Antitrust: Why are we in this mess again?

January 15, 2019

As Wisconsin Farmers Union members, we’ve watched our market access shrink while wholesale buyers consolidate and dominate the system. Like the proverbial frog in the pot of slowly-heating water, the erosion of farmer power in supply chains has happened slowly over past decades. At WFU Conventions, we’ve heard Mary Hendrickson and Bill Heffernan (Rural Sociologists, University of Missouri), Peter Carstensen (Law, UW-Madison) and others present about concentration in the poultry, beef and dairy industries. We hear from our dairy co-op managers about the squeeze they are in. Wisconsin potato growers are fighting court battles for market access and production control. Even the Farmers Union youth program teaches about this problem. Isn’t this why our ancestors fought for anti-trust rules in the marketplace at the turn of the 20thcentury? Why are we in this pickle again? 

 

At a December workshop sponsored by the American Antitrust Institute and hosted by UW-Madison’s Law School, farmers and lawyers and others discussed the short-comings of current antitrust laws. Iowa’s Assistant Attorney General Max Miller noted that judicial activism has eroded the intent and enforcement of the original laws. This means we need new statutes to address antitrust since judicial interpretation of these century-old laws has eroded the intent and enforcement of the original laws. 

 

Neoclassical economics, where consumer price effects are the primary measure of healthy markets, is not a sufficient measure of harms that result from business consolidation. Consumer price indices are the measure now used by the courts, but the companies themselves don’t use this measure. They use behavioral economic approaches that take into account non-price effects. Examples of non-price effects include food quality, food safety, food access, and market innovation and entrepreneurial opportunity (including beginning farmers). Consolidation’s non-price effects must be considered when enforcing anti-trust. 

 

New law needs to address broader supply chain issues so consolidation in one part of the supply chain could be regulated because it is shown to have anti-competitive effects on other parts of the supply chain. When the original antitrust legislation was passed, supply chains were shorter, especially before refrigeration and transportation innovations made it possible to ship perishable foods long distances. As a result, the courts are not looking at supply chains as a whole but limiting their decisions to address consumer harm at the very end of the supply chain. 

 

As many WFU members regularly discuss, there are other limitations of the Capper-Volstead Act (1922) and its focus on production co-ops. The Act falls short of addressing issues confronted by marketing co-ops. Our co-ops are pushed to concentrate to the point that they are not meeting the needs of their members. We witness this when our dairy co-ops may be less willing to serve smaller farms, in favor of adding larger dairies as a way to improve first-mile efficiencies for milk hauling. Favoring big dairies exacerbates oversupply and market volatility. 

 

Even though the existing laws are not ideal, they would be better than nothing if they were enforced. Federal enforcement dropped precipitously since the 1960s and it shows. To enforce the anti-trust laws on the books already, the Department of Justice needs funds allocated in the federal budget specifically for enforcement. 

 

Senator Corey Booker (D-MN) and Representative Mark Pocan (D-WI) introduced legislation in 2018 to slow consolidation in food and agriculture so that existing anti-trust laws could be reviewed and revamped. Over 200 sustainable agriculture organizations and other NGOs, including Wisconsin Farmers Union, National Farmers Union, the Wisconsin Organic Marketing Alliance, the Organization for Competitive Markets and Family Farm Defenders, signed on to the 2018 Food and Agribusiness Merger Moratorium and Antitrust Review Act. This will be re-introduced in 2019. The letter stresses the following trends: 

 

  • Few firms dominate the farm business landscape; 

  • Independent farm income is harmed by growing consolidation;

  • Corporate domination of farming occurs through unfair contracts;

  • Food prices are rising faster than typical wages and families have fewer meaningful food choices; 

  • Consolidation across the food chain is harming workers and exacerbating income inequality; and

  • Food and agribusiness consolidation erodes rural economic vitality. 

 

It is time to re-commit to meaningful anti-trust laws and take back our food system. Farmers and their co-ops deserve to be respected partners in the supply chain, not serfs serving wholesale buyers. Pull Together!

 

Michelle Miller

Farmers Union member & Torchbearer 1979

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