Meatpacking Scrutiny Accelerates as Senate Considers New Antitrust Bill

According to the U.S. Bureau of Labor Statistics, the March 2020 outbreak of COVID-19 in the United States kicked off a series of demand shocks that disrupted America’s food supply chain.¹ These disruptions led to “increased vulnerability” in the prices of meat, fish, dairy, and eggs during the pandemic.² Some public officials argued that high levels of concentration exacerbated these shocks and caused consumers to pay inordinately high prices for goods at the supermarket. As Senator Amy Klobuchar of Minnesota put it, “The COVID-19 pandemic painfully exposed some of the inherent risks to our food supply chain resulting from such high levels of industry consolidation. As the spread of the virus forced closures at major meat packing facilities, for example, livestock producers were left with no willing buyers for their livestock. And, due to consolidation in the meat processing industry, there weren’t really alternatives. The result for consumers was inflated retail prices for beef and pork products, and in some areas empty meat cases.”³

Many antitrust enforcers at the state level seemed to share Senator Klobuchar’s view. In December 2021, sixteen state attorneys general signed an open letter to U.S. Department of Agriculture Secretary Tom Vilsack, lamenting increased concentration in livestock and poultry markets.⁴ The signatories asked that the USDA establish a grant program for state enforcers to investigate potential malfeasance amongst meatpacking companies and bring enforcement actions.⁵ They also sought more aggressive enforcement of the Packers and Stockyards Act (“PSA”)⁶—a 1921 competition statue that prohibits meatpackers and swine contractors from engaging in any course of business “for the purpose or with the effect of manipulating or controlling prices, or of creating a monopoly in the acquisition of, buying, selling, or dealing in, any article, or of restraining commerce[.]”⁷

The following month, President Joe Biden invited Vilsack and Attorney General Merrick Garland to the White House for a joint event on the subject of competition in agriculture markets. Both leaders touted their resolve to robustly enforce the antitrust laws against wrongdoers in the industry, thereby protecting “farmers, ranchers, and other agricultural producers and growers from unfair and anticompetitive practices[.]”⁸ To facilitate detection and enforcement, the agencies agreed to develop a centralized and confidential process for farmers, ranchers, and other whistleblowers to submit complaints about violations of the antitrust laws and the PSA.⁹ The USDA also committed to cooperate with the Department of Justice’s Antitrust Division to better police anticompetitive practices in the industry, including by referring suspected violations of the PSA to the Antitrust Division for enforcement.¹⁰

Now, Senator Hawley’s bill attacks the issue of consolidation from the opposite end—not by facilitating enforcement of the PSA as it stands, but by expanding the existing law’s scope to prohibit more types of conduct. The Strengthening Antitrust Enforcement for Meatpacking Act would eliminate the PSA’s requirement to show actual or likely injury to competition,¹¹ at least with respect to certain acquisitions.

Under the new bill, acquisitions that sufficiently increase the Herfindahl-Hirschman Index (“HHI”) in a relevant market subject to the PSA would automatically “create a monopoly” for the purposes of the statute. The HHI is a tool commonly used by economists, lawyers, and regulators to measure concentration in a given relevant market.¹² The higher the HHI, the more concentrated the market. Markets with an HHI of under 1,500 are unconcentrated. Those between 1,500 and 2,500 are moderately concentrated. Highly concentrated markets have HHIs exceeding 2,500. The Strengthening Antitrust Enforcement for Meatpacking Act prohibits acquisitions that would result in an HHI exceeding 1,800 in any relevant market or that would increase the HHI by more than 100 in any relevant market—even if the resulting HHI suggests that the market would remain unconcentrated.

Whether Senator Hawley’s bill gains traction in the Senate remains to be seen. Still, it serves as another signal that regulators and legislators alike continue to harbor competition concerns about the meatpacking industry. Firms in the space should be aware of the heightened public scrutiny that persists at both state and federal levels.

¹See The Impact of The COVID-19 Pandemic on Food Price Indexes and Data Collection, Bureau Lab. Stat. (Aug. 2020), https://www.bls.gov/opub/mlr/2020/article/the-impact-of-the-covid-19-pandemic-on-food-price-indexes-and-data-collection.htm.
²Id.
³Press Release, Senator Amy Klobuchar, At Judiciary Committee Hearing, Klobuchar Emphasizes Need for Increased Competition in Food Supply Chain (July 29, 2021), https://www.klobuchar.senate.gov/public/index.cfm/2021/7/at-judiciary-committee-hearing-klobuchar-emphasizes-need-for-increased-competition-in-food-supply-chain.
⁴See generally Letter from Keith Ellison et al., to Tom Vilsack, U.S. Sec’y Agric. (Dec. 21, 2021), https://oag.ca.gov/system/files/attachments/press-docs/2021_12_21%20-%20State%20Ltr%20to%20Sec%20Vilsack%20re%20Packers%20and%20Stockyards.pdf.
⁵See id. 2.
⁶See id. 1–2.
⁷7 U.S.C. § 192(e).
⁸Press Release, U.S. Dep’t of Agric., Agriculture Department and Justice Department Issue Shared Principles and Commitments to Protect Against Unfair and Anticompetitive Practices (Jan. 3, 2022), https://www.usda.gov/media/press-releases/2022/01/03/agriculture-department-and-justice-department-issue-shared. 
⁹See id.
¹⁰See id.
¹¹See, e.g., Terry v. Tyson Farms, Inc., 604 F.3d 272, 277 (6th Cir. 2010) (observing that seven of the twelve federal circuit courts of appeal have “weighed in on this issue, with unanimous results” (collecting cases)).
¹²See Herfindahl-Hirschman Index – Antitrust Division, U.S. Dept. of Just. (July 31, 2018), https://www.justice.gov/atr/herfindahl-hirschman-index.