Senator Against JBS Merger Monopoly

US - The Chairman of the Senate's antitrust subcommittee has recommended that the JBS-Swift/Smithfield merger should not be allowed to go ahead on the grounds of reduced competition and consumer protection.
calendar icon 25 June 2008
clock icon 3 minute read

Sen. Herbert Kohl sent a letter to the Justice Department on Tuesday advising against the deal which would give JB-Swift & Co. major control of the market and consequently drastically reduce competition. If the deal were to go ahead then three U.S. beef packers would have more than 80 percent control of the US beef market.

Senator Kohl held an Antitrust Subcommittee hearing on the proposed deal in May. The text of the resulting letter was sent to Assistant Attorney General Thomas Barnett of the Antitrust Division in the Justice Department follows.

"The likely anti-competitive effects of permitting such a high level of concentration in an already concentrated market are plain to see."
Letter by Sen. Herbert Kohl

In the letter he said that he had concluded that these acquisitions, if permitted to proceed, would likely cause substantial harm to competition and consumers and that they would be contrary to section 7 of the Clayton Act.

JBS Swift is currently the nation's third largest beef processor. It now intends to acquire the fourth and fifth largest beef processors, National and Smithfield, which will result in JBS Swift becoming the nation's largest beef processor and leaving only two other major companies in the industry. These three remaining firms will have over 80% market share of steer/heifer slaughter, and JBS Swift alone will control nearly a third of the market.

"The likely anti-competitive effects of permitting such a high level of concentration in an already concentrated market are plain to see." The letter read. "By reducing the number of major buyers for ranchers' cattle from five to three -- and in some regions even one or two -- this deal will give the remaining beef processors enormous buying power. With little choice to whom to sell their cattle, ranchers will increasingly be left in a "take or leave it" position. On the national level, the JBS Swift acquisitions would combine 11 meat packing plants now owned by three meatpackers under the single ownership of JBS Swift. On the regional level, many ranchers and feed lot operators will be left with only one, and at best two, meat packing plants to sell their cattle.

"Given this sharp increase in market concentration and reduced options for ranchers to sell their cattle, these acquisitions are likely to substantially injure competition for cattle sold by independent ranchers for slaughter. These acquisitions are likely to substantially increase the market power of three remaining national meatpacking firms, and significantly reduce the prices ranchers are able to obtain for their cattle.

Senator Kohl also raised serious concerns that the three major meatpacking firms will substantially increase their market power in the downstream market - finished beef sold to supermarkets, small grocery stores, butcher shops and restaurants. This raises the serious danger of significant increases in the price of beef paid by consumers. According to the Bureau of Labor Statistics, U.S. beef prices have increased at a rate 68% faster than overall inflation over the last decade. Reducing the number of major suppliers of beef from five to three obviously leaves retailers and restaurants, and ultimately consumers, with significantly fewer competitive choices. With food prices already rising recently, this enormous consolidation in the beef processing industry is likely just to add to higher food prices at a time that consumers can least afford it.

Further Reading

- Go to our previous news item on this story by clicking here.

TheCattleSite News Desk

© 2000 - 2023 - Global Ag Media. All Rights Reserved | No part of this site may be reproduced without permission.