Senator Chuck Grassley issued the comment below about the federal government’s action today to block the acquisition by the third-largest U.S. beef packer, JBS, of the fourth-largest beef packer, National Beef Packing Company. The Justice Department filed a civil antitrust lawsuit in U.S. District Court in Chicago.
Senator Grassley has been urging the Justice Department for the last decade to more aggressively scrutinize mergers in the agricultural sector with the goal of maintaining a competitive marketplace for independent producers, family farmers and the American consumer.
The letter Senator Grassley wrote in March expressing concerns about the effort by JBS to buy National Beef is below this comment. In addition, Senator Grassley requested the hearing held in May by the Judiciary subcommittee on antitrust to shine a spot light on the problems with this proposed acquisition and competition in agriculture. He has introduced legislation to strengthen the antitrust laws relative to agricultural transactions, and to require the Department of Agriculture to formally comment on ag-related mergers during the anti-trust review process. Senator Grassley also has long sought legislation to ban packer ownership of livestock. He is a senior member of the Senate Judiciary Committee.
Senator Grassley’s comment:
“Thank goodness the Justice Department finally has recognized that there is too much concentration in agriculture, and is taking some action to protect consumers and ensure there is a level playing field for independent producers and family farmers. It’s welcome news for those of us who’ve been urging antitrust enforcers to pay more attention to the wave of consolidation in the agricultural sector, a trend that increases the ability of larger companies to engage in predatory business behavior, limits the buying and selling options for farmers, and results in higher prices and fewer product choices for consumers. For some time I believed that antitrust enforcers were asleep at the switch, and today’s action couldn’t come too soon.
“Agricultural competition issues need to stay on the Justice Department’s radar screen, particularly with the rising cost of food worldwide. The reality is that every American family pays for reduced market opportunities, anticompetitive business practices, and excessive consolidation in agriculture. That’s why the decision by the antitrust division to block the proposed JBS-National Beef acquisition is a positive first step. I’ll continue to prod federal anti-trust enforcers to be vigilant about keeping the agricultural sector of our economy competitive.”
For Immediate Release
Wednesday, March 5, 2008
Grassley concerned about further consolidation in agriculture
WASHINGTON – Senator Chuck Grassley today expressed concern that further consolidation in the beef industry will reduce market opportunities for family farmers and increase prices and provide less choice for consumers. Grassley wrote to Assistant Attorney General Thomas Barnett to ask for added scrutiny of JBS Acquisitions’ plans to purchase National Beef Packing Co., Smithfield Beef Group and Five Rivers Ranch Cattle Feeding LLC from Continental Grain Company and Smithfield Foods.
“I’ve been pressing the Justice Department about consolidation in agriculture, but the Department doesn’t appear to think there is a problem. Quite honestly, I don’t know how much longer they can continue to let these mergers slide by,” Grassley said. “Now producers will only have 3 major beef packers to sell their livestock to. Is it going to take only one packer in the industry for the Justice Department to say there isn’t competition?”
Grassley has long sought to ensure there is healthy competition in the agriculture industry for all market participants by taking legislative action and conducting aggressive oversight.
Grassley said his legislation to ban packer ownership of livestock, which is included in the Senate version of the farm bill, would have an impact on the proposed JBS acquisition. The feedlots JBS would be purchasing would be considered “packer owned” and would not be allowed under Grassley’s bill. The packer ban would make it unlawful for a packer to own or feed livestock intended for slaughter. The Packer Ban would exclude single pack entities, packers that are too small to participate in the Mandatory Price Reporting program and would exempt farmer cooperatives where the members own, feed, or control the livestock themselves.
Grassley has also introduced legislation that would formalize the Department of Agriculture’s review of agriculture mergers with the Justice Department and the Federal Trade Commission, by requiring the Agriculture Department to provide comments on agriculture transactions. It would require the Justice Department and the Federal Trade Commission to issue agriculture guidelines, taking into account the special conditions of the agriculture industry. The bill also creates a “Working Group on Buyer Power” to make recommendations and assist the Justice Department and Federal Trade Commission in drafting the agriculture guidelines.
Here is the text of Grassley’s letter.
March 5, 2008
The Honorable Thomas O. Barnett
Assistant Attorney General
Antitrust Division
United States Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530
Dear Assistant Attorney General Barnett:
JBS Acquisitions has just announced that it plans to purchase National Beef Packing Co., Smithfield Beef Group and Five Rivers Ranch Cattle Feeding LLC from Continental Grain Company and Smithfield Foods. The estimated value of this transaction is $1.5 billion in cash, stock and debt assumption. I am concerned about how this proposed acquisition would increase concentration and decrease competition in the beef industry. I am also concerned about the impact on consumer choice and the price of beef products. Should this proposal come before the Department, I urge you to carefully scrutinize this transaction.
JBS is the world’s largest beef packer and the third largest beef processor in the United States. National Beef Packing and Smithfield Beef Group are the fourth and fifth largest beef processors in the United States, respectively. A merger of these companies would make JBS the largest beef processor in the nation. If this transaction were to be approved, JBS would control an approximate 32% of the beef processing market share, killing far more animals than Cargill Meat Solutions or Tyson Foods.
The proposed JBS transaction would severely reduce the already limited number of buyers for the commodities of small, independent beef producers. The transaction would leave producers minimal selling options throughout large geographic regions. The transaction would allow JBS to control the largest share of the beef market, and potentially decrease product choice and increase product prices for the American consumer.
I urge the Antitrust Division to thoroughly examine this proposed acquisition to protect competition in this important sector of our nation’s economy. The small, independent producers and family farmers in my state of Iowa, as well as across the country, are concerned about reduced market opportunities, possible anti-competitive and predatory business practices, and increasing agribusiness consolidation. Expanded packer ownership, exclusive contracting and captive supply are adversely impacting their ability to compete in the marketplace. I share these concerns about fewer competitors, increased consolidation, and less choice and higher prices for consumers.
Thank you for your attention to this matter. I look forward to hearing from you soon.
Sincerely,
Charles E. Grassley
United States Senator
cc: Attorney General Michael Mukasey
