Wednesday, October 22, 2008

Justice Department, States Move to Block Beef Packer Combination

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The proposed combination of the third and fourth-largest U.S. beef packers has been challenged by the U.S. Department of Justice Antitrust Division and 13 state attorneys general. A complaint to block JBS S.A.'s proposed acquisition of National Beef Packing Company LLC was filed October 20 in the federal district court in Chicago.

The proposed transaction would combine two of the top four U.S. beef packers, resulting in lower prices paid to cattle suppliers and higher beef prices for consumers, according to the Antitrust Division.

Elimination of Significant Competitor

The complaint alleged that JBS's acquisition of National would substantially restructure the beef packing industry, eliminating a competitively significant packer and placing more than 80 percent of domestic fed cattle packing capacity in the hands of three firms: JBS, Tyson Foods Inc., and Cargill Inc. The Justice Department concluded that the acquisition would lessen competition among packers in the production and sale of USDA-graded boxed beef nationwide.

JBS's acquisition of National also would lessen competition among packers for the purchase of cattle ready for slaughter in the High Plains, centered in Colorado, western Iowa, Kansas, Nebraska, Oklahoma and Texas, and the Southwest, the Justice Department concluded.

The Attorneys General of Colorado, Iowa, Kansas, Minnesota, Missouri, Montana, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Texas, and Wyoming joined in the Justice Department's lawsuit.

Text of the complaint in U.S. v. JBS S.A. appears here on the Department of Justice Antitrust Division website. Further details will appear in CCH Trade Regulation Reporter.

Reactions from Congress

Senator Chuck Grassley (R-Iowa), a critic of the Antitrust Division's scrutiny of mergers in the agricultural sector, called the move to block the proposed acquisition "a positive first step." In an October 20 announcement, Grassley promised to "continue to prod federal antitrust enforcers to be vigilant about keeping the agricultural sector of our economy competitive."

Senator Tim Johnson (D-South Dakota) issued a press release stating that "agriculture communities are faced with pressure from large agri-business and [the] decision by the Department of Justice [to challenge the acquisition] is a reflection of what ranchers and farmers across the state and nation and members of Congress have communicated to the Department."

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