Antitrust Experts Commend Department Of Justice For Blocking The Acquisition Of National Beef Packing By JBS

The American Antitrust Institute (AAI) today commended the U.S. Department of Justice (DOJ) Antitrust Division for taking an important, needed step in preventing further, harmful consolidation in the U.S. agricultural sector.  The AAI praised the DOJ’s October 20, 2008 complaint seeking to enjoin the acquisition of National Beef Packing by meat packing giant JBS.

JBS and National Beef Packing compete head-to-head in the purchase of fed cattle and sale of USDA-graded beef products to grocers, food service companies, and U.S. consumers.  A week after the complaint was filed in district court, the DOJ opposed a motion by the merging companies to expedite the trial schedule.

“The complaint is the first DOJ enforcement action in the meat packing sector in several years.  It is a step in the right direction to slow the march to consolidation in U.S. agriculture that harms competition and consumers,” said AAI President Bert Foer.

Brazilian-based JBS is the world’s largest beef packer and National Beef Packing is the fourth largest in the U.S.  According to the DOJ complaint, the proposed acquisition is JBS’ third attempted takeover of rival beef packers in the U.S. since 2007.  Also pending is a proposed acquisition by JBS of Smithfield Beef Group, the fifth largest beef packer in the U.S.

The DOJ complaint describes the acquisition as completing a “fundamental restructuring of the United States beef packing industry.”  The consolidation would give JBS 35 percent of the market for the purchase of fed cattle packing capacity in the High Plains region of the U.S. known as the “beef belt.”  Moreover, the deal would create a three-firm oligopoly controlling 85 percent of the market for fed cattle packing capacity.  In the Southwest, JBS would have a whopping 75 percent market share.

The DOJ complaint explains that the elimination of actual and potential competition in beef packing would likely result in lower prices to ranchers, cattle producers, and feedlots for their fed cattle and higher prices to consumers for boxed beef, in violation of Section 7 of the Clayton Act.

“This complaint goes to the core issues of the merger – foreclosure of competition in buying cattle from the High Plains and Southwest feed lots and consumer harm in the boxed beef market,” said Foer.

At the same time the AAI commended the DOJ for acting to block the proposed JBS/National Beef Packing deal, the Institute expressed concern that the loss of competition in the agricultural sector. “AAI remains deeply concerned about the health of competition in U.S. agriculture, which has been compromised by lax merger enforcement under the current Administration,” noted AAI Vice President and Senior Fellow Diana Moss.  “Agriculture is one of the most important industries in the U.S. economy and it is incumbent upon antitrust enforcement to pay particular attention to the protection of competition and consumers.”

In its recent report, The Next Antitrust Agenda, the AAI dedicates a chapter to competition policy and agriculture.  Specific recommendations on agriculture can be found at: http://www.antitrustinstitute.org/archives/transitionreport.ashx

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