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Mayer Brown captures appellate victory for Nestlé in closely-watched Puerto Rico antitrust case

2 September 2011

Mayer Brown, a leading global law firm, announced today that it has secured a key appellate victory for client Nestlé.  The U.S. Court of Appeals for the 1st Circuit issued an unanimous opinion in Sterling Merchandising, Inc. v. Nestlé , S.A., Payco Foods Corporation, and Nestlé Puerto Rico, Inc., affirming a District Court’s summary judgment ruling last summer in what is generally regarded as the largest antitrust case in Puerto Rico’s history.

In 2003, Nestle combined its ice cream distribution business in Puerto Rico with Payco Foods, the largest ice cream distributor operating on the island.  At the same time Nestle acquired the Dreyer’s ice cream brand on a national scale.

Plaintiff Sterling Merchandising, a distributor of Dreyer’s and Puerto Rico’s second largest ice cream distributor, filed an antitrust lawsuit in the U.S. District Court for the District of Puerto Rico in 2006.  In the lawsuit, Sterling Merchandising alleged that Nestlé was attempting to monopolize the ice cream market on the island via the acquisitions and other exclusionary practices.

Both the district and appellate court rejected that argument.  Chief Judge Sandra Lynch of the 1st U.S. Circuit Court of Appeals authored the detailed 30-page opinion.  In order to challenge the post-acquisition structure of the market, Sterling also had to demonstrate antitrust injury.  But Sterling could not do so  because it failed to demonstrate any increase in prices, reduced output, or other anticompetitive impact on its business.  In fact, according to the court, Sterling seemed to perform better after the acquisitions than before, negating the notion that antitrust violations occurred.    
Nestlé’s litigation team is led by Carmine Zarlenga, a partner in the Litigation & Dispute Resolution practice at Mayer Brown.

“This appellate court ruling is significant in an era where private parties are more frequently attempting to challenge mergers and acquisitions as anticompetitive,” Mr. Zarlenga said.  “It demonstrates that market structure alone will not support an antitrust claim in the wake of an acquisition.  The parties claiming anticompetitive injury will have to prove it and their allegations will be scrutinized as they were here and as they should be in other cases.”

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