“Fighting for the U.S. Cattle Producer”
For Immediate Release Contact: Shae Dodson, Communications Coordinator
March 13, 2008 Phone: 406-672-8969; e-mail:
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Cattle Producers to Department of Justice: Block JBS Purchases
Washington, D.C. –
In a letter sent today to the U.S. Department of Justice regarding JBS Acquisitions’ plans to purchase National Beef Packing Co., Smithfield Beef Group, and Five Rivers Ranch Cattle Feeding, R-CALF USA expressed concern that such transactions would cause injury to competition in both the U.S. cattle industry and the U.S. beef industry, which would result in harm to both independent U.S. cattle producers and U.S. consumers.
JBS Acquisitions would become the largest beef packer in the U.S., and R-CALF USA explained that JBS likely
would capture over 35 percent of the domestic cattle slaughter – based on evidence that indicates Tyson Foods already controlled that amount of the market in the mid-1990s.
“We urge the U.S. Department of Justice to rigorously investigate the potential impacts of this proposed purchase; to prevent its consummation pending a thorough investigation; and to ultimately block this proposed purchase should evidence be found indicating any reduction in competition to either the U.S. cattle industry or the U.S. beef industry,” wrote R-CALF USA President/Region VI Director Max Thornsberry. “Should this purchase materialize, the market power concentrated in the hands of the remaining three packers…would intensify, as would their propensity to exercise this market power to the detriment of competition, resulting in economic injury to independent U.S. cattle producers and U.S. consumers.”
Evidence already exists that demonstrates the exercise of market power by the current four firms that dominate the beef packing industry. Juries in Pickett v. Tyson Fresh Meats, Inc. and in Herman Schumacher et al. v. Tyson Fresh Meats, Inc. et al. have found, as matters of fact, that the actions of dominant beef packers, even at the current level of concentration, effectively manipulated prices paid to domestic cattle producers. Studies also show that market power can be, and is being, exerted by the dominant beef packers, at current concentration levels.[1]
Equally disturbing are media reports indicating that JBS SA’s Friboi Group (JBSS3.BR) has been cited by the Brazilian Justice Department’s antitrust division for engaging in anti-competitive practices to keep cattle prices low when purchasing for slaughter.[2] The U.S. Department of Justice should independently investigate the circumstances surrounding any such anti-competitive practices alleged against and/or committed by JBS before allowi ng this proposed purchase to proceed.
“Specifically, the department should determine, as a precondition for this sale, whether U.S. laws are adequate, and adequately enforced, to prospectively prevent a recurrence of the kind and type of anti-competitive behavior as was alleged to have been perpetrated by JBS in Brazil,” Thornsberry wrote.
“R-CALF has taken a strong position against these JBS purchases for good reason,” said R-CALF USA Vice President/Region II Director Randy Stevenson. “The Justice Department must make absolutely certain that U.S. laws are adequate – and that there is adequate enforcement of those laws – to ensure U.S. cattle producers and consumers are not subjected to anti-competitive practices.
“Imagine if you will, the day before the purchases are announced, that three buyers from Swift, National and Smithfield meet together to discuss their plans to buy slaughter cattle,” he explained. “If that occurred, those buyers would be in violation of antitrust laws against collusion. If they had such a discussion openly, it would provide the Justice Department with a ‘smoking gun’ with which to prosecute.
“The activities of three buyers of the third, fourth and fifth largest beef processors colluding would most certainly hurt the price of live cattle,” Stevenson continued. “But, on the day after these proposed acquisitions, the same three buyers could discuss their plans without breaking the law. Who among us would expect the outcome on live cattle prices to be any different?”
Note: To view the letter, visit the “Competition Issues” link at
http://www.r-calfusa.com, or contact R-CALF USA Communications Coordinator Shae Dodson at the phone number or e-mail address listed above.
