October 23, 2008
The U.S. Justice Department has joined 13 states in asking a federal
court to block a proposed merger they say would reduce competition in
the beef industry and significantly drive up prices for consumers.
The federal and state governments are opposing Brazil-based JBS's acquisition of Missouri-based National Beef Packing Company. The suit was filed in the U.S. District Court for the Northern District of Illinois alleging the merger will substantially lesson competition in the beef market in violation of the federal Clayton Act.
JBS is the largest beef packer in the world. National, the nation's fourth-largest packer, operates two Kansas packing plants that are among the largest and most profitable in the country.
"The beef industry an integral part of Oklahoma's economy," said Oklahoma Attorney General Drew Edmondson, representing one of the 13 states in the suit. "This merger has the potential to raise the price consumers pay for beef at the store and lower the price producers receive at the sale barn."
Citing a "fundamental restructuring of the United States beef packing industry" the suit alleges the merger would eliminate competition in the industry by increasing JBS's share of packing capacity from almost 20 percent to about 35 percent. Further, the merger would place more than 80 percent of the country's packing capacity under the control of only three firms, JBS, Tyson and Cargill.
"Last year, these three companies together purchased more than 85 percent of the more than 27 million fed cattle sold," Edmondson said. "We agree with the other states and DOJ that further consolidation of this type of market power likely will lessen competition and heighten the possibility of collusion to the detriment of producers and consumers."
Edmondson last May asked the DOJ to review the JBS plan. His office has consulted with feedlot owners, cattle producers and other attorneys about the practical, economic and legal implications of the merger.
According to the attorney general, Oklahoma is the fifth largest cattle producing state in the nation. In addition to Oklahoma and the DOJ, the merger is opposed by the states of Colorado, Iowa, Kansas, Minnesota, Missouri, Montana, North Dakota, Ohio, Oregon, South Dakota, Texas and Wyoming.
