Antitrust Enforcers Are Continuing to Plow the Fields of Agriculture
, Alan H. Schwartz
The Biden administration is carrying through on its commitment—which we previously analyzed in Antitrust Today—to beef up antitrust enforcement in the agriculture industry in an attempt to increase competition and address rising food prices.
While some are debating whether increased antitrust enforcement will help reduce prices, activity by the Department of Agriculture (“USDA”) and the Department of Justice (“DOJ”) indicate the Biden administration remains undeterred in seeking to increase competition in this critical sector of the economy.
DOJ Sues to Block Merger of Sugar Manufacturers
DOJ filed a lawsuit in the U.S. District Court for the District of Delaware challenging the merger of U.S. Sugar and Imperial Sugar Company, arguing that the merger would eliminate aggressive competition and leave the market highly concentrated with only two competitors selling a significant share of refined sugar in the southeastern United States.
The sugar manufacturers recently filed an answer challenging the DOJ’s product and geographic markets, allegations of competitive effects and raising arguments of immunity. The sugar companies argue that “DOJ misunderstands the rationale for [their] deal, how refined sugar flows costeffectively across the United States, and the number of firms that compete aggressively to supply refined sugar to customers located in the Southeast and elsewhere in the country.” They claim that the deal has never been about raising prices, and could not, because of “the vigorous competition United and Imperial face today and the powerful customers to which they sell.” According to this argument, “[m]arket realities, including the many tools wielded by the USDA to regulate sugar supplies—and therefore refined sugar prices—will prevent any harm to consumers resulting from the Transaction.”
DOJ won an initial skirmish earlier this month when it convinced the court to deny defendants’ motion to transfer the case. The defendants had obviously hoped to get a home-field advantage with a transfer from the District of Delaware to the District of Southern Georgia, site of defendant Imperial Sugar’s only sugar refinery. The court, however agreed with DOJ that the Government’s choice of forum should be given great deference.
USDA and DOJ Issue “Shared Principles”
The USDA and DOJ issued “Shared Principles and Commitments” to protect against anticompetitive practices in the agriculture industry. Consolidation has led to fewer firms controlling more of the agriculture industry, which may have led to higher prices to consumers for beef, pork, and poultry. For example, more than 80% of the beef in the U.S. is processed by just four companies, while the price of beef has recently risen by 14 percent.
Secretary of Agriculture Tom Vilsack said “[p]roducers all across the country for too long have faced a marketplace that benefits a few large companies over those who are growing our food.” “This means that consumers are paying more and farmers, ranchers and producers see less of the profits.” Vilsack added “[a]ntitrust and market regulatory enforcement is essential to enabling the competition necessary to transform our concentrated supply chains in favor of diversified, resilient food systems.”
The USDA and DOJ continue to work to protect farmers, ranchers and other agricultural producers. Their Shared Principles and Commitments include:
1) “Prioritizing matters impacting competition in agriculture” because “[f]armers, ranchers, and other producers and growers deserve the benefits of free and fair competition.”
2) The agencies will jointly develop “a centralized, accessible process for farmers, ranchers and other producers and growers to submit complaints about potential violations of the antitrust laws and the Packers and Stockyards Act.”
The USDA and DOJ will also support Agriculture Antitrust Whistleblowers by “protect[ing] the confidentiality of the complainants, if they so request” and by “commit[ting] to supporting the strongest possible whistleblower protections.”
3) The USDA and DOJ will “work together to promote effective information sharing and case cooperation.”
4) Both agencies commit to “vigorously enforce the laws that protect farmers, ranchers and other producers and growers from unfair, deceptive, discriminatory, and anticompetitive practices. As appropriate, USDA will make reports or refer potential violations of the Packers and Stockyards Act to the Justice Department to better enable its Antitrust Division to pursue meritorious competition-related cases and to allow the agencies to collaborate on issues of mutual interest.” The USDA and DOJ will also work together to identify areas where Congress can “help modernize these toolkits.”
How these shared principles will be implemented remains to be seen but the message is clear—competition in the agriculture sector is a priority.
Written by Gary J. Malone