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Big four packers taken to court by grocery chain

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Packer collusion in protein markets has been a hot button issue for years. The COVID-19 pandemic further highlighted these issues as packer margins soared and producer margins plummeted.

The Department of Justice (DOJ) Antitrust Division recently sent investigative demands to Tyson Foods, JBS-SA, Cargill Inc. and National Beef Inc. 

 In early May, President Donald Trump asked the DOJ to look into allegations that U.S. meat packers broke antitrust laws because prices paid to farmers and ranchers declined even as meat prices rose.

“I’ve asked the DOJ to look into it. I’ve asked them to take a very serious look into it, because it shouldn’t be happening that way, and we want to protect our farmers,” President Trump said at a recent White House event.

Most recently, on June 6, Central Grocers filed a class action lawsuit alleging the big four violated the Sherman Act by conspiring to constrain meat prices in the U.S.

Central Grocers is an Illinois-based retailers’ cooperative, which supplies brand name and private label goods to member stores across the Midwest.

Central Grocers suit 

According to the complaint, the defendants were responsible for the sale of roughly 80 percent of the more than 25 million pounds of fresh and frozen beef sold in the U.S. market in 2018. Per the case, the companies collectively controlled between 81 to 85 percent of the domestic cattle processed in the U.S. since 2015. 

According to the case, “Defendants sit atop the supply and distribution chain that ultimately delivers beef to the market. Their vital role is to purchase cattle from the nation’s farmers and ranchers, slaughter and pack cattle into beef and sell beef to Central Grocers and other class members.” 

The suit continued, “Defendants’ gatekeeping role has enabled them to collusively control both upstream and downstream beef pricing throughout the class period.”

“Plaintiff alleges defendants violated Section One of the Sherman Act by conspiring to constrain beef supplies in the United States, thereby artificially inflating domestic beef prices paid by direct purchasers,” the complaint read. “As a direct result of defendants’ unlawful conduct, Central Grocers and the other class members suffered antitrust injury for which plaintiff seeks treble damages and injunctive relief and demands a jury trial.”

Sherman Act

According to the Federal Trade Commission (FTC), the Sherman Act is the oldest of the U.S. antitrust legislations. 

“Congress passed the first antitrust law, the Sherman Act, in 1890 as a comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade,” according to FTC records. “In 1914, Congress passed two additional antitrust laws – the Federal Trade Commission Act, which created the FTC and the Clayton Act. With some revisions, these are the three core federal antitrust laws still in effect today.”

“The Sherman Act outlaws every contract, combination or conspiracy in restraint of trade, and any monopolization, attempted monopolization, or conspiracy or combination to monopolize,” the DOJ explained. 

DOJ noted the Supreme Court decided the Sherman Act does not prohibit every restraint of trade, only those that are unreasonable. For instance, in some sense, an agreement between two individuals to form a partnership restrains trade, but may not do so unreasonably, and thus may be lawful under the antitrust laws. 

On the other hand, certain acts are considered so harmful to competition they are almost always illegal. These include plain arrangements among competing individuals or businesses to fix prices, divide markets or rig bids. 

DOJ noted these acts are “per se” violations of the Sherman Act. In other words, no defense or justification is allowed.

Although most enforcement actions are civil, the Sherman Act is also a criminal law, and individuals and businesses that violate it may be prosecuted by the DOJ.

“Criminal prosecutions are typically limited to intentional and clear violations such as when competitors fix prices or rig bids,” DOJ explained. “The Sherman Act imposes criminal penalties of up to $100 million for a corporation and $1 million for an individual, along with up to 10 years in prison.” 

Under federal law, the maximum fine may be increased to twice the amount the conspirators gained from the illegal acts or twice the money lost by the victims of the crime, if either of those amounts is over $100 million.

Callie Hanson is the editor for the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net.

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