Personal Injury Law

Stakeholders Debate Competition in the Poultry Industry at USDA/DOJ Workshop

By Joseph Eckhardt

It's been a couple weeks since chicken farmers and processors met with Secretary of Agriculture Tom Vilsack and Attorney General Eric Holder in Normal, Alabama to discuss competition in the poultry industry. The May 21 USDA/DOJ workshop was the second such meeting conducted by the agencies in their quest to review enforcement policy relating to competition in agriculture. The meeting certainly highlighted the fact that there is debate among stakeholders in the industry about the state of competition, healthy or not.

Several sources noted with great interest that Christine Varney, DOJ's Assistant Attorney General in charge of the Antitrust Division, asked one poultry farmer to call her directly if he experienced intimidation from poultry processors. The farmer declared that he was concerned to appear in public speaking about the way poultry 'integrators' contract with poultry farmers like himself, who actually raise chicks into broilers. The recently published transcript of the May 21 proceedings also contains a farmer's anonymous statement that was read to the government lawyers by a farmer willing to speak on his colleague's behalf.  

From a policy perspective, there was more to the May 21 workshop than fear and loathing. For example, Assistant Attorney General Varney asked about the prevalence of farmer cooperatives in the industry – to which farmers on the panel replied that poultry farmers do not generally work together in cooperatives. Large poultry integrators, therefore, deal with poultry farmers on a one-on-one basis. And as one can read in the transcript, poultry farmers present in Normal, Alabama generally felt that the large poultry 'integrators' have too much power over them. Outside the context of the workshop, Poultry farmers recently sued processors for their alleged unfair practices, without success. On May 10, a federal appeals court upheld the dismissal of claims against Tyson Foods, because the poultry farmers failed to allege that the challenged tactics actually harmed competition – i.e., reduced output or increased prices.

That brings us back to Assistant Attorney General Varney's question about the prevalence of farmer cooperatives. Because the Capper-Volstead Act enables farmers to band together and jointly negotiate with the large buyers without violating Section One of the Sherman Act, farmers could theoretically deal with poultry processors through a collective or cooperative organization.  

Leading up to the meeting, large-scale poultry producers prepared themselves for criticism from farmers. The National Chicken Council released a report by an agricultural economist that describes healthy, vigorous competition in the poultry industry. And while chicken farmers at the workshop complained about the 'power' of large poultry integrators, the National Chicken Council report cited a 2001 study that found farmers were generally happy to raise chickens for integrators. Interestingly, the report also reviewed government reports that show much higher levels of concentration among beef and pork processors relative to the poultry industry, and the report showed modest declines in retail prices for chicken products over the past 18 years.

What's the takeaway from this round of the USDA/DOJ meetings? It's hard to say. As a general rule, the antitrust enforcement agencies hate to argue with falling consumer prices. But the transcript reveals certain concerns about the power of poultry integrators over the farmers. Though the government's listening tour clearly shows that government lawyers from USDA and DOJ are listening, it's not clear yet what they are thinking. Watch for more clues at the June 25 workshop in Madison, Wisconsin, when the DOJ and USDA will be examining competition in the dairy industry.

Full post as published by Food Liability Law Blog on June 11, 2010 (boomark / email).