Breaking Up Big Ag Requires Reasonable Antitrust Enforcement


The Regulatory Review

The FTC and Justice Department must change their interpretation of antitrust laws to protect fair competition in agriculture.

In 2007, food sovereignty activists from around the world convened in Sélingué, Mali to write the Declaration of Nyéléni. That declaration asserts that activists should seek to democratize the flows of power, wealth, and resources that have moved predominantly toward the core industrialized countries and multinational corporate agribusinesses, and away from farmers all over the world.

The declaration aims to ensure that the food system protects those who produce and consume the world’s food supply: farmers and people, rather than corporate agribusinesses. Yet in the United States and elsewhere, the food system has a long way to go toward meeting the needs of both farmers and consumers.

Farmers are increasingly driven out of agriculture by the unequal distribution of market power. To ensure fair competition in the agri-food marketplace, it is imperative that the federal government provide the proper enforcement of antitrust regulations. Currently, corporate agribusinesses hold a disproportionate amount of market power in the agri-food economy. Farmers, on the other hand, are under economic pressure to compete in a growing global market, and often must rely on contracting with just a few processing companies to sell their products.

Many of these contracts contain conditions which force farmers to buy seeds and equipment from a small handful of input companies. Often, the big food companies are vertically integrated—that is, the same companies operate at various levels of the supply chain. At the end of the day, farmers only receive 14.8 cents per every dollar consumers spend on food—yet the costs of production amount to 80 cents per dollar. The majority of the revenue is realized by corporate agribusiness executives and shareholders.

In 2015, the four largest beef firms controlled 85% of the beef market. The four largest U.S. corn seed firms controlled 85% of the corn seed market, and the four largest U.S. soybean seed firms controlled 76% of that market. In 2017, after the Bayer–Monsanto and Dow–Dupont mergers, the four largest global herbicide and pesticide firms now own 84% of the market share.

The Federal Trade Commission (FTC) and Antitrust Division of the Department of Justice interpret and implement antitrust statutes. The Sherman Antitrust Act of 1890 renders price-fixing, restraint of trade, and excessive market monopolization illegal, and the Clayton Antitrust Act asserts that it is unlawful for any business to merge with or acquire any part of its industry in a manner that significantly damages that industry. Despite these laws, corporate agribusiness’ monopolization of the agricultural market continues to persist at the expense of farmers in the United States.

Over the past 40 years, corporate agribusinesses have benefited from the FTC and Antitrust Division’s lax interpretations of antitrust statutes. These agencies have permitted large corporate agribusinesses to merge and monopolize the market excessively, despite the fact that antitrust statutes were created explicitly to regulate monopolies and ensure fair market competition.

Admittedly, given that the Sherman Act makes it illegal to restrain trade, it might be said that only by allowing agribusinesses to merge, acquire other businesses, and monopolize the market is trade able to continue unrestrained. But that trade is unrestrained only for the big firms. Small farmers are unable to compete in the marketplace when the concentration of big firms continues unrestrained, particularly when mergers and acquisitions promote the monopolization of the market.

Consider how small farmers have fared under the consolidation of the meat packing industry. According to the Packers and Stockyards Act of 1921, price-fixing was supposedly rendered illegal, but even with this protection the plight of small farmers has been profound.

In 2004, for example, cattle farmer Henry Lee Pickett sued meat packer Tyson Foods when he noticed that Tyson was lowering prices in its marketing agreements with farmers. Pickett preferred to charge the cash market price to avoid being paid an unfair price. Even if farmers did not sell their products through marketing agreements like Tyson’s, often they still needed to lower their prices on the open market. Pickett was unable to provide evidence that Tyson’s market agreements were producing unfair competition practices, so he lost his case.

Separately, pork producers also unsuccessfully fought meat packer Smithfield Foods, citing illegal price-fixing under the Packers and Stockyards Act. The marketing agreements were seen by the judiciary as reasonable business practices because they cut costs to the agribusiness contractors.

In both of these cases, Tyson and Smithfield were protected by the “freedom of contract” principle, which declares that everyone is free to participate in, or opt out of, any contractual agreement. However, the share of this “freedom” in terms of food sovereignty is certainly asymmetrical. When the market price is controlled by an artificially low price created by a marketing agreement, farmers are not free from poverty. When marketing agreements are adopted by the majority of processors, and there are not alternative agreements offered, farmers are not free from opting out of unfair contracts. In effect, farmers are locked into receiving an unfair price for their product.

The Agricultural Adjustment Act of 1933 contained an important policy for agrarian viability: parity pricing, or a price support that covers producers’ costs of production in setting commodity prices. But that policy lapsed in 1973 and has never returned as part of federal agricultural law. Reinstating a parity price for farm products would ensure that consolidated corporate agribusinesses would not be able to fix prices below the costs of production. Farmers would have to be paid a fair price for their products under the law.

Another important solution will be for farmers and food sovereignty advocates to seek judicial review of mergers and acquisitions approved by the FTC and DOJ. When firms are too big, they accumulate too large a share of power, land, and wealth. This inequality inherently renders farmers dispossessed of their ability to compete in the marketplace.

Instilling food sovereignty into our food governance requires prioritizing our farmers’ needs. The law must guarantee a fair price for the food they grow to feed all of us. The judiciary must consider the “restraint of trade” that their previous merger approvals have imposed on farmers, and enforce antitrust laws in favor of farmers going forward.

Hannah Kass is a master’s degree candidate in environmental studies at the University of Pennsylvania.


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