[imgcontainer] [img:Normal.jpg] [source]USDA[/source] It was unprecedented. The Attorney General and the Secretary of Agriculture came to five hearings on competition in the agriculture industry. And all that came out of it was a flimsy report. This is a picture from the hearing in Normal, Alabama, where testimony was taken on the poultry business. From the left: Alabama (D-7th District) Congressman Artur Davis, Agriculture Secretary Tom Vilsack, Attorney General Eric Holder, and Assistant Attorney General for Antitrust Christine Varney. Varney has since left the administration. [/imgcontainer]
The U.S. Attorney General was at all five hearings. So were the Secretary of Agriculture and all the top anti-trust officials at the Departments of Justice and Agriculture.
It was unprecedented: At five public hearings in five places across the country in 2010, two cabinet secretaries and all the top antitrust cops on the federal payroll were in one room listening to farmers and consumers talk about competition — or the lack of it — in the business of agriculture.
These officials were fulfilling a promise the Obama administration made soon after coming to office. The promise was that the markets for food would be free for producers and consumers — that violations of antitrust laws would be confronted in the courts.
That was the promise. Now, two years later the Department of Justice has issued a report on those five hearings, the ones that consumed so much time from two cabinet secretaries. What’s in the report? Mostly cheap talk, and little action.
Let me explain.
Five public workshops to explore competition issues in agriculture were held in 2010. Hosts were the U. S. Departments of Justice (DOJ) and Agriculture (USDA). Topics for the five workshops (and locations) were as follows: General Issues of Concern to Farmers (Iowa); the Poultry Industry (Alabama); the Dairy Industry (Wisconsin); the Livestock Industry (Colorado); and Marketing Margins (Washington, DC).
U.S Secretary of Agriculture Tom Villsack, U.S. Attorney General Eric Holder, Assistant Attorney General and Head of the DOJ Antitrust Division Christine Varney, and the Grain Inspection, Packers and Stockyards Administration administrator Administrator Dudley Butler attended all of the workshops.
(Conspicuously and inexplicably absent was the Federal Trade Commission (FTC), which has antitrust authority over the fertilizer industry as well as general antitrust responsibility in the retail food sector.)
Attendance of two Cabinet members other top antitrust cops at a public agricultural meeting, much less at five such meetings, is not a normal occurrence. In fact, I’ve never heard of anything like it.
Attorney General Holder stated that the purpose of the workshops was to learn how to best promote “free and fair competition” in agriculture. Assistant AG Varney observed that “agriculture is an essential part of the American economy” and “well functioning agricultural markets are not only a matter of economic efficiency, but a matter of national security and public health.”
DOJ recently released their report on the Workshop. You can get the full report here. What does the report say?
Here are a few excerpts.
A clear lesson of the workshops … is that antitrust enforcement has a crucial role to play in fostering a healthy and competitive agricultural sector. A number of participants (including Division staff and leadership) stressed the importance of vigorous antitrust enforcement and detailed the ways that anticompetitive mergers and conduct can harm producers, consumers, and others. … These discussions confirmed that a healthy agricultural sector requires competition and, consequently, vigorous antitrust enforcement.
But what does the report really say? Here are my impressions.
Understanding the issues
A clear understanding of complex and often subtle competition issues unique to agriculture and the food system is reflected in the report. That, in and of itself, is unprecedented progress, and a necessary first step.
Cheap Talk About Fair Markets
AG Holder, Secretary Villsack and other government officials made repeated reference to promoting “fair” markets. The word “fair” also permeates the report, and in official news releases and testimony by administration officials.
Antitrust law was originally intended to establish “free and fair competitive markets.” But early in the history of U.S. antitrust law, the courts decided that “fair” was difficult to define so they essentially deferred to economists’ notion of economic efficiency, which has nothing to do with fairness. It seems to me that the courts shirked their responsibility, particularly since the role of our legal system is justice, not economic efficiency.
A hundred years of case law and economics has completely removed the concept of fairness from the nation’s antitrust laws. Recent efforts to define what constitutes fair business practices under the Packers & Stockyard Act—the proposed GIPSA Rules—were killed by powerful agribusiness interests in a compliant House of Representatives.
Actually the report contradicts the fairness rhetoric by Cabinet and other government officials. It says, “The antitrust laws focus on competition and the competitive process, and do not serve directly other policy goals like fairness …”
So all the talk about fairness in the workshops and in the report is nothing more than political rhetoric, commonly known as cheap talk. New legislation will be required to define fair business practices, and new legislation ain’t gonna happen as long as powerful corporations control the legislators.
Too Big to Prosecute
Included in antitrust law is a process by which the antitrust cops — DOJ and FTC — can block mergers and acquisitions by large companies. (A loophole in antitrust law is that it does not apply to firms that acquire bigness and market domination through internal growth, such as a Wal-Mart.)
That’s theory. Practice, however, seems to be that bigness is just fine, thank you.
Over 30 years of permissive merger policy by DOJ and FTC has led not only to banks and agribusiness firms “too big to fail,” but also to corporations that are “too big to prosecute” for antitrust violations.
The combined annual budget for the Antitrust Division of DOJ and the Competition Bureau of FTC is only about $250 million, only a fraction of which can be devoted to agricultural and food issues. Government attorneys and economists are often grossly outnumbered, and can easily be buried in legal paperwork by an expensive herd of corporate lawyers.
The color of justice is green.
Another problem under previous administrations is that government employees — competition attorneys and economists — have at times been placed under “cubicle arrest” and have not been allowed to officially investigate formal complaints of antitrust violations. Or, high-ranking officials have buried results of the competition investigations.
But there is a more insidious problem. There are recent instances where antitrust cops and referees reluctantly backed away from investigations because of the very real threat that their funding would be cut by politicians on “The Hill.” This has happened before. This may happen again. This appears to be a bipartisan problem.
In my opinion, this is not legislation by representatives of “the people,” but plain thuggery by moneyed politicians at the beck and call of corporate donors. Legislators should change laws in an open transparent way and not be allowed to repeal parts of law behind our backs.
A Fight Without a Referee
Thurman Arnold, Assistant Attorney General in charge of the Antitrust Division in Franklin Delano Roosevelt’s Department of Justice, was arguably the last to attempt to strictly enforce antitrust law. Arnold once said, “The competitive struggle without effective antitrust enforcement is like a fight without a referee.”
The referees have put on quite a show with the hoopla surrounding the agriculture workshops and now the this final report.
The DOJ report concluded, “… we are better positioned to lend our expertise … to promote ‘free and fair competition’ in agriculture.”
Better positioned? That’s it? I guess this means that the referees now have a better understanding of anti-competitive infractions and are better ‘positioned’ to see an infraction and to throw a flag.
But will they throw flags for market manipulation? Will they throw flags for unfair business practices? Will they be impartial? Will they impose penalties sufficiently large so that violations will be meaningful and not just a cost of doing business?
And who will do any of this now? Both Christine Varney and Dudley Butler — the two people who were most likely to take any action after the five workshops — have both left the Administration.
In my opinion, we have some highly competent, hard working and conscientious attorneys and economists employed as antitrust cops and referees. Unfortunately political forces greatly limit their ability to throw flags and impose penalties stiff enough to change behavior.
Until the corporate stranglehold on government is broken, the competitive struggle in the food and agricultural system will continue to be a fight without a referee.
C. Robert Taylor is the Alfa Eminent Scholar and Professor of Agriculture and Resource Policy, Agribusiness and Concentration at Auburn University.