President Trump asked the Department of Justice, on May 6, 2020 to investigate meatpacker pricing activity.
“I’ve asked the Justice Department 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,” the president said at a White House event attended by Agriculture Secretary Sonny Perdue and Iowa Governor Kim Reynolds, reported AgWeb.
Last week, 11 state attorneys general in large cattle producing states asked for this very thing.
The AGs point out in their letter to US AG William Barr that antitrust concerns in the cattle market are nothing new. “Competition issues arising from agricultural markets existed long before the COVID-19 pandemic and will persist long after we defeat the current crisis. The US beef processing market is highly concentrated, with the four largest beef processors controlling 80 percent of the U.S. beef processing. In this highly concentrated industry, meatpackers have achieved sizeable profit margins. Cattle rancher, however, who for generations have supplied our nation’s beef, are squeezed and often struggle to survive. Consumers, moreover, do not realize the benefits from a competitive market.”
The letter went on to say that the AGs “have concerns that beef processors are well positioned to coordinate their behavior and create a bottleneck in the cattle industry – to the detriment of ranchers and consumers alike.”
The attorneys talked about live cattle futures recently hitting 18-year lows while boxed beef and consumer demand remain high.
“We are specifically asking the DOJ to lead a thorough examination of the competitive dynamics of this industry,” added the attorneys.
This request differs slightly from one made by 23 state cattle organizations, including the North Dakota Stockmen’s Association, South Dakota Cattlemen’s Association, Montana Stockgrowers Association, Wyoming Stock Growers Association, and more. Those organizations asked the DOJ to work with USDA on the ongoing investigations into beef and cattle pricing disparities stemming from the Holcomb, Kansas Tyson plant fire last August and the more recent pricing activities during the COVID-19 pandemic, but Trump’s orders indicate the DOJ may take the lead on the investigation rather than just assisting the USDA.
While boxed beef prices hit new record highs day after day (doubling in the last 4 weeks), live cattle prices are lower than they have been for years, with many independent cattle feeders reporting cattle on showlists for 5 weeks or more without a bid from the packers.
Robin Bonn, a former investigator with the Packers and Stockyards Agency, and more recently a staff member of the U.S. Department of Health and Human Services, helped the Oregon Cattlemen’s Association understand the need for the DOJ involvement, and spurred them on to request it several months ago, after USDA agree to investigate the pricing activity following the Tyson plant fire.
“I know from doing criminal investigations and working with the Department of Justice, how important it is to have the DOJ on board early on in the investigation,” she said. “They are the ones who will prosecute, if anyone does. You want buy-in from an attorney, you want them to direct the investigation, so they get the information they need,” she said. Bonn added that the DOJ could follow up with either a criminal or a civil case if they determined the evidence was sufficient to justify one.
Bonn said that USDA’s Ag Marketing Service, which is the agency that now oversees the Packers and Stockyards division, isn’t geared for major criminal investigations. Taking on the “large, politically powerful meatpacking industry,” would not necessarily be something USDA administrators are comfortable with, she believes.
Bonn explained that if the DOJ determined that there was a “preponderance of evidence” to support a civil case, they could go forward with a suit against one or more of the meatpackers, and would likely seek a large fine, which would be intended to “detour such behavior.”
Whereas if they sought a criminal charge, they would need evidence that proved illegal activity “beyond a reasonable doubt.”
“They could criminally charge the corporation but it basically does no good,” she said. “Look at the pharmaceutical companies. A lot of times they go with civil charges and get large settlements,” she said.
According to CNN, about a year ago, 44 states filed suit alleging that in 20 major drug manufacturers conspired to artificially inflate and manipulate prices of more than 100 generic drugs.
The suit seeks civil penalties, damages and court orders to restore competition, said CNN.
Bonn also mentioned that a group of feeder or producers could even consider asking the FBI in their state or region to open a case into alleged anti-trust practices.
Bonn emphasized, while she does own a few head of cattle, and grew up on a small ranch, she is not an expert in the cattle industry and is not alleging any wrongdoing of any kind. She simply wanted to help her friends in the Oregon Cattlemen’s Association understand the investigation protocol when illegal activity is suspected.
In her role as an investigator in recent years, she looked into possible fraud within the human health industry. Bonn said she learned that “you can investigate all you want but if you don’t have someone to prosecute your case, it goes nowhere,” which is why she urges DOJ involvement.
“You want their buy-in early on. You want them in charge so they can determine which evidence they need and who they need to talk to,” she said.
Todd Nash, OCA’s first vice president, said he appreciates the help from Bonn, a college friend. “We just didn’t know how those agencies work. She’s been a tremendous asset in helping us understand,” he said.