The New Rural Antitrust Cop

Three years ago, the Obama Administration announced that it intended to enforce antitrust laws in the business of agriculture. That never happened, and now the job of antitrust cop in rural America has fallen to a Kansas City attorney.

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The business of agriculture may be changed in the next few years because of a Kansas City lawyer.

Dan Owen has filed two suits aimed at both the economics and politics of the food industry — and he told a meeting in Kansas City late last week that he is gathering evidence for a third suit that would challenge the way meat packers are buying live cattle at auction.

Three years ago, it appeared that the Obama Administration was intent on changing how the business of food was conducted. Agri-business was becoming increasingly concentrated, Obama officials said at a meeting in St. Louis in 2009. They announced that the new administration was beginning a wide-ranging investigation to determine if concentration of ownership — from seed producers to grocery owners — were violating antitrust rules.

Obama cabinet secretaries held hearings and made speeches, but nothing happened. No suits were ever filed.

President Obama’s reticence at filing antitrust action in the ag sector has led activists in rural America to look to private action. Nobody has taken up the cause more fervently than Owen, a partner is a Kansas City firm with over 700 attorneys. 

Owen is the new antitrust cop on the beat in the food business. He talked about his three cases last Friday at the annual meeting of the Organization for Competitive Markets. 

Suit #1: Beef Checkoff Money and the NCBA

The suit that got the most notice last week was Owen’s request that the courts bar any money collected through the Beef Checkoff program from being given to the National Cattlemen’s Beef Association.

For the past 26 years, the U.S. Department of Agriculture has collected $1 a head of cattle sold for a fund that pays for promotion of the beef industry in general. This is the Beef Checkoff fund.

Almost all of this money (some $1.6 billion over the life of the program) has gone to the National Cattlemen’s Beef Association (NCBA). 

Owen, representing Kansas cattleman Mike Callicrate, filed suit Friday against the U.S. Department of Agriculture and others saying the NCBA had violated the terms of the Beef Checkoff program and should be barred from receiving any additional funds.

Owen and Callicrate say that the terms of the Beef Checkoff prohibit any money to be used “in any manner for the purpose of influencing governmental action or policy.” The suit filed last week says that NCBA has violated those terms.

“This is a very direct and simple lawsuit,” Owen said at the OCM conference. “We contend that NCBA has been using Beef Checkoff dollars to lobby and to influence public policy.” 

In the suit, Owen points to NCBA’s description of its activities. On its website, the organization says it “works to advance the economic, political and social interests of the U.S. cattle business and to be an advocate for the cattle industry’s policy positions and economic interests.”

The suit says that nearly two-thirds of NCBA’s budget comes from Beef Checkoff funding and that an independent audit of NCBA’s compliance with checkoff regulations “revealed a number of deficiencies, including numerous violations of the prohibition against using Beef Checkoff funds to influence governmental actions and policies.”

This suit is largely about policy, however. Callicrate and OCM believe that the NCBA supports policies that help the handful of corporations that dominate the meatpacking industry while harming independent farmers and ranchers — and that the NCBA is using Beef Checkoff money to do it.

“We think we have been funding our own misery and that has to stop,” said OCM president Fred Stokes.

The NCBA, meanwhile, contends that OCM “has formed a partnership with the Humane Society of the United States (HSUS) to destroy more than 25 years of market development and consumer demand building by the Beef Checkoff Program.” 

In fact, OCM has trumpeted an alliance with the HSUS — and HSUS president Wayne Pacelle spoke at the OCM convention. HSUS shared research on a similar suit it filed in California concerning money collected from egg producers. 

Owen said, however, that HSUS had not contributed to this filing nor was it a party to the suit.

Suit #2: Fertilizer Cartels

Owen said his firm was approached about price fixing in the fertilizer business, particularly among the producers of potash. Five companies control 70 percent of the world’s potash supply.

Prices for potash had increased from $140 a ton to spot market prices that reached over $1,000 a ton. Owen contends that there was an “illegal agreement” among producers to fix prices. For example, the suit Owen eventually filed said that the potash companies conspired to close mining operations in order to manipulate supplies and prices.

A suit saying the potash producers violated U.S. antitrust laws was filed in 2008. Just last month, in ruling on procedural issues, the 7th Circuit Court of Appeals ruled in favor of Owen and the plaintiff, a feed and seed dealer, finding that there was “compelling” evidence of a violation of antitrust laws. 

This case will be back before a federal judge in three weeks. A technical analysis for the case can be found here

Owen told the OCM meeting that he had heard of similar price manipulation in the phosphate and nitrogen markets.

Suit #3: A Potential Action Against Livestock Buyers

Owen said he has begun an “investigation, not a lawsuit” after receiving complaints from cattle raisers who said they were receiving only one bid at auction. He said he was talking to producers about “questions of whether packers are avoiding bidding against each other by divvying up feed lots.”

Owen said one academic study in Utah found that half of all feedlots sold to only one buyer. He said this information has been backed up by his own inquiry. 

“We’ve been told by feed lot owners that there will be equidistant packing companies that never seem to send buyers to that feed lot,” Owen said.

If Owen said if he found that packing companies were colluding to avoid competitive bidding for live cattle, “we may pursue an action.”

 

Topics: Ag and TradeFood
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