ORGANIZATION FOR COMPETITIVE MARKETS

P.O. Box 6486

Lincoln, NE 68506 

Web site: www.competitivemarkets.com 

Date:  January 29, 2001                        For Immediate Release

 Contact:           Fred Stokes: 662-476-5568

                        Michael C. Stumo: 860-379-6199                       

 

TYSON/IBP CLEARS ANTITRUST REVIEW HIGHLIGHTING NEED FOR PACKER MERGER SUSPENSION

The Organization for Competitive Markets (OCM) renewed its call for a two year suspension of meat and poultry processor mergers among the biggest companies.  OCM's statement came after Tyson publicly stated that its acquisition of IBP cleared U.S. regulatory review.  According to Tyson, the time period has now passed within which the U.S. Department of Justice (DOJ) could act to prevent the acquisition or modify its terms to protect producers and consumers.

"When this deal was announced, OCM publicly stated that the antitrust laws, as they are currently interpreted, would not protect farmers and consumers from harm," said Fred Stokes, president of OCM.  "That fact gave rise to OCM
calling for a two year suspension of meat and poultry processor mergers to allow Congress time to determine the best way to promote a better industry structure.  Unfortunately, most people merely made meaningless statements
asking DOJ to scrutinize the merger."

The deal merges the country's largest poultry producer and processor with the country's largest processor of fresh beef and pork.  The acquisition has been valued at $3.2 billion in cash and stock.  Tyson will also assume $1.5
billion in debt.  According the Associated Press, the new mega-meat company would control 30 percent of the beef market, 33 percent of the chicken market, and 18 percent of the pork market.  The new firm will have annual
sales of $24 billion.

"It has been obvious for some time that current antitrust law allows the agricultural marketplace to continuously degrade,"  said Michael C. Stumo, general counsel of OCM.  "This degradation takes the form of continuous reduction in farmer choice in selling his product.  Tyson's history of vertical integration will shift more production away from the open market, and into off-market contracts.  Price discovery will suffer, the markets will become thinner, and the major players will enhance their ability to affect the markets in their favor."

The federal Surface Transportation Board (STB) halted mergers in the railroad sector last year.  During that temporary  suspension, the STB revamped its regulations in a manner to condition future mergers on a showing that the result will be enhanced competition.

"When a narrowly tailored merger suspension is discussed, a common response is a Chicken Little-style fear of 'unintended consequences,'" continued Stumo.  "There has been no showing of 'unintended consequences' by anyone.  This irrational response to a sensible, targeted merger suspension bill is further disproven by the experience of the federal STB.  When railroad company mergers were suspended last year, their were no so-called 'unintended consequences.'  The new STB rail merger rules allow mergers when they increase competition."

"Something needs to change," said Keith Mudd, vice-president of OCM.  "When the law supposedly allows the Government to look the other way as the nation 's largest poultry producer and processor swallows the nation's largest red meat processor, then its time to change the law."  Mudd continued, "Not only will farmers be squeezed, but this deal will restrict consumer's choices at supermarkets.  And given the concentration of firms at the retail food level, its likely that if a new major meat firm raises prices to retailers, the retailers will simply pass through the price increase to consumers."

OCM has called for a two-year suspension of mergers among meat and poultry processors so that Congress has time to study how to protect consumers and producers from the spiraling concentration in this sector.  The proposal would only affect the largest firms, would not prevent companies from outside the sector from acquiring a processor, and would require a Congressional study to come up with better policy.

The Organization for Competitive Markets is a multidisciplinary, nonprofit group of farmers, ranchers, academics, attorneys, and policy makers dedicated to reclaiming the agricultural marketplace for independent
farmers, ranchers and rural communities.