New draft guidelines from the Department of Justice and the Federal Trade Commission related to reviewing mergers will benefit farmers and return to the rule of law, say advocates for greater enforcement.
Mike Stranz, National Farmers Union (NFU) vice president of advocacy, said greater scrutiny of mergers will help address the lack of competition in the rural economy.
“We’ve seen how a lack of choices keeps input costs high for farmers and the prices we receive for our crops and livestock low,” he told the Daily Yonder. “These new guidelines are poised to push back against continued economic consolidation in our communities.”
He said there needs to be a shift in the thinking behind allowing or not allowing mergers, and these guidelines “represent a long-overdue change.”
“Family farmers and ranchers have long felt the effects of increasingly consolidated and uncompetitive markets,” Stratz said. “NFU supports the new draft merger guidelines, which are very much in line with the ideas behind our Fairness for Farmers campaign.”
Kathleen Bradish, vice president for legal advocacy at the American Antitrust Institute (AAI), a center-left organization dedicated to advocating for greater enforcement in antitrust, said she believes there will be greater scrutiny in the ag industry in terms of mergers.
She told the Daily Yonder that she anticipates pushback.
“I think there’s obviously a lot of very talented lawyers with a lot of the company money behind them who don’t like what this has to say,” she said. “They don’t like the idea that there could be more expense or greater challenges or more obstacles to their deals. So that does tend to inflame passions.”
Section 7 of the Clayton Act was enacted as part of a law called the Anti-Merger Act of 1950. “That law prohibited mergers, whose effects may be to lessen competition or to tend to create a monopoly in any line of commerce in any section of the country,” said Basel Musharbash, an attorney who focuses on community development and anti-monopoly advocacy.
For the first 25 years, he said, the Supreme Court interpreted it to prohibit any merger that allowed a company to absorb a substantial competitor or to absorb a substantial source of supplies for its rivals. “So if there was a rival that was not competing with them now, but could in the future have the ability to be a competitor, it prohibited that type of acquisition, as well.”
In 1982, the Justice Department and the Federal Trade Commission published a set of merger guidelines that were the first to incorporate the consumer welfare standard for judging antitrust violations. “They essentially said that instead of enforcing the law the way the Supreme Court interpreted it in the last 25 years, they were going to enforce the law primarily to challenge mergers that they thought would lead to company’s being able to raise prices for consumers of its products, Musharbash said.
“So what the new guidelines do [is] restore the agency’s enforcement practice to what the law prohibits, according to its text, and according to how the Supreme Court had interpreted it,” he told the Daily Yonder. “[The guidelines] embody the standards that the Supreme Court announced in its case law between 1950 and 1975.”
Musharbash said he believes the proposed guidelines will stop the growing trends towards concentration and vertical integration in the ag industry.
“But the other thing it means is that, hopefully, as companies realize that they’re not able to grab more market share, grow their revenues, or block rivals from entering their markets through mergers and acquisitions that redirects all of that energy and all of those resources towards productive things like innovation and towards serving the farmer or serving the consumer in new and innovative ways, instead of just trying to sort of gain leverage over consumers and leverage over farmers,” he said.