Mergers killing healthy competition

When University of Wisconsin law professor Peter Carstensen read the U.S. Department of Justice May 4 press release announcing its blessing on pork giant Smithfield, Inc.’s acquisition of rival giant Premium Standard Farms, he was “dumbfounded.”
Speechless. His speechlessness wasn’t based on the fact that official sanction of the questionably anti-competitive deal arrived via the late week press “dump,” a tiresome Washington trick to announce bad news late Friday in the hope no one will notice.
Nor was he surprised the Department of Justice (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.
After all, he surmised, this administration hasn’t seen a mega-buyout or merger it hasn’t loved.
“What blew me away, however,” Carstensen related, “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 explained, “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.”
Killing competition. There’s only one way to read the May 4 action, he continued: “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.
Consequences. “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 said with sad fury.
The Smithfield- Premium Standard Farms deal is just his latest lesson in this futility.
In a conference call last October with Department of Justice officials reviewing the proposed buyout, Carstensen, Stumo and others offered solid proof, he said, 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 recalled.
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.
Bad deal. “When Senator Harkin finished,” Carstensen said, “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 Department of Justice-Smithfield record to show the antitrust reviewers took the Senate testimony, USDA’s research or even Carstensen and his colleagues’ information into account when deciding the buyout.
In fact, there’s barely a record.
In its deal-approving, May 4 press release, Justice notes that the Smithfield investigation, “(a)s in most of its investigations