Agriculture and Antitrust Enforcement Issues in Our 21st Century Economy

AGENCIES:

U.S. Department of Agriculture and U.S. Department of Justice, Antitrust Division.

ACTION:

Notice of public hearings and opportunity for comment.

SUMMARY:

The Antitrust Division of the U.S. Department of Justice (DOJ) and the United States Department of Agriculture (USDA) strongly believe that a competitive agriculture sector is vitally important to producers and consumers alike. To this end, the DOJ and USDA, with the participation of State Attorneys General, intend to hold a series of public workshops to explore competition issues affecting the agricultural sector in the 21st Century and the appropriate role for antitrust and regulatory enforcement in that sector. Agricultural producers and their representatives have expressed concerns about changes in the agricultural marketplace, including increasing processor concentration in some commodities. There have been several congressional oversight hearings related to competition in the agricultural sector, as well as legislative proposals to restrict the activities of agricultural processors and intensify federal government scrutiny of agricultural mergers.

The workshops will address the dynamics of competition in agriculture markets, including, among other issues, buyer power (also known as monopsony) and vertical integration. They will examine legal doctrines and jurisprudence and current economic learning, and will provide an opportunity for farmers, ranchers, consumer groups, processors, agribusinesses, and other interested parties to provide examples of potentially anticompetitive conduct and to discuss any concerns about the application of the antitrust laws to the agricultural sector. The goals of the workshops are to promote dialogue among interested parties and foster learning with respect to the appropriate legal and economic analyses of these issues as well as to listen to and learn from parties with real-world experience in the agricultural sector.

To begin, the DOJ and USDA are soliciting public comments from lawyers, economists, agribusinesses, consumer groups, academics, agricultural producers, agricultural cooperatives, and other interested parties. The DOJ and USDA are interested in comments on the application of the antitrust laws to monopsony and vertical integration in the agricultural sector, including the scope, functionality, and limits of current or potential rules. The DOJ and USDA are also inviting input on additional topics that might be discussed at the workshops, including the impact of agriculture concentration on food costs, the effect of agricultural regulatory statutes or other applicable laws and programs on competition, issues relating to patent and intellectual property affecting agricultural marketing or production, and market practices such as price spreads, forward contracts, packer ownership of livestock before slaughter, market transparency, and increasing retailer concentration.

The DOJ and USDA plan to hold the first workshop in early 2010. While some of these workshops may be held in Washington, DC, others will be held regionally. The DOJ and USDA plan to publish a more detailed description of the topics to be discussed before each workshop and to solicit additional submissions about each topic. The workshops will be transcribed and placed on the public record. Any written comments received also will be placed on the public record.

DATES:

Any interested person may submit written comments responsive to any of the topics addressed in this Federal Register notice. Respondents are encouraged to provide comments as soon as possible, but no later than December 31, 2009.

ADDRESSES:

Written comments should be submitted in both paper and electronic form to the Department of Justice. All comments received will be publicly posted. The comments should be submitted as follows:

Two paper copies should be addressed to the Legal Policy Section, Antitrust Division, U.S. Department of Justice, 450 5th Street, NW., Suite 11700, Washington, DC 20001. The Antitrust Division is requesting that the paper copies of each comment be sent by courier or overnight service, if possible, because U.S. postal mail at the Department is subject to delay due to heightened security precautions. The electronic version of each comment should be submitted by electronic mail to agriculturalworkshops@usdoj.gov.

FOR FURTHER INFORMATION CONTACT:

Mark B. Tobey, Special Counsel for State Relations and Agriculture, Antitrust Division, U.S. Department of Justice, 950 Pennsylvania Ave., NW., Washington, DC 20530; telephone: (202) 532-4763; e-mail: agriculturalworkshops@usdoj.gov. Detailed agendas and schedules for the workshops will be made available on the Antitrust Division's Web site, http://www.usdoj.gov/atr .

SUPPLEMENTARY INFORMATION:

The Horizontal Merger Guidelines recognize monopsony power and its exercise as a concern in analyzing potential competitive effects of proposed mergers and acquisitions. As a general proposition, the analysis of competitive issues in monopsony cases is the mirror image of the more common analysis of competitive issues in monopoly cases. For example, instead of determining whether the merged firm would gain sufficient market power to raise prices to consumers, monopsony analysis focuses on whether the merged firm would gain sufficient market power to depress prices paid to its suppliers. Likewise, instead of determining whether the buyers could defeat an attempt by the merged firm to increase prices by a small but significant and non-transitory amount by switching to alternative products or alternative suppliers, the issue in a monopsony investigation is whether the sellers could defeat an attempt by the merged firm to depress prices by producing other products or by selling their products to other buyers.

Vertical integration occurs when multiple stages of production, for example, processing, distribution, or marketing, are brought together in one firm or are linked by contracts. In many instances, vertical integration may be procompetitive, allowing firms to reduce their costs. However, there may be circumstances in which vertical integration raises antitrust concerns, usually by increasing barriers to entry, facilitating collusion, or circumventing regulation.