Food & Farm: DOJ stance on Smithfield deal blows legal observer away

 1 comment(s)  
 E-mail Story
 Print Story
  Share

 digg it!
 Facebook
 del.icio.us
Seed Newsvine
Fark It
Reddit

Text Size: 

Tools Sponsor

By ALAN GUEBERT/Food and Farm Columnist

When University of Wisconsin law professor Peter Carstensen read the U.S. Department of Justice news release announcing its blessing on pork giant Smithfield Inc.’s acquisition of rival Premium Standard Farms, he was “dumbfounded.”

His speechlessness wasn’t based on the fact that official sanction of the questionably anti-competitive deal arrived via the press “dump,” a tiresome Washington trick to announce bad news late Friday in the hope that no one will notice.

Nor was he surprised DOJ approved the deal’s essentials: Smithfield, the world’s largest pork producer and processor with $11 billion in annual sales, could buy the nation’s second-largest producer and sixth-largest processor.

[+]Enlarge

After all, he surmised, this administration hasn’t seen a mega-buyout or merger it hasn’t loved.

“What blew me away, however,” Carstensen relates, “is that Justice approved every aspect of the buyout without reservation, especially Smithfield’s acquiring Premium’s processing plant in North Carolina,” its only regional competitor.

“I had thought,” he explains, “there’s no way Justice could possibly allow only one pork packer in the entire Southeast. But, (wow), they approved it all. I was flabbergasted.”

There’s only one way to read the May 4 action, he continues: “The U.S. Justice Department is killing competition in American agriculture one merger at a time.”

The Wisconsin law professor is in a position to make such an indictment.

For years, Carstensen and other legal and economic scholars — like Neil Harl of Iowa State, Ron Cotterill of the University of Connecticut and Michael Stumo of the Organization for Competitive Markets — have fought anti-competitive bigness through academic research, congressional testimony and, when all else fails, federal lawsuits.

At every turn, however, they have been outflanked, outgunned and out-DOJed. “There is a complete unwillingness on the government’s part to recognize the dire consequences of the continued concentration of market power in these ag giants’ hands,” Carstensen says with sad fury.

The Smithfield-PSF deal is just his latest lesson in this futility.

In a conference call last October with DOJ officials reviewing the proposed buyout, Carstensen, Stumo and others offered solid proof, he says, that Smithfield’s enormous-and-getting-bigger size was harmful to producers and consumers alike for several legal and economic reasons — especially in North Carolina.

The DOJ group “listened and we never heard from them again,” Carstensen recalls.

Then, in late April, after testifying before the Senate Ag Committee on “restoring” fair and open markets in agriculture, Carstensen stuck around to listen to Committee Chairman Tom Harkin, D-Iowa, skillfully carve up another witness’s pro-bigness research, research the U.S. Department of Agriculture had spent five years and $6 million to produce.

“When Senator Harkin finished,” Carstensen says, “I thought to myself, ‘Well, there’s $6 million worth of data to prove the Smithfield deal is bad all around.’”

Not so, because there is no evidence in the DOJ-Smithfield record to show the antitrust reviewers took the Senate testimony, USDA’s research or even Carstensen and his colleagues’ information into account when making their decision.

In fact, there’s barely a record.

In its May 4 press release, Justice notes that the Smithfield investigation, “as in most of its investigations … has been highly fact-specific, and many of the relevant underlying facts are not public.”

Well, that’s just terrific.

One publicly traded company that deals with thousands of farmers and millions of consumers — everyday buys another very public, public-reliant company and “many of the relevant underlying facts are not public”?

That could — and should — change as Congress makes another run to include tough competition language in the 2007 farm bill. A similar attempt in 2002 cleared the Senate but was killed by House aggies.

Alan Guebert is a freelance agricultural journalist. He can be reached at agcomm@sbcglobal.net or at agcomm, 21673 Lago Drive, Delavan, IL 61734.