| |
 |
| May 7th, 2008 |
|
Media Contact(s): Mark Eddington or Lindsey Stimpson, (202) 224-5251 |
[  ] Listen to Radio Clip |
Printable Version |
|
|
HATCH EXPLORES ANTITRUST CONCERNS OF PROPOSED JBS SWIFT DEAL
|
| |
Washington – Sen. Orrin Hatch (R-Utah) today explored the ramifications of JBS Swift and Company’s proposed acquisition of National Beef and Smithfield Beef.
In his remarks to the Judiciary Committee’s Antitrust Subcommittee, Hatch noted the proposed purchase would give JBS Swift and Company 32 percent of the market in the meatpacking industry, and therefore should be examined thoroughly.
Sen. Hatch’s complete statement to the Antitrust Subcommittee follows:
As always it is a pleasure to be with you here today. I appreciate that you have called this hearing on agriculture consolidation and JBS Swift’s proposed acquisitions.
Agriculture consolidation has been one of the most important questions facing antitrust law for decades. In fact, one could say that our nation’s antitrust laws were born from the concerns of farmers and ranchers that improper market power was being employed by large agricultural processors and the railroads.
The antitrust ramifications of agriculture consolidation are still an important topic today.
The meatpacking industry has had some tough times over the past several years. Perhaps the most dramatic was the 2003 BSE incident, which led to an overreaction by many of our trading partners and the almost overnight collapse of our most important beef export markets.
In addition, there has been enormous consolidation in the agriculture industry over the past 30 years, especially in livestock markets. For example, according to the Congressional Research Service, in 1985 the four largest meatpackers accounted for only 39 percent of cattle packing industry. By 2007, that number had grown to 71 percent. Similarly, in 1985, the four largest swine packers represented 32 percent of the market. In 2005, that share had risen to 63 percent. The effects of this consolidation are not only being felt in the packing business. The number of American farms producing swine has fallen dramatically, from 667,000 in 1980 to 67,000 in 2005.
This consolidation has also had a major impact on theories of the proper enforcement of antitrust law. Currently, there is a disagreement between two groups of legal thought.
The first group believes market consolidation and vertical integration undermine the smaller livestock producers by reducing their potential to use the cash or spot market.
The second group argues antitrust law is designed to maintain or create competitive markets for consumers. They believe it is improper to regulate an industry through antitrust law because one of the market’s competitors is suffering due to otherwise legitimate competition and business practices.
Articulating these different views will be one of the subjects of today’s first panel.
Our second panel will explore the specifics of consolidation with a discussion of JBS Swift and Company’s proposed acquisition of National Beef and Smithfield Beef.
If the transaction is approved, only three major meatpackers will remain from the current five. Specifically, JBS Swift will control 32 percent of the market, Tyson 24.8 percent and Cargill 21.6 percent.
It should also be noted that JBS Swift is making these acquisitions when most experts agree that there is overcapacity in the packer market.
So how does JBS Swift intend to profit from its investment?
I have been informed that JBS Swift intends to promote the export of American beef vigorously. If so, the acquisition is well-timed to exploit the Korean government’s recent decision to lift many of its remaining importation barriers imposed on American beef.
It remains to be seen if this business model will succeed. However, JBS Swift has recently acquired meatpackers in Argentina, Australia and Italy. After the company’s acquisition of Swift, to its credit, it did follow through on its promise to expand operations and hire additional workers.
However, many have antitrust concerns about this transaction. I look forward to exploring these issues in greater detail during the hearing.
Again, thank you, Mr. Chairman, for calling this important hearing.
|
| |
| ### |
| |
| |
| |
|
|
