DOJ is focusing on antitrust enforcement in agribusiness: Remarks by Michael Kades on this regulatory trend
Agribusiness should always be a priority for the antitrust enforcers. This is the key takeaway from remarks by Michael Kades, Deputy Assistant Attorney General in the Department of Justice’s Antitrust Division, in his speech last week at the 2023 Food & Agribusiness National Conference.
This is the second major speech in which Kades has talked about his personal interest in antitrust enforcement, especially concerning farmers and farm workers.
Kades began his remarks with a broad overview of the antitrust movement generally, with a particular emphasis on what he called “bipartisan concerns with markets and competition” and the potential for greater legislative action regulating antitrust behavior. He said that regulators’ current “reevaluation” of antitrust enforcement is particularly focused on competition in agriculture markets.
Below, we provide an overview of Kades’ discussion of antitrust enforcement in agribusiness.
1. Agriculture and antitrust. Repeatedly in his remarks, Kades emphasized the importance of antitrust enforcement in agribusiness. In line with the Biden Executive Order of July 2021, Kades equated concerns about market concentration in agribusiness with other more familiar targets, among them tech, pharma, and life sciences. He linked lax antitrust regulation of agribusiness to other struggles being faced in rural communities acoss the country – in particularly, the opioid crisis and the economic struggles of small towns. Kades believes that “the revealed wisdom of the 1980s – markets self-correct, concentration is rarely a problem, exclusionary conduct usually fails and buyer market power is not a concern” actually “opened to the door to rising concentration across agricultural markets.” He then called for regulators to “revisit whether firms in agricultural markets have improperly acquired or abused market power.” He urged that “where those violations have occurred, farmers, livestock producers and independent businesses, like seed dealers, will benefit from restoring competition.”
2. History of competition in agricultural markets. Following his call for greater antitrust enforcement, Kades provided a brief history of antitrust enforcement in agribusiness. Indeed, one of the earliest examples of US antitrust enforcement involved agribusiness – the challenge posed by the five companies that dominated the meatpacking industry around the turn of the previous century. The Federal Trade Commission investigation of these companies led to charges of such anticompetitive behaviors as price fixing and dividing territories. The five companies eventually entered into a consent decree with the Department of Justice in 1920. Subsequently, their combined market share dropped from 80 percent to 25 percent between 1920 and 1980.
3. Renewed concentration in agribusiness. Kades said that “concentration returned across the agricultural industry” after 1980 due, in part, to economies of scale, innovations such as pesticides and genetically modified, proprietorial seeds, and worldwide markets. “Today, four companies control 85 percent of the corn seeds market. Three manufacturers control 95 percemt of equipment production and maintenance. Four companies control over 80 percent of beef packing. And so on. Those stats are national, but at the local level, concentration is even worse.” Kades stated his belief that this concentration is responsible for the “loss” of “100,000 farms between 2011 and 2018.”
4. Recent actions involving agricultural markets. Kades specifically highlighted Congress’s longstanding concern about bargaining inequities in livestock production, particularly among chicken growers. He described two cases that the Justice Department recently brought against large chicken sellers using the 1921 Packers and Stockyards Act, which he said provides chicken growers “a broad range of protections from unfair and deceptive Acts, unjust discrimination, and undue preferences or penalties”:
a. United States v. Koch Foods. This civil complaint was filed by the Justice Department this month in the Northern District of Illinois against Koch Foods alleging that “Koch required independent chicken farmers to pay Koch a termination penalty if the farmers wanted to switch from working with Koch to another processor.” The consent decree proposed by the government would require Koch to inform chicken growers that the termination penalty is unenforceable, among other requirements.
b. United States v. Cargill. This 2021 action brought by the DOJ’s Antitrust Division alleged that Wayne Farms and Sanderson Farms failed to provide sufficient disclosures of the risks chicken growers face and also were deceptive in explaining contractual penalties to growers. The defendants settled with the government in August this year.
5. Right to repair. Kades also touched on farmers’ rights to repair their farm equipment. He said that some farm equipment manufacturers limit the ability of farmers to independently (personally or using a third party) repair their equipment. The equipment sellers have asserted that limitations of repair rights cannot violate antitrust laws where those contractual provisions do not surprise or deceive consumers. The Antitrust Division disagrees and believes the provisions are anti-competitive. The Justice Department is currently awaiting a court decision on this issue.
6. Worker pay. Three major poultry producers recently executed a consent decree with the Justice Department in which they agreed to pay restitution to workers, refrain from retaliation, and allow regulators to monitor for antitrust violations where, according to Kades, the companies “conspire[ed]… to suppress competition and reduce compensation below the levels that would have prevailed in a competitive market.” The government’s complaint alleged that the companies collaborated for 20 years regarding compensation decisions, including in-person meetings regarding salaries, attendance bonuses, and overtime pay.
a. Wage and labor agreements. Agribusiness has been one of the primary focus points in the DOJ’s recent antitrust investigations into wage and labor agreements. We expect further investigations and developments in this area are to come.
7. Consumers: Kades described a recent complaint brought against Agri Stats in the District of Minnesota. The complaint alleged that Agri Stats used its information exchanges with agri-processors to produce pricing and inventory reports, which it encouraged the processors to use to “weaken competition, curb production and increase prices to the processors’ customers.” This litigation is particularly notable because it follows the withdrawal, earlier this year, of the prior information sharing safe harbors.
Kades concluded his remarks by reiterating that the “whole of government” is committed to “promoting competition in agricultural markets.” He said that the aforementioned litigation brought recently by the DOJ involved long-term coordination and exclusionary conduct that is “not supposed to happen.” Further, he noted that “[f]our of the five actions involve allegations of a buyers’ exercising market power, an area that has traditionally been of secondary importance in antitrust enforcement.” Kades stated his belief that the seriousness of the allegations from these cases reflects the fact that “we still have plenty of work to do” in agribusiness and that the Justice Department believes it must continue to “prioritize agriculture.” ”“I won’t discuss any open investigations,” he said in closing, but “I can say that a significant number of attorneys and staff are looking at these issues from an enforcement and a policy perspective… we have begun to revive antitrust enforcement in agricultural markets.”
In sum, Kades’ remarks to the Food & Agribusiness National Conference reflect the DOJ’s particular focus on antitrust enforcement in agribusiness and its willingness to aggressively pursue litigation in that area. It is more important than ever for agribusiness companies to receive counsel on potential antitrust issues as they plan short and long-term market strategies and platform development opportunities.
Please feel free to reach out to any of us for more information.
