July 15, 2011
Assistant Attorney General Christine Varney has announced that she is leaving the Department of Justice to join a private law firm. Varney took over as the head of the Department’s Antitrust Division in 2009. During 2010, Varney attended the five joint workshops held by DOJ with USDA around the country on Agriculture and Antitrust Enforcement Issues in Our 21st Century Economy. In addition, the Department of Justice Antitrust Division has worked with USDA ‘s Grain Inspection, Packers & Stockyards Administration (GIPSA) on the rule mandated by Congress in the 2008 Farm Bill to reform and strengthen measures to protect farmers and ranchers in the marketplace.
The Antitrust Division has also taken some antitrust actions in the agricultural sector under Varney’s watch. Most recently, on May 10, 2011, the Antitrust Division lodged a complaint against the sale of a Tyson Foods poultry processing to George’s Inc. poultry in the Shenandoah Valley of Virginia. The complaint contended that sale, which would leave George’s as the major poultry processor in the region, would give the company sufficient market power to depress the price offered to farmers for their services in growing poultry.
The action was noteworthy because it was brought under a monopsony theory, which applies when a large number of sellers are faced with few buyers who can depress the price offered to the sellers. Most antitrust cases brought by the Department address monopoly situations in which many buyers are confronted by a few sellers who can control and raise the price paid by buyers.
On June 30, the Antitrust Division filed a proposed Final Judgment with the federal court hearing the complaint. The settlement must be approved by the judge. Under the proposed settlement, George’s agrees to make capital improvements to the chicken processing plant that could allow a significant increase in the number of chickens that will be processed at the facility. The improvements include the installation of a special freezer and deboning equipment, which will allow George’s to produce a variety of highly valued products at its two plants located in the Shenandoah Valley.
The Justice Department concluded that as a result of these improvements, George’s will have the incentive and ability to increase its local poultry production, thereby increasing its demand for grower services and averting the likely adverse competitive effects arising from the acquisition. In addition, the Antitrust Division announced that it will monitor George’s efforts to improve the plant until the new equipment is installed and operational.
In a recent farewell address, Christine Varney noted that the antitrust laws cannot solve all the problems faced by farmers and ranchers in their relations with processors and packers. The George’s settlement illustrates this conclusion. The increase in the size and upgrades to the processing operation purchased by George’s will likely raise the company’s requirements for poultry. But the antitrust settlement agreement does not include important protections that would be available to poultry farmers under the GIPSA proposed rule. These protections include a base price for the chicken, prohibitions on retaliation against farmers who speak out about their contracts, measures to ensure that growers can recoup a significant part of their investment in costly poultry houses, and other measures summarized in a fact sheet prepared for growers by Rural Advancement Foundation International–USA.
Categories: Competition & Anti-trust