Senator's Antitrust Panel Exmaines Effects of Proposed JBS Swift Aquisitions

WASHINGTON -- During a Senate hearing on agriculture competition and a proposed large-scale meatpacking industry merger, U.S. Senator Herb Kohl called for the U.S. Government Accountability Office (GAO) to investigate whether unabated agricultural consolidation has led to anticompetitive business practices and higher food prices for consumers. Kohl, Chairman of the Senate Antitrust, Competition Policy and Consumer Rights Subcommittee, called the hearing to examine JBS Swift's plans to acquire two other meatpacking firms, a transaction that would reduce the number of major competitors in this industry from five to three.

Kohl urged the Department of Justice to closely scrutinize the proposed JBS Swift acquisitions' effects on both family farmers and consumers, saying that "…this deal will give the remaining beef processors enormous buying power. With little choice to whom to sell their cattle, ranchers will increasingly be left in a 'take it or leave it' position. And we should be equally concerned with effects on millions of beef consumers across the country in this era of rising food prices. Will only three major national sellers of beef be enough to ensure a competitive market for supermarkets, small grocery stores, and restaurants? Or will consumers need to go on a diet while the giant meatpacking firms grow fatter and fatter?"

In 1890, the country's fundamental antitrust law -- the Sherman Act -- was passed in large part as a response to the consolidation in the meatpacking industry. If approved, the JBS Swift acquisitions will increase the market share of the top four firms to 91%. JBS Swift will also acquire Five Rivers, the nation's largest feedlot marketing two million cattle annually This threatens to give JBS Swift a very strong lever over the nation's cattle supply, while leaving independent ranchers with little bargaining power.

"We now appear to have gone full circle, as the JBS Swift acquisitions will leave the meatpacking industry even more concentrated than it was a century ago," Kohl said.

Kohl criticized the Administration's antitrust enforcement efforts -- both in the agricultural sector and generally -- as too weak and passive: "In the opinion of many experts, the Justice Department has often failed to take effective action as merger after merger in the pork, milk, and seed markets have sharply increased concentration and reduced competition. Antitrust investigations in the dairy industry have languished with no resolution. While the Justice Department sits largely on the sidelines, agriculture concentration increases and food prices rise," Kohl said.

Therefore, Kohl said he plans to initiate a GAO investigation of the impact of consolidation in agriculture on food prices paid by consumers.