poultry Archives - ANTITRUST ALERT

by Gregory E. Heltzer and Carrie G. Amezcua

On May 10, the U.S. Department of Justice (DOJ) filed a civil lawsuit against George’s Inc. to block its $3M acquisition of Tyson Foods Inc.’s, Harrisonburg, Virginia chicken processing plant, showing that deals of all sizes face scrutiny. This case also continues the trend of challenges to non-reportable transactions by both the DOJ and FTC, as well as the DOJ’s current focus on the agriculture sector. It is also notable because the DOJ is alleging that the merger leads to monopsony power, a relatively rare allegation, but one that is increasingly used in challenging deals in the agriculture business.

The DOJ began investigating the acquisition when it was announced in mid-March, and issued Civil Investigative Demands to the parties on April 18, 2011. Despite their awareness of the DOJ’s concerns and ongoing data and document productions, the parties consummated the deal.

George’s and Tyson are two of only three chicken processors in the Shenandoah Valley. Chicken processors process and distribute "broilers," which are chickens raised for meat products. The processors compete for contracts with growers, who care for and raise chicks from the time they are hatched until the time they are ready for slaughter.

In its complaint, the DOJ alleges that the relevant product market is the "purchase of broiler grower services from chicken farmers." The DOJ then asserts that, following the proposed merger, chicken farmers would have only a single processor to sell their growing services to – in part because the only other processor in the 50-75 mile range, Pilgrim’s Pride, is at capacity. The DOJ alleges that the consolidation would not only harm grower’s contract prices but also lead to inferior contract terms on other, non-price factors. The DOJ argues that the relevant geographic market is limited to the Shenandoah Valley because of transportation costs for feed and live birds.

The full complaint can be found on the DOJ website: https://www.justice.gov/atr/cases/f270900/270983.pdf.

Proposed GIPSA Rule

by Carrie G. Amezcua

Earlier this week, The Tribune (Greely, Colorado) published the article below discussing proposed changes to livestock marketing rules. The article discusses the pros and cons of the Grain Inspection, Packers and Stockyards Administration proposed rule – commonly referred to as the GIPSA rule.

"New rules were mandated by the 2008 Farm Bill, which required the U.S. Department of Agriculture to conduct rulemaking that ‘improves fairness in the marketing of livestock and poultry.’"

The rule aims to promote fairness and transparency, and would make it easier for a plaintiff to bring a case under the Packers & Stockyards Act by no longer requiring that the plaintiff first show harm to competition in a complaint alleging certain unfair trade practices. However, critics say that the changes will promote unnecessary litigation and would result in anywhere from 22,800 to 104,000 jobs lost.

Comments on the new rule were due November 22, 2010 and are currently being reviewed. However, on January 21, 2011, the USDA published one change to their regulations requiring testing of scales twice per year, at defined 6 month intervals.

More information on GIPSA and the 2008 Farm Bill can be found here: https://www.gipsa.usda.gov/GIPSA/webapp?area=home&subject=landing&topic=landing

Proposed changes in livestock marketing rules prompt fears, confusion
Link to article: https://www.greeleytribune.com/article/20110123/NEWS/701229893/1002&parentprofile=1

Poultry Merger Challenge

Proposed GIPSA Rule

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