A Letter of Concern from R-CALF

US - Cattlemens' action group, R-CALF USA, have sent a letter to the US Department of Justice expressing their concern regarding JBS's recent plans to aquire National Beef Co., and Smithfield Beef Group, believing that the outcome could only harm independent cattle producers.

14 March 2008

2 minute read

North America

If the aquisitions were to go ahead, JBS would become the largest beef packer in the U.S., and R-CALF USA explained that JBS likely would capture over 35 percent of the domestic cattle slaughter – based on evidence that indicates Tyson Foods already controlled that amount of the market in the mid-1990s.

“We urge the U.S. Department of Justice to rigorously investigate the potential impacts of this proposed purchase; to prevent its consummation pending a thorough investigation; and to ultimately block this proposed purchase should evidence be found indicating any reduction in competition to either the U.S. cattle industry or the U.S. beef industry,” wrote R-CALF USA President/Region VI Director Max Thornsberry. “Should this purchase materialize, the market power concentrated in the hands of the remaining three packers…would intensify, as would their propensity to exercise this market power to the detriment of competition, resulting in economic injury to independent U.S. cattle producers and U.S. consumers.”

According to R-CALF USA, evidence already exists that demonstrates the exercise of market power by the current four firms that dominate the beef packing industry. Juries in Pickett v. Tyson Fresh Meats, Inc. and in Herman Schumacher et al. v. Tyson Fresh Meats, Inc. et al. have found, as matters of fact, that the actions of dominant beef packers, even at the current level of concentration, effectively manipulated prices paid to domestic cattle producers. Studies also show that market power can be, and is being, exerted by the dominant beef packers, at current concentration levels.[1]

Equally disturbing are media reports indicating that JBS SA’s Friboi Group (JBSS3.BR) has been cited by the Brazilian Justice Department’s antitrust division for engaging in anti-competitive practices to keep cattle prices low when purchasing for slaughter. The U.S. Department of Justice should independently investigate the circumstances surrounding any such anti-competitive practices alleged against and/or committed by JBS before allowing this proposed purchase to proceed.

“Specifically, the department should determine, as a precondition for this sale, whether U.S. laws are adequate, and adequately enforced, to prospectively prevent a recurrence of the kind and type of anti-competitive behavior as was alleged to have been perpetrated by JBS in Brazil,” Thornsberry wrote.