In a move signaling that agriculture will be a focus of the antitrust enforcement agencies under President Obama, on August 5, 2009, the Antitrust Division of the United States Department of Justice (DOJ) and the United States Department of Agriculture (USDA) announced plans to hold workshops in early 2010 addressing antitrust issues in the agricultural markets. Although it has been widely reported that the agriculture industry would receive increased scrutiny as part of the stepped-up enforcement agenda of Assistant Attorney General Christine Varney, head of the Antitrust Division, the announcement of the workshops provides a more detailed picture of the Division's enforcement priorities.
As described in preliminary terms, the workshops will address several areas of interest to the food industry, including the effect of agriculture on food costs, the effect of regulatory statutes on competition in agriculture, increasing retailer concentration, price spreads, and market transparency. The workshops, which are to be held regionally, are intended to provide a forum for dialogue, and written public comments are invited by the end of 2009. In addition to providing education and background information about the intersection of antitrust and agriculture, the DOJ and USDA intend the workshops to be a platform for "farmers, ranchers, consumer groups, processors, the agribusinesses, and other interested parties to provide examples of anticompetitive conduct."
In a speech given on August 7, 2009 at the annual meeting of the farmer advocacy group Organization for Competitive Markets, Deputy Assistant Attorney General Philip J. Weiser reiterated the goals of the joint workshops and elaborated on some of the probable areas of focus:
Particular Markets: Seed markets — particularly for corn and soybean seed — as well as livestock and dairy markets, are expected to receive special attention in the workshops. In explaining why these industries would be areas of interest, Weiner referenced lessons learned by the Antirust Division about livestock markets in its examination of the merger of beef producer JBS and beef packer National Beef Packing, which eventually was abandoned by the parties earlier this year. He also referenced concerns about the level of concentration in dairy markets, which is an issue the Antitrust Division has reportedly recently agreed to investigate.
Vertical Integration: Weiner noted that in the past 15 to 20 years, many agricultural companies have acquired ownership of a source of an input ("upstream integration") or a channel of distribution ("downstream integration"). Because integration in a chain of production can lead to protection of monopoly power (a particular regulatory target of the Obama-era Antitrust Division) in addition to lower costs and greater efficiencies, Weiner included it as a practice worthy of further scrutiny.
Monopsony or "Buyer Power": Characterized by Weiner as the "other side of the coin" of monopoly, monopsony occurs where a buyer for a certain product or input exercises power to depress prices. Where buying power is concentrated and sellers have limited options in terms of where they can sell, competition may be hampered.
Packers and Stockyards Act and Other Laws: Weiner indicated that the vitality and relevance of laws such as the Packers and Stockyards Act, enacted more than 85 years ago, will be examined in the workshops. Although not specifically enumerated, another antitrust law affecting agriculture that may be considered under the same rubric, i.e., whether the law "protects certain producers at the expense of consumers," is the Capper-Volstead Act, covering agricultural cooperatives.
Marketplace Transparency: Although Weiner noted that transparency in agricultural markets can sometimes lead to anticompetitive coordination, he expressed a view that increased transparency is something to be fostered. He said that a move away from trading on organized exchanges, accompanied by a rise in vertical integration and bilateral trading between entities, had obscured the view of the public and the government into what goes on in some agricultural markets, often to the detriment of competition.
Whether these workshops will result in new legislation or regulations in 2010 is questionable. Several of the focus areas listed above such as the Packers and Stockyards Act have been debated in past years to no conclusion. Other food and agriculture issues, like the food versus fuel debate, food safety, or cap and trade in agriculture, likely will remain the main focus of debate going into next year.
Public comments regarding these issues may be submitted by December 31, 2009, with two paper copies to be delivered to Legal Policy Section, United States Department of Justice, Antitrust Division, 450 5th Street NW, Suite 11700, Washington, D.C. 20001, and an electronic copy to agriculturalworkshops@usdoj.gov. All comments will be posted for public review.
The Food Industry Team and the Antitrust Practice at Foley & Lardner LLP will continue to track developments regarding the workshops, including the public statements of the Antitrust Division and the content of public comments.
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