Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: AAI joins farm, consumer groups in opposing JBS-Cargill Pork merger, (Aug 3, 2015)
Organizations Mentioned:American Antitrust Institute | U.S. Department of Justice
By Michael Menzhuber, J.D., LL.M.
The American Antitrust Institute (AAI), Food & Water Watch, Iowa Farmers Union, Missouri Rural Crisis Center, and National Farmers Union have demanded that the U.S. Department of Justice investigate the proposed JBS-Cargill pork packing acquisition, the AAI has announced.
Rapid consolidation in the food and agriculture sectors has been of rising concern to farmers, consumers, and federal regulators. Since the economy began to recover from the recession, the pace of mergers has accelerated and threatened to increase concentration in the already over-consolidated food and agriculture sectors. The proposed $1.45 billion acquisition, which would create the second largest pork processing company in the U.S., raises the concern that increased concentration in the pork packing industry would harm hog farmers and consumers, according to the AAI.
Effects of the Proposed Acquisition. If the proposed acquisition were approved: (1) the four largest pork packers would slaughter about three-quarters of hogs; (2) the number of buyers and marketing options for hog farmers would be reduced; and (3) the top four pork packers would control 94.5 percent of the market in Iowa alone, 85.5 percent in Iowa and surrounding states, and 82.3 percent in Illinois-Indiana and surrounding states, it was alleged.
A joint white paper documenting the anticompetitive effects of the proposed JBS-Cargill acquisition was submitted by the Food & Water Watch, Iowa Farmers Union, Missouri Rural Crisis Center, and National Farmers Union. The white paper suggested that the proposed acquisition would significantly increase the pork packing industry’s power over hog farmers. In addition to accelerating vertical integration and reliance on hog production contracts, a combined JBS and Cargill would concentrate the wholesale pork product market, disadvantaging grocery stores and restaurants and ultimately raising pork prices for consumers, the white paper concluded. Post-merger, the largest two pork packing firms operating in the U.S., Smithfield and JBS, would be controlled by foreign companies.
Group Comments. Several groups commented on the proposed JBS-Cargill acquisition:
AAI President, Diana Moss, stated that “This merger could also create ripple effects throughout the food chain by spurring additional mergers to push back against the greater market power of JBS and Cargill. With less and less competition, we should be gravely concerned about the safety and stability of our important food supply chain.”
Food & Water Watch executive director, Wenonah Hauter, observed that “The wave of mega-mergers sweeping the food and agribusiness industries encourages a cascade of consolidation throughout the supply chain.” According to Hauter, “The rampant consolidation is raising consumer prices, reducing consumer choices and undermining the economic livelihood of farmers.”
National Farmers Union President, Roger Johnson, commented that “The JBS-Cargill merger would combine the third and fourth largest pork packing companies in the United States, further concentrating an industry that is already run by just a handful of firms.” He further stated that, “the rapid consolidation of market power in the hands of just a few pork processors has resulted in the loss of more than 90 percent of all hog farms since 1980.” According to Johnson, “the JBS-Cargill merger certainly warrants further investigation by the Department of Justice and should be stopped.”
Program Director at Missouri Rural Crisis Center, and a livestock and grain farmer in Howard County, Missouri, Rhonda Perry, said that, “the JBS-Cargill merger would reduce the number of hog buyers in the Midwest and allow the pork packers to further depress the prices farmers receive for their hogs.” She further stated that, “the pork packing monopoly has already driven almost all the independent hog farmers out of business.” According to Perry, “the DOJ has to stand up for America’s farmers and rural communities and block this merger.”
News: AcquisitionsMergers Antitrust