A federal judge has thrown out an antitrust lawsuit against giant tortilla maker Gruma Corp., flattening the hopes of manufacturers in California and elsewhere that had accused the industry leader of unfairly wresting control of the U.S. retail tortilla market.
Attorneys said Monday that U.S. District Judge Kenneth Hoyt in Houston dismissed the suit late last month after deciding that the 18 plaintiffs had failed to prove their allegations. They had sought $70 million in damages, claiming that Gruma had broken the law by, among other things, paying grocery stores to stock its products and eliminate competing brands.
The ruling was a blow to some of the oldest tortilla makers in California. They were counting on the court to take a hard line on so-called slotting fees, the controversial practice of buying shelf space at supermarkets that many small firms say makes it impossible for them to compete with deep-pocketed rivals.
"We were shocked," said Philip Manly, owner and general manager of Los Angeles-based El Dorado Mexican Food Products, a 58-year-old, family-owned firm and one of eight California companies among the plaintiffs. "But we're not giving up."
Manly said the small tortilla makers planned to appeal the ruling.
Irving, Texas-based Gruma is the American subsidiary of Mexican conglomerate Gruma, which dominates the fast-growing U.S. market in packaged tortillas -- estimated at $5.2 billion last year -- with a stable of brands that includes the popular Mission and Guerrero labels.
Gruma officials maintained that they had done nothing improper, paying slotting fees only if retailers demanded them. The company also contends that many grocers have turned to Gruma because the firm has adapted to a changing retail climate, instituting rigid quality control systems and providing rapid, nationwide distribution that has become the standard for the industry.
The judge's ruling "sends a clear message that ... competitors would be well advised to spend their efforts to try to do a better job in the marketplace rather than complaining about them in court," Gruma's attorney, Gregory Huffman, said.
In his ruling, Judge Hoyt wrote that slotting fees, co-op advertising, discounts and other deals hammered out between retailers and their vendors were long-standing practices and not illegal on their face. He said the plaintiffs had failed to show that the deals that Gruma struck with supermarkets had resulted in rivals being shut out of the market or in consumers paying more for tortillas.
