted.