NSAC's Blog

Smithfield Buyout Raises Fair Competition Concerns

May 31, 2013

A bid by Shuanghui International, also known as Shineway, to purchase Smithfield Foods for $4.7 billion became national news this week.  Shuanghui is the majority shareholder of China’s largest meat processor and, according to the Wall Street Journal, sources most of its products from private farmers – a practice that has been scrutinized in China “amid a spate of food scandals in which poorly regulated small farms played a role.”

The merger prompted concerned reactions from members of Congress regarding market competition and food safety.  Senator Chuck Grassley (R-Iowa) stated, “I share the concerns of many family farmers and independent producers that the agriculture industry has consolidated to the point where many smaller market participants do not have equal access to fair and competitive markets.  [The] announcement by Smithfield and Shuanghui do not alleviate those concerns.”

Representative Rosa DeLauro (D-CT) similarly commented on the food safety concerns associated with the merger, stating, “I have deep doubts about whether this merger best serves American consumers and urge federal regulators to put their concerns first.”

These concerns are not unfounded.  Shuanghui Chairman Wan Long is reported to have said that he wants to increase the amount of pigs that come from company-owned farms.  Smithfield controls nearly a third of the U.S. pork-processing industry and is one of four firms that together control over 70 percent of the industry.  Smithfield owns other common pork-product brands, such as Armour and Farmland, and most of Smithfield’s sales occur in the United States.

This announcement comes as the full Senate prepares to continue consideration of the Senate Farm Bill next week.  Several floor amendments have been offered that address some of these fair competition concerns.  NSAC supports the following amendments in the Senate:

  • The Grassley Amendment (SA 969), which creates a USDA special counsel on agricultural competition to coordinate and oversee competition and antitrust enforcement activities among the USDA, Federal Trade Commission, and Department of Justice.
  • The Rockefeller Anti-Retaliation Amendment (SA 993), which would clarify that it is a clear violation of the Packers and Stockyards Act for companies to retaliate against farmers for exercising their legal rights, such as talking to federal agency officials or members of Congress about their contracts or farming.
  • The Tester Amendment (SA 971), which would require USDA to collect information on market consolidation levels throughout the food and farm sector and issue an annual report.

You can follow these and other amendments that we are watching closely by visiting our Amendment Tracker, which we will update as the Farm Bill debate continues.

Categories: Competition & Anti-trust, Farm Bill, Food Safety

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