Competition and Agriculture: U.S. Department of Justice Releases Report

June 25, 2012
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“Free and fair competition” in agriculture is what Eric Holder, U.S. Attorney General, had in mind when he set up workshops to explore the subject in 2010.  The U.S. Department of Justice recently released this report from the workshops: “Competition and Agriculture: Voices from the Workshops on Agriculture and Antitrust Enforcement in our 21st Century Economy and Thoughts on the Way Forward.”

Yes, that title is a mouth full but it does make for interesting reading.  The full 24 page report is available as a downloadable pdf.

According to the report, the intent of the workshop was to learn from real-world experiences of farmers, including farmers, processors, cooperatives, academics, and others who make agriculture their lives’ work. The workshop locations included: Iowa, Alabama, Wisconsin, Colorado and Washington, D.C.

Here are few highlights I found interesting:

  1. Poultry growers in the South expressed different concerns than row-crop farmers in the Midwest, dairymen in California and New York, ranchers in the Plains States, and hog producers in the Southeast. Moreover, producers in the same line of business did not always share the same perspective.
  2. Anticompetitive Mergers were described as beneficial concentrated marketplaces for agribusiness, but not necessarily good for farmers.
  3. High market concentration in the food chain limits producer options and prices.  Ancedotes included consolidation of seed companies, grain elevators, rail transportation and meat packing.
  4. Monopsony Power, the converse of monopoly, means market power on the buying side of a market as compared to market power on the selling side of a market. You can tell which side the power is on in that definition.
  5. Lack of Capital and its limited availability, especially for young farmers, was a big topic.
  6. Contracting and the shortcomings with a “take it or leave it” situation were especially discussed in relation to the poultry sector. Such terms as open dates, ranked payment system and required upgrades to facilities have forced some producers out of business.  On the upside, contracting could be the only way young farmers can get a bank loan, especially in the corn or hog business.
  7. Market Transparency is an ongoing issue with limited and accurate information about current market prices.
  8. Market Manipulation brought up the subject of bid rigging to control the price that producers are paid.
  9. Genetically Modified Seeds are high priced, and the future holds even more expensive genetics and traits.  Just in case you don’t have time to download and read the whole pdf, this item  found on page 23 is worth quoting directly from the report:

    The issue of genetically modified seeds implicates the careful balance of the antitrust laws and the intellectual property laws. These regimes employ different means to the same ends of enhancing consumer welfare and promoting innovation. The antitrust laws preserve the competitive spur to innovation, and the intellectual property laws create incentives for innovation.

    Antitrust law recognizes the critical role that intellectual-property rights play in driving innovation and values those rights. For example, antitrust law typically does not limit the prices that a patent holder may charge to license that patent. As the Seventh Circuit held, the “price of” a patented product “cannot violate the Sherman Act: a patent holder is entitled to charge whatever the traffic will bear.”

    However, if conduct goes beyond the appropriate use of intellectual property and harms competition, it should be disciplined by appropriate antitrust enforcement. The Division stands ready to take the appropriate action in those cases. Thus, if the patent holder has crossed the bounds of the antitrust laws and abused his rights in a manner that leads to competitive harm, the Division is prepared to challenge that action. There may also be opportunities for clarification of how patent and antitrust law should align.

 

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