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Antitrust Complaint Against Big Shrimp

CORPUS CHRISTI, Texas (CN) - A Florida shrimp breeder with alleged ties to Southeast Asian slave labor can't use a noncompete agreement to stifle U.S. competition, a Texas rival claims in a federal antitrust lawsuit.

Shrimp is the most popular seafood in the United States: the average citizen eats 4 lbs. a year, according to the National Marine Fisheries Service.

The crustaceans have become a staple on the menus of fast food restaurants like Popeye's Chicken and Long John Silver's, and are so abundant that Red Lobster and Sizzler offer all-you-can-eat deals.

Those bite-sized morsels add up to a multibillion-dollar industry fueled by farms that raise shrimp in inland ponds.

Defendant Florida-based Shrimp Improvement Systems (SIS) "completely dominate(s) the shrimp broodstock and postlarvae shrimp market in Texas and throughout the United States," the complaint states, by using selective breeding to produce lines that resist disease and quickly grow to harvest size.

Global Blue Technologies seeks a declaration that its new, state-of-the art shrimp breeding operation in Taft, Texas, doesn't violate any noncompete deal it signed with SIS.

SIS produces "shrimp broodstock," which are "mature shrimp, preferably of high quality genetics, mated to produce other shrimp," and makes clients sign restrictive covenants that preclude them from using its shrimp to start rival breeding programs.

But Global Blue claims "it is not feasible" for any U.S. farmer to start a rival program without using SIS shrimp.

"There are several reasons for this, including: (a) the quantities produced by other breeders are too small; (b) the United States' strict importation requirements - and even more strict requirements imposed by the State of Texas - impede would-be breeders from obtaining broodstock from outside the United States; and (c) the cost of obtaining broodstock or postlarvae shrimp from Hawaii is cost prohibitive," the lawsuit states.

It adds: "Postlarvae shrimp are young shrimp sold to shrimp farmers who raise them for consumption as food."

SIS is owned by co-defendant Charoen Pokphand Foods Public Company Limited, a Southeast Asian firm that sells shrimp throughout the world and is "the target of four lawsuits over slavery in its prawn supply chain," according to the complaint.

Much of the shrimp Americans buy at grocery stores and restaurants is peeled by Southeast Asian slaves in Thailand, Global Blue says.

"Thailand is one of the world's biggest shrimp providers and its seafood export industry is estimated to bring in about $7 billion annually. Many of Thailand's laborers are migrants who have been tricked or sold into shrimp-peeling sheds where they are forced to work 16-hour days with no time off, for little or no pay, and sometimes for years at a time," the complaint states.

Global Blue says one reason its owners started the company is that they "abhor" such labor practices and they wanted to give farmers an upstanding alternative to SIS.

SIS should not be allowed to monopolize U.S. shrimp breeding, Global Blue says, because it got its start with help from the U.S. government.

SIS obtained its "pure lines" in the 1980s from the U.S. Department of Agriculture, which ran a shrimp farming program to make the country competitive with burgeoning aquaculture in China, India, Vietnam, Thailand, Indonesia, Bangladesh, Japan, Chile, and Norway, according to the complaint.

"Pure lines" of shrimp are varieties that have been selectively bred, Global Blue says.

The phrase is "something of a misnomer" since it implies that breeding decisions are made on a genetic level, which is impossible, because shrimp DNA has not been sequenced, Global Blue says.

Due to SIS's monopoly, it has no incentive to maintain the quality of its shrimp, which has diminished over the years, Global Blue claims. In fact, Texas farmers using SIS shrimp had their worst-ever harvest in 2015, Global Blue says, adding that the last batch it bought from SIS contaminated its entire population of shrimp and hatchery.

Global Blue says it launched its competing breeding regime in 2015 and made a sale in May to one of SIS's biggest clients.

"That client obtained great results from GBT's products while every other shrimp farmer in Texas - all of whom purchased from SIS - received poor results," the complaint states.

Global Blue attributes its success to its genetics manager, co-plaintiff Eduardo Figueras, who worked for SIS from March 2010 to June 2014. Global Blue says Figueras, whom it calls the godfather of Mexico's shrimp farming industry, managed shrimp living conditions for SIS, but had nothing to do with its breeding decisions.

Nonetheless, SIS recently sent Global Blue a draft lawsuit, accusing it and Figueras of violating the noncompete agreement by running their own program.

Global Blue disagrees. It seeks declaratory judgment and an injunction, and damages for violations of the Sherman and Clayton Acts and the Texas Free Enterprise and Antitrust Act.

It is represented by Joe Flores in Corpus Christi.

SIS did not respond to a telephone message seeking comment on Wednesday.

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